Last month FinanceAsia announced the winners of our annual Country Awards for international banks. It is our custom to follow up with write-ups about the winning banks and why they merit special attention. The write-ups are presented in alphabetical order by country.
This year's field was very competitive. Foreign banks that have developed specialisations scored high marks as did those which performed exceptionally well despite a more demanding regulatory environment. For judging criteria, please click here.
BANGLADESH
BEST FOREIGN BANK
HSBC
However, the growth that HSBC has experienced in the past 19 years, particularly in the time period under consideration, make it stand out.
It is currently the only international bank in Bangladesh with a presence in all eight of its export processing zones — Standard Chartered only has branches in three. This effectively makes HSBC the go-to bank for facilitating export trade, a crucial sector of the economy given that Bangladesh is the world’s second-largest exporter of readymade garments after China.
Bangladesh holds a 10% global market share in clothing and apparel and plans to boost exports from $25 billion in 2014 to $50 billion by 2021.
HSBC - which already has a stronghold in all eight of the country's export processing zones - handled 35% of the export processing zones' exports last year.
In a year where political unrest remained widespread in Bangladesh it was difficult for banks to grow their businesses. Moody’s for a time even considered downgrading the country due to the fractious political backdrop, before ruling in April to maintain its credit rating at Ba3 due to Bangladesh’s track record of macroeconomic stability, modest debt burden, and ample foreign reserve buffer.
Yet in addition to boosting year-on-year revenues by 3%, HSBC’s safety as a bank was evidenced by its tier-1 ratio, which stood at a healthy 21.67% as of year-end 2014. That compares with Standard Chartered’s 12.52%, according to SNL Financial data.
Its non-performing loan portfolio is also worth highlighting. While NPLs soared for a number of state-owned banks last year, such as at Agrani Bank (16.96%), HSBC’s remained at a respectable 2.07%. Standard Chartered’s, in contrast, stood at 5.37%, SNL Financial data shows.
In addition, HSBC boosted its capital adequacy ratio by 10.06% in 2014 over 2013.
Its AAA rating underlines that HSBC can offer timely payments and is highly unlikely to be affected by external events. That is important in a country where a volatile political environment, narrow tax revenue base, and very low levels of income are the norm.
Indeed, HSBC showed its dedication to Bangladesh by boosting its headcount to 890 by the end of 2014 from 790 the year before. It has branches in the country’s key business hubs — Dhaka, Chittagong, Sylhet, Narayanganj, and Mymensingh.
CHINA
BEST FOREIGN INVESTMENT BANK
UBS
With a diversified and well-balanced business, UBS has performed outstandingly well in the last 12 months in China.
The Swiss investment bank, which registered its Chinese securities joint venture in 2006, is the first and one of the only two fully licensed foreign banks in the domestic market, giving it a leading presence on the mainland.
Among UBS’s clients in China are not only large state-owned enterprises and major banks such as Sinopec and Industrial and Commercial Bank of China but also privately owned giants such as Greentown China and Swire Group.
During the period under review, UBS led some of the most high-profile mergers and acquisitions. As a result, it sits top of the China M&A volume table, ahead of longtime rivals Goldman Sachs and Morgan Stanley, according to Wind data.
UBS was the exclusive financial adviser on ENN Energy’s $650 million acquisition of Sinopec’s retail business — the first major transaction of SOE mixed ownership reform in China. It also advised Sinopec Yizheng Chemical Fibre on its $3.9 billion acquisition of Sinopec Oilfield Service Corporation, another landmark transaction on the path to SOE restructuring.
In equity capital markets, UBS helped to arrange three domestic initial public offerings totalling $1.2 billion and seven private placements worth $1.8 billion, ensuring it was the top — ranked foreign investment bank in China also for equity and equity-linked offerings.
UBS led the IPO of Spring Airlines, China’s largest budget carrier. It also advised on two SOE private placements: Sinosteel Engineering ($1.88 billion) and Sinopec ($970 million).
Meanwhile, UBS continued to build up its strengths in the domestic bond sector, amassing $5 billion of league table credits, gaining a market-leading share of about 22% through its work on 13 deals.
Among the debt transactions it worked on are three jumbo renminbi bond offerings by China Minsheng Bank, ICBC, and China Everbright Bank. The first two banks each sold Rmb20 billion bonds while the third sealed a Rmb16.2 billion offering.
This smorgasbord of deals meant UBS was ranked second only to Morgan Stanley in China in terms of core investment banking revenues during the awards period, which reached $221 million, according to Wind data.
BEST FOREIGN BANK
HSBC
The London-headquartered bank has carved out several niches for itself, the most prominent of which is its position in cross-border renminbi transactions and solutions, where it holds the largest market share by volume for renminbi qualified foreign institutional investors.
Its renminbi clearing business and direct onshore trading of the renminbi, euro, and Singapore dollars on China’s interbank foreign exchange market, as well as its work toward the internationalisation of the Chinese currency, further cements its position.
HSBC’s renminbi leadership was confirmed when it became one of the first foreign banks to launch a free trade account in the Shanghai free trade zone. That expanded its FTZ footprint in China, which includes the Qianhai pilot zone where it helps clients to understand new policy initiatives, which in some cases it helped to shape through consultations with China’s State Administration of Foreign Exchange and other key regulators.
