In May, FinanceAsia named the winners of its annual Country Awards for Achievement. In June, we'll present the awards at our annual awards dinner in Hong Kong. Today, we begin presenting the rationale for our decisions, to celebrate the best in banking from across the region, starting with the fast-evolving Bangladesh market.
BEST BANK, BEST INVESTMENT BANK: CITY BANK
Bangladesh is always a difficult country to judge because its top tier banks have different strengths. This year, we decided City Bank deserved to regain the crown for two main reasons.
Firstly, it underscored its strong corporate banking franchise with a landmark power sector financing for the Summit Group, which won our Bangladesh Deal of the Year in the 2017 Achievement Awards.
Secondly, it has mae great strides to broaden and deepen its retail and small and medium-sized enterprise banking franchise in a country which remains severely under-banked outside of major urban conurbations.
Help is coming from a new shareholder, the International Finance Corporation (IFC). Bangladesh’s central bank finally allowed City Bank to change its articles of association at the beginning of the awards period, enabling IFC to buy a 5% stake.
The bank now hopes to sign similar agreements with other global institutions to improve overall governance and take its operations to the next level.
On the retail side, City Bank is already very well positioned at the upper end of the retail sector, particularly when it comes to credit cards. It maintains a strong hold on the top slot across card issuance, acquisitions and billings.
In 2017, volumes jumped 27% year on year to $301 million, compared to $220 million for second placed Standard Chartered.
The bank has also unveiled a new digital banking platform called Citytouch to offer more service to customers. It was rewarded with 89% growth in transaction volumes during 2017.
The big area of focus for 2018 is the SME sector. Here the bank does not yet rank in the top three, but plans to change that by 2020.
This year, it is opening 50 SME centres across the country, scaling up to 120 by 2020. By that point, its target is to have SME lending account for 25% to 35% of total assets.
The bank’s overall asset quality has also been on an improving trend, an important factor underpinning this award. Non Performing Loans (NPLs) stood at 5.47% at the end of 2017 according to NPL data.
Bank officials say they hope to bring the figure down to 4% by the end of the 2018 financial year. By contrast, the state-owned sector is suffering an “acute” problem according to Moody’s, which notes its average NPLs stood at 26.8% as of June 2017.
But the overriding reason City Bank won this award is its corporate finance abilities. Pure investment banking activity in the country remains at an extremely nascent stage, as evidenced by Summit Group’s attempted stock market listing in Singapore instead.
Domestically, the focus remains on bilateral and multilateral loans in funding the country’s infrastructure development. But the commercial banks are playing an increasingly important role.
In City Bank’s case, it should quite literally set the first benchmark for the whole country in the international bond markets following the announcement of plans to issue a $100 million IFC-backed green bond later this year or early next year to fund environmentally-friendly upgrading of the country’s ready made garment sector.
Bank officials also say they are extremely proud of their structured finance department, which is helping underpin domestic infrastructure development. In 2017, for example, City Bank arranged funding for 1,142 MW of power sector capacity out of a total 1,800 MW. This amounted to $323 million and was led by Summit Group’s $79.67 million 12-year and 10.5 year syndicated loans for Summit Barisal Power and Summit Narayanganj Power. City Bank was the mandated lead arranger and bridge finance provider. The deal was long and large by local standards.
It also closed an $80 million European Credit Agency-backed deal for two other power projects.
In total, the bank estimates that it has $2 billion of power sector deals that have either closed over the past year, or are in process. To put this figure in perspective, it is 25% larger than the entire amount City Bank has funded over the past three years.
BEST INTERNATIONAL BANK, BEST INTERNATIONAL INVESTMENT BANK: STANDARD CHARTERED
It is testament to Standard Chartered’s incredibly strong presence in Bangladesh that when asked who their main competitor is, national banks mention its name rather than one of their local peers.
The global bank has a very firm hold over this award and is roughly twice the size of its nearest foreign rival in terms of both assets and profitability. In line with much of the domestic banking sector, the former increased during 2017 (up 7% to $3.33 billion according to SNL data), while the latter decreased (down almost 10% to $91.9 million).
As a result, return on average assets (ROAA) and net interest margins (NIM) also came under pressure, but were still respectable by regional standards at 2.87% and 4.19% respectively. However, one area of big improvement has been NPLs, which declined from 4.22% in 2016 to 2.95% in 2017.
The bank’s ability to support higher loan growth was also underscored by its improving credit ratios, with its overall capital adequacy ratio (CAR) rising from 15.66% in 2016 to 15.93% in 2017.
Retail accounted for 36% of client income in FY 2017, while commercial banking accounted for 22% and global banking 43%. Like City Bank, which won our award for Best Domestic Bank, Standard Chartered is focused on the high end of the retail market and ranks behind it at second by credit card volume.
Standard Chartered officials highlight a number of new retail initiatives during 2017 including a new app, which was launched at the end of the calendar year and is activated by a fingerprint. The bank also opened its first global airport lounge towards the end of the year and believes the high footfall is taking its brand to a new level in the country.
However, the bank’s key strength and focus lies in helping finance the country’s massive infrastructure needs and acting as a facilitator for inbound and outbound flows.
For example, it remains the market leader in terms of trade finance among foreign banks, registering 15% and 9% growth during calendar year 2017 for imports and exports respectively. Overall, its trade finance balance sheet grew 25% during the full financial year.
Where cash management is concerned, it won its largest ever mandate in 2017: providing banking services for a consortium of international firms implementing the $4.3 billion Matarbari coal power project. Banking officials highlight that this is a pivotal project for the fast growing Bangladesh-Japan corridor, with fast growth also expect from new corridors between Bangladesh and Korea and Bangladesh and India.
However, the biggest growth corridor of all is between Bangladesh and China and here Standard Chartered faces intense competition from Chinese state-owned lenders. But it is still winning mandates.
One example is the $1.56 billion power project being developed by China National Machinery Corp (CMC) and Bangladesh’s North-West Power. Standard Chartered is not financing the project, but it is acting as security and facility agent.
Officials say the bank is also starting to provide advisory and financing services for Bangladeshi firms starting to expand overseas. One area of focus is helping companies remit funds out of a country without full capital account convertibility. One 2017 example concerned a power company expanding to Kenya, which needed to navigate a number of regulatory hurdles before transferring the first equity injection for a $75 million project.
