SINGAPORE
BEST BANK, BEST INVESTMENT BANK, BEST BOND HOUSE, BEST EQUITY HOUSE, BEST FOREIGN EXCHANGE BANK
DBS
DBS continues to bag the awards in Singapore for a number of reasons. For one, the bank’s earnings have hit record highs despite low rates — a sign that it has succeeded in de-coupling its earnings from the rate cycle. It has achieved this by cross-selling a wide range of products from cash to investment banking and has also beefed up its private wealth management arm.
During the financial year 2012, DBS reported a record net profit of S$3.81 billion, making DBS the second Singapore-listed company after SingTel to cross the S$3 billion earnings mark. Meanwhile, during the first quarter, its earnings hit a record high of S$950 million, rising 2% from a year ago.
Its return-on-equity is at a five-year high and it also has a strong capital position with a tier-1 capital adequacy ratio (CAR) of 14%. Its total CAR of 17.1% is comfortably above regulatory requirements.
The bank has also been ambitious in its overseas expansion — though this has not entirely been smooth sailing: it has bumped up against hurdles in buying a controlling stake in Bank Danamon. However, Hong Kong/China operations are now reaping returns and are a critical part of the bank’s overseas strategy and including its India presence, the bank has a stronger pan-Asian footprint than its peers.
On the bonds and equities front, DBS held onto its dominant position during the past year. It has been at the forefront in arranging bonds that have helped to develop and increase the diversity in the local bond market. During the past year, DBS was involved in arranging nearly all the marquee deals including issues for a number of foreign borrowers.
This included ABN Amro’s Sing dollar subordinated debt offering and NTUC Income’s debut bond. The bank was also an arranger on Indian Oil Corp’s maiden Sing dollar bond, which had the longest tenor and was largest amount issued by an Indian company in the Sing dollar market. Also noteworthy, is the bank’s growing presence in the US dollar market, an area where it has become more active.
While its rivals UOB and OCBC have built up a presence in debt, on the equities front, DBS is a tough act to follow. The real estate investment trusts (Reits) market continue to be a key feature in Singapore, and DBS was an active arranger for deals including Mapletree Greater China Commercial Trust’s IPO, Asia Pay Television’s IPO and Far East Hospitality Trust. The bank leverages on its strong origination abilities but is also active in the secondary market thanks to its stock-broking franchise DBS Vickers.
The bank bags the best investment bank award thanks to its well balanced business — on equities, M&A and debt. On the M&A front, DBS played a role in high-profile transactions, which included acting as adviser to TCC Assets for its multi-billion dollar acquisition of F&N, together with UOB and Morgan Stanley. It also acted as a sole financial adviser to property tycoon Simon Cheong, enabling its client to achieve a 100% buy out of SC Global without having to raise the offer price. This was achieved amid resistance from Wheelock which had appointed Goldman Sachs as a financial adviser and acquired shares at above the offer price.
On the foreign exchange front, DBS has the largest Singapore dollar trading book globally and a strong Asian trading mandate. It accounts for a dominant share of all Singapore dollar-related flows in the market, and commands a one-third share of the market for US dollar/Singapore dollar interbank and customer trade flows. The bank also has the biggest forex derivatives team in Singapore among the local banks — with 14 experienced forex traders and structurers to support its Asian clients.
BEST FOREIGN INVESTMENT BANK
Goldman Sachs
Goldman Sachs tends to pick high-profile deals and wins the award this year for ticking all the boxes in the city state. M&A certainly was a key theme, with cash-rich foreign buyers picking up iconic assets in the city state, such as Tiger Beer. In this respect, Goldman Sachs advised Fraser and Neave on its $4.5 billion sale of its interest in Asia Pacific Breweries to Heineken International, which is the fifth largest brewery M&A globally to date. It also advised Fraser and Neave in relation to takeover offers and the US bank was instrumental in helping F&N squeeze value by securing a competing bid from OUE Baytown after TCC’s initial offer. This created pricing tension and led to TCC revising its bid — which resulted in a total S$966 million more for F&N shareholders. The deal was the largest M&A transaction in Singapore and the largest takeover of a conglomerate in Southeast Asia to date.
Another theme in Singapore was the Reit market and Goldman Sachs played a role in a number of key offerings. It was a bookrunner on the well-received Mapletree Greater China Commercial Trust’s $1.4 billion IPO –which was also the largest Singapore Reit IPO and the largest IPO in Asia ex Japan so far this year. In addition, it was on Far East Hospitality Trust’s IPO. The debt capital markets also were busy during the past year, and on this front, the bank was an arranger for Temasek’s $1.7 billion bond offering — which succeeded in re-pricing its secondary curve and achieving a record low 30-year coupon for a non-US issuer.
BEST FOREIGN COMMERCIAL BANK
Citi
Citi reclaims the award this year, as it continued to deepen its penetration of the market. It remains the largest banking employer in the country, providing jobs to close to 10,000 people. Singapore is the regional cash processing hub for 14 Citi branches in Asia Pacific, Europe and the US. It also forms one of the key hubs for Citi’s trade risk distribution team globally — emphasising the city state’s importance.
It is locally incorporated and has the ability to open as many branches as it wants but is further penetrating the consumer market through Citibank Express — a next generation Smart banking machine that offers customers self service access to virtually all branch services including opening accounts, applying for loan cards and cashier’s orders. Singapore was among the first three markets globally to roll out the machine. On the securities and fund services side, Citi offers issuers, intermediaries and investors a wide range of client solutions and continued to grow its assets under custody during the period under review. With Singapore now able to clear the renminbi onshore, Citi is focusing on Chinese companies setting up their regional hubs and treasury operations in Singapore. Citibank Singapore continues to be well capitalised, with a total capital adequacy ratio of 28.06%, well in excess of MAS requirements.