The bank now has the most mainland Chinese branches among foreign banks, with 175 outlets in 57 cities as of May 15. In top-tier cities it has nailed down prime real estate for branches offering premium services.
HSBC has also jumped on opportunities related to foreign direct investment. Mainland China recently surpassed the US as the world’s leading destination for FDI, attracting some $114 billion in FDI in 2014, according to data released by the UN Conference on Trade and Development.
HSBC in China provides assistance covering major FDI-source countries, helping to facilitate inbound flows while assisting Chinese companies and capital seeking M&A and investment opportunities abroad. The bank maintains 20 so-called China desks around the world to help foreign capital and corporates source deals on the mainland; it also maintains country desks on the mainland to help Chinese enterprises expand beyond the Middle Kingdom.
In the last 12 months, roughly the period under review, HSBC provided advisory services and helped 30 major Chinese enterprises to complete on 28 debt-financing deals, four equity-financing plays, and four M&A transactions. To pass regulatory muster and withstand the rigours of due diligence by potential overseas partners, these deals required substantial preparatory work, generating value-adds for HSBC, which has the licenses, experience, and infrastructure to shepherd deals (and derive fees) from origination stage to execution.
HSBC is reducing headcount in other markets but has no plans to thin its ranks in China. That, in part, attests to the bank’s ability to manage risk. While China’s economic rebalancing and slowdown coupled with policies favouring domestic players has fostered uncertainty for many foreign banks,
HSBC has managed to control the downside and thrive in China’s “new normal.”
Moody’s upgraded HSBC China’s long-term deposit and issuer ratings — to A1 from A2 — toward the end of last year and gave the bank a stable outlook. The credit rating agency is confident that HSBC Holdings, the bank’s parent, will come to the assistance of its mainland subsidiary were its exposure to large Chinese borrowers to degrade its balance sheet.
Although it has been known for some time that the bank is seeking a partner for its mainland brokerage, the search has taken on added urgency since the launch of the Shanghai-Hong Kong Stock Connect scheme in November. FinanceAsia has learned that HSBC is now in active discussions with potential partners.
The British bank is also very focused on developing business in the Pearl River Delta, still an incredibly fertile region for technology and manufacturing plays; some 10% of China’s GDP is derived from the region, which borders Hong Kong.
In addition, HSBC has a growing profile in China’s so-called green sectors such as new energy, renewables, and waste management. It acted as co-manager for both Trina Solar’s $260 million convertible issuance and Yingli Limited’s $83 million equity follow-on offering — small transactions which are nonetheless indicative of HSBC’s goal of becoming an authority on sustainable financing.
HONG KONG
BEST FOREIGN BANK
CITI
Citi Hong Kong continued its strong growth momentum across the business, from helping clients to raise capital to providing cash management, trade, securities, and fund services.
Citi’s Securities Services had a whirlwind year with Asia Pacific assets under custody growing swiftly.
On the Shanghai-Hong Kong Stock Connect programme as of March, Securities Services had a significant market share of flows through including third-party clearing for a large global bank among others and execution for equities and foreign exchange.
In addition, Citi in November was named by the Hong Kong Monetary Authority as one of seven Primary Liquidity Providers for offshore renminbi trading.
Citibank was among the first retail banks to offer access to Stock Connect. Investment assets under management also grew between January and April this year.
Citi was also retained in July 2014 by the Hong Kong government as a provider of purchasing card services, representing the largest purchasing card mandate awarded by a public sector client to Citi outside of the US.
In treasury and trade solutions Citi also won the purchasing card mandate from Hong Kong’s flag carrier Cathay Pacific, a global deal covering 34 countries.
In investment banking Citi advised blue-chip clients on key deals, including Hong Kong Telecom on its $1.0 billion rights issue as well as Hutchison Whampoa on its $3.5 billion notes sale.
In M&A Citi advised an international consortium led by China Travel Financial Holdings, Pepper Australia, and York Capital Management Global Advisors on the acquisition of Prime Credit Limited. It also acted as joint sponsor for Global Brands’s listing by introduction, a transformational restructuring exercise for Li & Fung Group.
BEST FOREIGN INVESTMENT BANK
GOLDMAN SACHS
Goldman Sachs made the most of its integrated offshore and on-shore business in China. A standout deal was its role as sole placing agent and sole bookrunner in the first institutionally marketed A-share block trade — a $2 billion accelerated book build offering of shares in Industrial Bank on the Shanghai Stock Exchange.
Goldman Sachs led some of the most ground-breaking transactions for major Hong Kong-listed companies. It acted as sell-side advisor to Wing Hang Bank in Oversea-Chinese Banking Corporation’s $5 billion pre-conditional acquisition of Wing Hang Bank, the largest take-private transaction in Asia since 2008.
The New York bank also provided clients with innovative financing solutions. Helping to showcase its abilities in this sense are its roles as joint underwriter in Country Garden’s $410 million rights issue, joint lender for the concurrent $426 million margin loan facility, and provider of $400 million bridge loan in October 2014, the first ever triple-play financing for a China real estate developer.
In ECM, Goldman Sachs helped clients to make the most of a rise in valuations. One notable example is its role as joint sponsor, joint global coordinator, and sole stabilisation agent for GF Securities’s $4.1billion IPO — the largest-ever globally by a securities firm.
Another example is Dalian Wanda Commercial Properties’ $4.1 billion H-share IPO, the largest ever real estate equity offering globally. The US bank brought in all three international funds in the cornerstone tranche.
In DCM, Goldman Sachs advised on Hutchison Whampoa’s $5.4 billion triple-tranche dual-currency senior notes sale, which comprised $2 billion three-year, $1.5 billon 10-year and EUR1.5 billion seven-year senior notes. It was the largest ever multi-currency bond offering out of Asia.
A hallmark of a job well done is repeat businesses, which Goldman Sachs won during the awards period from clients such as Hutchison Whampoa and Country Garden.
INDIA
BEST FOREIGN BANK
CITI
Breadth and balance keep Citi atop an increasingly competitive Indian market for foreign banks. It offers a full suite of services; if the universal banking model is under siege worldwide, it is succeeding here.
One argument for a universal offering is that it delivers results in seasons fair and foul and Citi’s favourable financials reflect both the doldrums and the excitement around the election of Narendra Modi as prime minister.
Rivals are catching up to Citi’s deposit base size, and some are lending more aggressively. Citi’s loan-to-deposit ratio is 72%, which is in the middle of the pack for foreign banks in India — but against a larger balance sheet of $24.2 billion, against which the bank’s profits rose by 11.4% year on year to $853 million. Return on equity and return on assets were likewise moderate but stable. Deposits rose by 17% to $13.1 billion.
Solid if not dramatic financials aren’t enough. Citi also has the broadest array of businesses. The corporate banking and financial institution businesses saw the most new action thanks to the election, and the maintenance of low interest rates and lower inflation. Citi’s lending portfolio of $40 billion is as big as even that of the largest domestic banks. Its 1,600 corporate clients, ranging from small companies to huge conglomerates and multinationals, is the bank’s biggest pool outside of the US.
The most interesting aspect to Citi’s business is its leadership in digital technology. Banks are generally not known for consumer-friendly IT prowess but Citi is able to grow its consumer business while maintaining a streamlined branch network presence (45 sites, up from 42 a year before). It relies on a digital platform to reach customers, with e-commerce now accounting for 25% of new credit card business, while reward models from cards can be conducted in virtual currencies.
Corporate payments, not just retail ones, are increasingly conducted via mobile phones. The bank is also giving companies big-data analytics to help them analyse working capital. These examples show how technology enables Citi to deliver solutions once considered the preserve of a particular customer segment to a broader swath of its clientele.
BEST FOREIGN INVESTMENT BANK
GOLDMAN SACHS
Should an award go to an investment bank that has been consistently top tier, or to one that is uneven but happened to have a spectacular and (probably) unrepeatable year? And is that good year down to luck or does it exhibit skilled execution? FinanceAsia does not have a set policy on such matters, which are decided upon on a case-by-case basis. But this year the exploits of a firm focused on fair-weather opportunities merits our recognition.
Goldman Sachs may not win this sort of award in India every year; it’s not set up that way. But its activity in equity capital markets demonstrated how a bank can make a splash and get well paid along the way. Bloomberg data shows Goldman Sachs jumped from 24th place to 1st in terms of equity and rights offering fees during our 12-month awards period to May-end, accounting for nearly 24% of the total market take.
It was not India’s best-paid investment bank once debt capital market and M&A fees are included, but as splashes go this one got plenty of people wet. Much of Goldman Sachs’s success in India this year resulted from it advising Daiichi Sankyo on its sale of troubled Ranbaxy to Sun Pharma. Goldman Sachs not only helped Daiichi Sankyo to rid itself of a failed acquisition — and recoup some of its losses — it then also marketed the largest block sale in Indian history, along with related currency swaps.
Japan’s Daiichi Sankyo acquired Ranbaxy for $3.6 billion four years ago and quickly lived to regret it. For a time last year the Japanese thought they’d get no more than $1 billion back. But they were determined to wash their hands of Ranbaxy. In the end the company recouped over 80% of its initial investment.
Goldman Sachs’s bankers and traders worked on the deal for six months, with secrecy a major challenge; the firm avoided leaky local brokers and lined up 35 buy-side accounts through which it could cross a deal (of which 28 were long-only and seven were hedge funds).
It had a 48-hour window to generate a credible shadow book and Daiichi Sankyo indicated they wanted to sell their entire stake at once. So the block trade netted Rs239.9 billion ($4 billion) in which Ranbaxy shareholders received 0.8 shares of Sun Pharma for every Ranbaxy share held, and Daiichi Sankyo took a 9% stake in Sun Pharma. As a result, Daiichi got to retain a presence in India via a new strategic partner, while Sun Pharma bought its way into becoming the world’s fifth-biggest pharamceuticals company.
The Ranbaxy deal was the biggest M&A transaction in India since 2011.
Another notable job for Goldman Sachs in India was to midwife Alibaba’s first strategic investment in the country. It advised Paytm, an Indian electronic payments startup, to raise capital by bringing in a strategic minority investor that could help India to catch up with China. Who better than Jack Ma? The Alibaba impresario was looking for a toehold in India and Goldman Sachs helped to put them together.
Paytm’s founders originally wanted $100 million in capital but the acquisition by Ant Financial, Alibaba’s financial affiliate, raised a $575 million commitment for a 25% stake in One97 Communications, the company behind Paytm’s platform.
One aspect that made Paytm attractive to acquirers was its exclusive relationship with Uber in India; Goldman Sachs also brokered that deal, partly with an eye to boosting Paytm’s value.
INDONESIA
BEST FOREIGN BANK
HSBC
The choice this year in Indonesia was a very close call. Based on financial figures alone, Citi maintained its dominance as the US bank reported strong net income of Rp2.52 trillion ($188 million) and a return on equity of nearly 20%. But looking past these numbers, FinanceAsia feels HSBC deserves the nod.
In January, the British bank received approval from the country’s financial services authority to merge with PT Bank Ekonomi Raharja, allowing HSBC to become locally incorporated in Indonesia, a landmark move that will open up doors for HSBC that remain closed for other foreign banks.
International banks are limited in the number of cities they can operate in but, as a locally incorporated entity, HSBC is now free to expand its Indonesian franchise.
At the moment, HSBC operates 47 branches, while Bank Ekonomi has 99 branches. Post the merger, which should be completed by 2017 HSBC will have a presence across 30 cities in Indonesia, up from 6 now. Other international banks operate in no more than five provinces. Post-merger, HSBC will have branches in 18 provinces, with further growth on the horizon.
With a growing presence across Asean’s largest economy and a country with extremely promising demographics — out of a population of 251 million over half are under 30 — HSBC has put itself in a very strong and leading position in Indonesia. By cementing itself as a locally incorporated bank, HSBC has demonstrated that it is in Indonesia for the long haul.
To us, that commitment makes it a deserving candidate.
HSBC posted some solid numbers as well, managing to boost its total assets by 4.5% year-on-year, impressive considering how challenging 2014 was in Indonesia, both politically and in its capital markets. Loans increased by 12%, while deposits bumped up to Rp48 trillion in 2014 from Rp47.8 trillion the year before.
BEST FOREIGN INVESTMENT BANK
UBS
In terms of number of personnel, UBS does not match Credit Suisse, which has a longer history in the country. But for the period under consideration, UBS showed it is clearly a force to be reckoned with.
The Swiss bank jumped up the Indonesian league table rankings after bagging key roles on some of last year’s most noteworthy deals. UBS was ranked number one among foreign banks in terms of investment banking revenues in Indonesia, coming second overall to local titan Danareksa, according to Dealogic data.
The Swiss bank generated net revenue of $10 million, surpassing Credit Suisse and Standard Chartered to take up a 7.8% market share, Dealogic data shows. It also ranked top among other foreign players in both the Indonesian equity and M&A advisory rankings. UBS helped to raise $625 million of equity capital, comfortably surpassing JP Morgan, Credit Suisse, Deutsche Bank, and CIMB, the Dealogic data shows.
UBS was one of the leading banks on the BlueBird deal, helping the third-generation family-run cab company to raise $200 million via an IPO in October. Although the deal was downsized from $300 million and plagued by a family lawsuit, it was the largest IPO in Indonesia in 2014 and widely considered a success story. Its after-market performance has been impressive — shares in BlueBird finished the year up 45%.
UBS was also a joint bookrunner on an IPO by Mitra Keluarga Karyasehat, the hospital operator, that raised $343 million in March. Mitra Keluarga was priced at 41 times forward earnings and was very well received by investors, which allowed the syndicate to be slightly more aggressive with pricing and push the deal towards the top of its indicative price range.
In addition, the Swiss bank pushed its way up the M&A league table rankings, taking the number one spot for foreign banks for the period under consideration. It acted as sole advisor to local telecommunication infrastructure firm Tower Bersama on a landmark share swap transaction with Telekomunikasi Indonesia’s tower operator unit Mitratel.
UBS is also making a name for itself in high-yield debt, completing over 40% of Indonesian deals for the period under review.
KOREA
BEST FOREIGN BANK
HSBC
Foreign banks are restructuring their Korean operations. In some cases they are firing clients, shedding branches, and focusing on what truly makes money. Some are also fighting regulatory battles.
It remains unclear which banks will emerge from this process with their reputations, balance sheets, and growth prospects intact.
HSBC has acted soonest and done the most. It has torn up the universal banking handbook in Korea and is turning itself into a specialist provider to chaebols, multinationals, and smaller companies (and their employees) in the manufacturing supply chain. The final judgement on which bank has the sharpest, most value-added focus remains to be seen but HSBC’s 2013 restructuring has left it in pole position. It is now best placed to be more aggressive in its remaining areas of activity.
That’s because the bank’s financial situation in Korea has improved as a result of the restructuring. Year on year, HSBC’s net operating income grew by 7% to $293 million, its pre-tax profits grew by 67% to $176 million, and its return on equity improved by 3.3% to 10.89%. It has also increased total assets, the return on those assets, and loans. The only thing that has fallen is total deposits, as planned; its remaining deposits are from its custody and security services business.
HSBC is taking advantage of its narrower business to help finance Korean corporate activity abroad, including project builds and operations in the Middle East and Latin America. China-related business has been robust; yuan-denominated deposits onshore have leapt over the past year from $1.2 million equivalent to $20 billion.
HSBC now has 45% market share in renminbi-related business in Korea, from providing high-yield investment products to facilitating currency swaps. The won/renminbi swaps market is brand new and HSBC is now conducting daily average volumes of up to $3 billion.
BEST FOREIGN INVESTMENT BANK
CITI
Citi was involved in some of the year’s landmark transactions, particularly in equities. Citi underwrote Hyundai Glovis’s $1.1 billion block trade, the biggest in Korea since 2011. Demand was strong so the bank achieved favourable pricing and was able to help the Chung family behind Hyundai to restructure their shares — to avoid incoming regulations penalising intra-company transactions and to smooth the way for a generational transition.
Citi spent more than a year considering various divestment options but rejected the alternatives because they risked leaking information. The block trade, in contrast, was completed in a single day by selling first to foreign buyers, again to avoid issues of confidentiality, and then to local investors keen to get a piece of the action.
Citi was also joint global coordinator and joint bookrunner on Cheil Industries’s $1.4 billion IPO, the largest IPO in Korea since 2010. The de facto holding company of the Samsung Group, Cheil also enjoyed healthy demand and priced at the top end of its range. Citi’s bankers did the valuation and helped sell the story, which resulted not only in a spectacular listing but also a strong aftermarket performance.
Citi was involved in key M&A deals including an intra-group deal for Hanwha to sell Q Cells to Hanwha SolarOne, creating the world’s largest solar panel cell maker. It also advised Saudi Aramco on its $1.9 billion acquisition of a 28.4% stake in S-Oil, helping Hanjin Group to monetise its stake in the oil company and enabling Saudi Aramco to enter the East Asian market.
Much of the DCM business Citi was involved in was flow-related but some bond deals were complex, such as Shinsegae’s issue of a guaranteed subordinated note — a first for a Korean company. Such instruments are usually issued by banks but Citi recommended it for Shinsegae to help the retailer deleverage.
MALAYSIA
BEST FOREIGN BANK
HSBC
Business conditions in Malaysia have not been easy in the last year. The economy has been hamstrung by falling commodity prices and slower export growth to key markets such as China. Having a strong balance sheet is the best way a bank can survive in such an environment.
HSBC saw a modest slip in its Malaysian earnings — attributable profit declined by -1.1% year on year to Rm964 million ($255 million) — but in that time it has also expanded its deposit base, bolstered its capital, and reduced non-performing loans.
Deposits grew by 2.5% to Rm58.6 billion, tier-1 capital was raised by 0.3% to 12.6% (while total capital increased by 0.8%, to 14.3%), and impaired loans declined from Rm305 million to Rm294 million over the year. The portion of impaired loans to total loans declined somewhat from 1.7% to 1.5%.
Also helpful in a downturn is a strong client base. HSBC’s corporate and consumer clients are diverse and stable and have been able to continue growing despite an adverse economic backdrop. That is especially true of companies involved in regional supply chains, whose contracts remain in place, although more of these companies are now looking to trim costs.
HSBC set up a new China desk to help Chinese companies do business in Malaysia, either as manufacturers or traders, particularly in the field of natural resources. HSBC is also a major financier of the domestic oil and gas industry and has led projects to help customers finance themselves more efficiently.
Foreign exchange trading plays a leading role in terms of driving revenue at the bank (in the fourth quarter of 2014 alone, currencies trading accounted for Rm386 million in revenues).
Many of the bank’s corporate clients want to diversify their funding base, so HSBC arranges more deals in renminbi, yen, US dollars, and Singapore dollars. Providing ringgit loans is no longer enough to service the top Malaysian companies.
The next phase of development is likely to be to help these companies do more business overseas. HSBC is beefing up its capabilities to help identify broader opportunities to help companies achieve financing across more products and structures.
BEST FOREIGN INVESTMENT BANK
CREDIT SUISSE
Credit Suisse achieved investor confidence by bringing in Socso, a local provident fund, as a cornerstone. The very conservative Socso had never participated in a deal this way so getting its commitment sent markets the message Malakoff needed.
Despite the downturn in oil prices, Credit Suisse also helped offshore services provider Bumi Armada to raise a $608 million rights issue with a $201 follow-on placement. Shareholders didn’t want to stump up money for the issue due to the sector’s woes. So Credit Suisse, in league with local banks CIMB and Maybank, tried a risky tactic: get new shareholders to buy the issue at a higher price and then subscribe for the follow-on bonus placement (called a cum-rights issue) at a discount.
To achieve a positive result required bags of coordination with the issuer, with investors, and with regulators. Essentially it required new shareholders to have faith that they weren’t being taken for a ride by existing shareholders, whilst ensuring Bumi Armada’s owners raised new funds for capex without diluting their stake.
PAKISTAN
BEST FOREIGN BANK
STANDARD CHARTERED
Standard Chartered has had a long time to put plenty of clear water between itself and every other foreign bank in the country, having been established in Pakistan for 152 years. And done so it has; not only is Standard Chartered larger in Pakistan than its foreign rivals, the country also hosts the bank’s second-largest retail banking network globally. Naturally, the bank is still expanding, with profit before tax up 16% in 2014 to PKR 15.2 billion ($149 million).
Helping to make Standard Chartered stand out is the breadth of its geographical presence, with 116 branches nationwide, and the depth of its product offering, particularly where Islamic financing is concerned.
In the past year-and-a-half, the bank has launched a string of new offerings including Saadiq home financing, which is based on the concept of “diminishing Musharaka” — a form of co-ownership where the bank and its client share ownership of a tangible asset in an agreed percentage.
In 2014 it also launched a Shariah-compliant instalment plan, which enables retail banking clients to pay for travel and home furnishings at zero interest rates and over time periods ranging from three to 12 months.
Standard Chartered is the only foreign bank with a Shariah-compliant credit card based on the concept of Urjah. It also reports strong growth in Musharika, a form of certificate of deposits. Outstandings, securities in existence, in this segment rose 61% over the course of 2014.
Standard Chartered’s commitment to Islamic banking also won it one of the slots to lead manage the government’s first international sukuk bond issue in a decade.
The $1 billion five-year deal, which priced in November, was the largest emerging market sukuk of the year and saw the government price about 50 basis points through its dollar curve. Bankers attributed the cheaper funding to strong investor interest in the Middle East where 54% of the transaction was placed.
One of the bank’s major strategic drives is to improve its digital presence. It opened its first digital branch in 2014 at Dolmen in Karachi, offering a range of online services including an online banking kiosk, ATMs and cash deposit machines.
In 2015 Standard Chartered hopes to open other digital branches in Lahore and Islamabad. The bank has also launched Mobile Money phase 1, whereby corporate clients can make bulk payments into a mobile wallet via interbank electronic fund transfers.
BEST FOREIGN INVESTMENT BANK
CREDIT SUISSE
This award was a contest between two banks: Credit Suisse and Deutsche Bank.
For the period under review, Deutsche was stronger in terms of product range. It acted as joint bookrunner on the government’s landmark privatisation of Habib Bank and played a similar role as one of four lead managers on the country’s $1 billion international sukuk.
But 2014 was Credit Suisse’s year because of the role it played re-opening Pakistani equity markets to international investors. Testament to its success is the news, this June, that MSCI is putting Pakistan under review for re-classification from Frontier to Emerging Market status.
The country was dropped from the MSCI Emerging Markets Index in 2008 after the Karachi Stock Exchange was briefly shut during the global financial crisis. It re-appeared on investors’ radars in June 2014 when the government re-opened its privatisation programme for the first time in seven-years.
Credit Suisse was the sole international lead manager for the sale of the government’s 19.8% stake in United Bank, which raised $388 million for state coffers. The deal was unusual in a number of respects.
Firstly, it represented the first-ever accelerated bookbuild from Pakistan and, secondly, it did not come with a tranche of global depositary receipts for international investors. The decision to exclude a GDR tranche reflects a shift towards direct trading in a company’s home market, although in Pakistan’s case many international accounts had not yet set up there.
One of Credit Suisse’s chief jobs was therefore to facilitate this process and one market participant estimated that foreign trading now accounts for up to 10% of daily turnover.
That increase in activity enabled the government to be far more ambitious with its second divestment, a 41.5% stake in Habib Bank this April. Credit Suisse was joint bookrunner on the deal, which presented a new set of complications, not least the fact that it represented a massive 5,145 days trading volume.
The $1 billion deal, which was priced with a reasonable 8.9% discount, took foreign investment in Pakistan to a new level. Foreign portfolio investors took up $764 million of the paper on offer, representing just over two times their total net portfolio inflows into Pakistan for the whole of 2014.
Credit Suisse has bolstered its commitment to Pakistan by dedicating research coverage to the country and now produces reports on 14 companies. It is also putting its balance sheet to work with ongoing mandates that include acquisition financing for an oil and gas company, plus two potential government financings.
PHILIPPINES
BEST FOREIGN BANK
CITI
Citi continues to use its strong corporate banking relationships to offer investment banking services to customers, arranging four capital markets transactions for the Asian Development Bank in the 12-month period as well as bond offerings for SM Investments and ICTSI.
It successfully syndicated a NZ$742 million ($507 million) acquisition loan facility for Universal Robina to fund its purchase of Griffin Food in New Zealand. The transaction was oversubscribed 1.3 times by 10 banks, removing the need for general syndication.
Citi’s financial institutions business remains robust and in the past year it has increased the size of its secured loan book, extending loans to banks using securities such as government bonds as collateral.
It is also the largest foreign exchange bank in the Philippines, controlling 10% of the interbank spot market and 15% of the swap market. Up to 112 of its customers now use its electronic foreign exchange platform, an increase of 20% on 2013/14. Citi holds the position as the top foreign dealer and number five overall dealer of government bonds, both primary and secondary trades.
BEST FOREIGN INVESTMENT BANK
UBS
UBS leads with its equities business and it also competes well in other areas of the capital markets, completing bond transactions for the sovereign and Security Bank, and M&A deals for San Miguel, Emperador, and Philippine Bank of Communications.
SINGAPORE
BEST FOREIGN COMMERCIAL BANK
CITI
Citi has a long-standing history in Singapore, spanning over a century, and is the country’s largest employer with a headcount of about 10,000 people. It stands out this year for its impressive breadth of businesses, ranging from cash management, treasury and trade services, foreign exchange, consumer banking, and credit cards.
Among foreign banks, its retail presence compares favourably with 23 branches in Singapore, compared with Standard Chartered and HSBC on 20 and 13, respectively, according to data provider SNL. It also has some 228 ATMs throughout the city state.
Singapore is the hub for Citi’s business in the Asean region, underscoring its importance to the bank. During the period under review, Citi continued to grow its assets under custody in Singapore and its office in Singapore played a part in transitioning over billions worth of assets owned by Norges Bank Investment Management, the world’s largest sovereign wealth fund — a major mandate win for the bank.
Citi posted a superior return on average equity of 13.19% compared with Standard Chartered’s 8.37%, according to SNL. Its tier-1 capital ratio was similarly robust at 21.4 versus Standard Chartered’s 8.9.
On the retail side, based on statistics from VISA, Citi leads the credit card business in Singapore with a market share of 32% for dining, 33% for shopping, and 33% for travel.
On the consumer front, Citi continues to push ahead, launching Citi Direct Car Loan, a new auto financing arrangement, in November 2014.
BEST FOREIGN INVESTMENT BANK
BANK OF AMERICA MERRILL LYNCH
The Singapore best investment bank award is a hotly contested one as different banks were strong in different asset classes. Citi and Credit Suisse were both noteworthy contenders; Citi ran the sale of Stats Chippac and Neptune Orient Lines’s sale of APL Logistics, while Credit Suisse banked the Keppel name with multiple deals.
HSBC has also been more active, leveraging off its balance sheet.
But in the end, Bank of America Merrill Lynch stood out. It may not be the most active dealmaker out of Singapore but during the period under review it advised on the most prominent cross-border M&A deal, namely Oversea-Chinese Banking Corporation’s acquisition of Wing Hang Bank, which closed in July 2015.
Bank of America Merrill Lynch advised OCBC as it faced off with a key adversary — hedge fund Elliott Management Corp. The Singapore bank held its ground and refused to raise its offer, which resulted in Elliot capitulating. The deal was a high-profile example of how Bank of America Merrill Lynch helped a client to fend off an activist shareholder.
Backing OCBC continued to reap rewards for Bank of America Merrill Lynch, which acted as one of the underwriters on the Singapore bank’s S$3.4 billion rights issue, the largest rights issue in Southeast Asia since January 2009. It was also a bookrunner on OCBC’s $1 billion Basel III compliant bond, which priced in June 2014 and allowed the Singapore lender to replenish capital.
In terms of outbound deals, Bank of America Merrill Lynch advised Singapore-listed Jardine Cycle & Carriage on its $615 million acquisition of a stake in Siam City Cement, helping the latter to expand into Thailand.
SRI LANKA
BEST FOREIGN BANK
HSBC
In the meantime, the Sri Lankan sovereign continues to set benchmarks for the rest of the country with its most recent $650 million international bond deal. HSBC was one of the lead managers for the 10-year deal as it has been for every single one of the sovereign’s international forays.
HSBC’s own balance sheet in Sri Lanka grew by 39% in 2014 and loans increased by 53% year-on-year to $1 billion. The bank’s pre-tax profit in Sri Lanka stood at $97 million backed by revenues of $170 million.
Return on equity came in at 16.46%, well above the 10% target that the overall bank is now governed by, shielding it from the axe that its parent has been wielding through many of its emerging market operations.
TAIWAN
BEST FOREIGN BANK
CITI
Deregulation is the watchword for the domestic regulator, particularly where the renminbi is concerned and Citi has pushed hard to stay at the forefront of developments.
In 2014 it became the first bank to obtain regulatory approval to offer cross-border renminbi pooling solutions for domestic banking unit and offshore banking unit clients.
It also recently started offering cross-border renminbi supplier financing. That means clients can now not only improve their liquidity management but also get more working capital options as well.
As part of its closer integration with China, Taiwan wants to grab a greater share of the fast-growing wallets of the mainland’s high net worth individuals. Again Citibank is very well placed.
Citibank is still the number one local credit card issuer by average spend thanks to its high net worth client base in Taiwan.
Its Citigold (customers with an average daily balance of NT$3 million or $98,000) and Citigold Private Client (average balance of more than NT$30 million) networks both continue to grow. Between June 2014 and end-May, the former grew by 3% and the latter by 9%.
The bank believes much of its success can be attributed to its integrated platform across commercial and investment banking. An example of this collaboration in action include the work its bankers executed last year for Delta Electronics, Taiwan’s largest power supply unit manufacturer, and for Norwegian power equipment supply maker, Eltek.
Citi advised Eltek on an M&A deal, which led the company to be taken private by Delta. The latter did not have an advisor but its close relationship with the US bank bore fruit on the commercial banking side.
Citibank provided the foreign exchange services to convert the deal’s cash funding into Norwegian krone. It is also now busy hooking Eltek’s 30 European subsidiaries into its cash management network.
Last year, marked Citibank’s 50th anniversary in Taiwan, an important milestone for the bank. The 4,500 employees across 60 branches and its corporate and investment banking network generated earnings before interest and tax of $331 million. That broadly matches half the Ebit of the top-five foreign banks in Taiwan put together, once more underscoring the bank’s almost unassailable position in the country.
BEST FOREIGN INVESTMENT BANK
MORGAN STANLEY
This award was a very close run thing between Citigroup and Morgan Stanley.
Citigroup announced or completed more M&A deals in Taiwan in terms of clients, including the acquisitions of Cosmos Bank by China Development Financial Holdings, of Forepi by Epistar, and of Eltek by Delta Electronics.
Citi was also prominent in equity capital markets with deals for Quanta and Acer, while JP Morgan should also be noted for its ECM showing with convertibles for Siliconware and TPK.
But Morgan Stanley was strong across every single investment banking category whether it be M&A, ECM or even debt capital markets, where it created a very strong niche for itself bringing US corporates to the fast-growing Formosa bond market.
As of June 1, it had acted as structuring agent and co-ordinator on $5.5 billion worth of bond deals for the likes of AT&T, Monsanto, and Verizon, although none of the foreign banks get league table credit for this role.
Testament to the high regard in which Morgan Stanley is held is the recognition its research team has garnered. It has won Institutional Investor’s award for Best Taiwanese Research Team for two years running.
Last year was not a banner year for ECM in Taiwan but the country generated plenty of M&A mandates as its banks sought to become regional players. As such Morgan Stanley’s role as house bank to CTBC Financial Holdings made a considerable difference to the league table rankings.
And during the period in question, Morgan Stanley either announced or completed five transactions for CTBC (FinanceAsia’s Best Domestic Bank). These included the $380 million acquisition of Citic Bank International (China) plus a $429 million private placement, which financed China Citic Bank’s 3.8% stake in CTBC (the first-ever investment by a Chinese financial institution in a Taiwanese financial holding company).
Last summer, Morgan Stanley also advised on CTBC’s $277 million acquisition of a 19.99% stake in China’s ABC Life Insurance. That was followed in May by the announcement of CTBC’s $1.1 billion acquisition of Taiwan Life, the second-largest insurance M&A in the country’s history.
Finally, it also advised CTBC on its ground-breaking acquisition of Tokyo Star Bank in Japan, which closed last summer.
Notable deals on the equity side include a $600 million convertible for semiconductor giant United Microelectronics Corporation, another house client, plus follow-on offerings for E.Sun Financial Holdings, China Development Financial Holdings, and Primax Electronics.
THAILAND
BEST FOREIGN COMMERCIAL BANK
CITI
Citi bags the best foreign commercial bank award in Thailand this year, re-capturing the award thanks to its strong profitability, admirable in light of the difficult economic environment in Thailand.
The US bank posted net income of $140 million in Thailand in 2014 compared with about $67 million in the case of Standard Chartered, according to audited financial statements at the end of last financial year.
Citi operates three full-service branches and 31 Citi network branches through its non-bank vehicle unit, with approximately 2,500 local employees. While the US bank may not have the most number of branches (Standard Chartered has 20 branches in Thailand, according to SNL Financial), it outpaces Standard Chartered in Thailand in terms of other metrics. For example, its non-performing loan ratio for 2014 was 2.66% far below Standard Chartered’s 7.43%.
The US bank also remains strong in its credit card segment.
During the period under review, Citi Thailand built out its cash-management relationships, working closely with the likes of PTT group, Indorama Petrochem, and Central Pattana, amongst others.
The second half of 2014 was characterised by oil price volatility and a sharp weakening of the Thai baht after the Bank of Thailand took measures to stimulate the economy. Amid such market volatility, Citi helped clients to hedge their exposure to currencies, interest rates, and commodities.
The bank is a key commodity hedging counterparty for many of Thailand’s large corporates and local institutions.
The bank also continues to have a strong presence among multinational companies as well as Japanese companies that require cash management services in Thailand.
BEST FOREIGN INVESTMENT BANK
MORGAN STANLEY
Deal flow out of Thailand remained muted as the kingdom went through a coup in May. Any equity capital markets business that was undertaken primarily involved deals led by domestic banks selling to Thai retail investors.
Thanks to its strong franchise in Thailand, Morgan Stanley was nonetheless able to claim enough success to bag this year’s best foreign investment bank award.
The US bank was a bookrunner on Jasmine Broadband Internet Infrastructure Fund’s $1.1 billion Thai initial public offering, alongside Bualuang Securities.
The deal was the third largest ever IPO in Thailand and offered yield-hungry investors a pick up over deposit rates.
The deal was one of the few Thai IPOs that was distributed to the onshore US investor base during the period and Morgan Stanley was the only foreign bank involved in the deal.
The Jasmine IPO was a culmination of a one-and-a-half-year-long effort between Morgan Stanley and Bualuang Securities, legal advisers, and the regulators to create an optimal fund structure.
In the M&A space, Morgan Stanley was the financial adviser to Lion Capital for the sale of canned tuna company Bumble Bee to Thai Union Frozen Food for $1.5 billion. While it was advising on the sell-side, Morgan Stanley had initially been picked by Thai Union Frozen to look into the deal but ended up being conflicted. Bumble Bee is the largest acquisition ever made by Thai Union Frozen.
The deal is expected to boost its revenues but could yet face keen scrutiny from US anti-trust regulators.
VIETNAM
BEST BANK
BEST INVESTMENT BANK
HSBC