TAIWAN
BEST BANK, BEST FOREIGN EXCHANGE BANK
CTBC Bank
Even as the operating environment in Taiwan remained challenging with slowing economic growth and low interest rates, CTBC Bank, or Chinatrust Commercial Bank as it was known before it changed its name earlier this year, was able to generate growth across its various business lines and maintained its market leadership in credit cards, structured finance, foreign exchange, cash management and fund custody.
It is also the top-ranked bank in the slightly newer business lines of online and mobile banking. As of April this year, its number of internet banking clients exceeded 2 million, which gives it a market share of 28%.
But more interesting for the purpose of winning this award is the fact that it continued to bring innovative products and services to its clients, such as a number of trade finance and factoring solutions aimed at penetrating the market for small and medium-sized companies, and a new ATM remittance service, which is described as cutting-edge and targeted at overseas workers and migrants as well as SMEs operating offshore.
It also set a valuable benchmark when CTBC Bank itself decided to issue the first renminbi-denominated bond in Taiwan just a few weeks after the regulators gave the go-ahead for such transactions. The three-year deal, which was self-led but involved a number of other underwriters, raised Rmb1 billion ($160 million) and was an interesting way for the bank to kick-start this market.
On the FX side, it launched a new trading solution called Crown Pivot, which provides an alternative in a range-trading market by giving the user an opportunity to make profits as the exchange rate swings within a range. CTBC Bank maintained its market leading position in FX derivatives and since the beginning of this year, the gap towards the closest competition has widened slightly.
Similarly, the bank was able to increase its share of the syndicated loan market to 7% at the end of 2012 from 6.1% a year earlier, even though the total syndicated loan volume in the market fell by 23% during this period.
Supported by these improvements, CTBC Bank posted a 9.1% increase in net profit last year to $621 million, while its return-on-equity increased to 13.4% by the end of 2012 and 15.1% at the end of April this year. The return-on-assets also crept above 1% to 1.1% in the first four months, versus 0.92% at the end of 2011.
The bank recorded almost 6.8% growth in loans, 4.5% in deposits and 2.4% in total assets last year. Provisions required for its exposure to a syndicated loan to struggling ProMos Technologies pushed its non-performing loan ratio to 0.52% at the end of April from 0.28% at the end of 2011, but that is a minor blip and doesn’t take away from an otherwise stellar performance.
BEST INVESTMENT BANK, BEST EQUITY HOUSE, BEST BOND HOUSE
Yuanta Securities
Among these three awards, Yuanta had the toughest competition in the equity category where Grand Cathay Securities and KGI Securities both had a strong year. Following an acquisition in 2012, both these firms are now owned by China Development Financial Holding but they are still operating as two entities. If they were to pool their activities, their combined volumes would have been superior not just to their domestic peers, but to all international banks as well, which tend to focus on larger deals done in the offshore markets.
But it is not just about volumes. In particular, Yuanta’s strength in bringing new companies to the market through initial public offerings does make it stand out from the crowd. Whether it’s smaller companies listing on the Emerging Stock Market or companies moving on to the next stages on the GreTai over-the-counter market and the Taiwan Stock Exchange, Yuanta appears to be the bank of choice. Notable deals in the past 12 months include the NT$2.72 billion ($91 million) public offering of Grand Ocean Department Store Group, which was the largest IPO in Taiwan in 2012; and the IPO for Eastern Technologies, which was returning to the public markets after a separation from its original group that led to a de-listing from the Singapore Exchange.
Yuanta’s underwriting of follow-ons and convertible bonds is almost as strong and keeps it in the top-two or three in the overall ECM league table depending on which data one looks at. It is also second to none in equity brokerage, which this year is included as part of the Best Equity House award. Since Polaris Securities started operating under the Yuanta name in April last year, the enlarged firm has had an average brokerage market share of 13.7%, which of course increases its attractiveness as an IPO arranger even further. It also ranks as number one when it comes to margin financing, online trading, futures and options trading and assets under management, and it boasts the largest retail client base in Taiwan with more than 750,000 active accounts.
The firm is also not scared to put its neck out in terms of research calls and investors who follow the advice of its analysts have had the opportunity to generate some significant returns in the past year. One example is contact lens manufacturer St.Shine Optical. Yuanta went against most of the street when it upgraded the company to a “buy” in November last year, citing sustainable demand from its Japanese clients as they were gaining market share. As of mid-May the stock has gained 64% since that call and outperformed the benchmark index by 48%.
Meanwhile, the firm once again clinched the Best Bond House award ahead of KGI and Masterlink for its market-leading presence in corporate bonds and financial debentures, both with regard to primary issuance and secondary market trading. Between June last year and April this year it had a 16.8% share of the total underwriting volume. It is also a strong player in convertible bond asset swaps, which are an important feature of the Taiwan CB market as they help increase the liquidity in the secondary market and also breaks these instruments into smaller sizes better suitable for individual fixed-income investors.
Yuanta was also a lead underwriter for the first renminbi-denominated bond in Taiwan, which was issued by Chinatrust Commercial Bank in March, shortly after such bonds were allowed by the regulators. This shows its ability to move into new market areas and products as and when they become available. So far, there have been five renminbi-denominated bonds issued in Taiwan and Yuanta has underwritten two of them.
Yuanta’s deep-rooted corporate client relationships also enabled it to land advisory roles on a number of M&A transactions, particularly pure domestic deals that the international banks view as too small to get involved in. That said, it is working with Mediatek on its $3.8 billion tender offer for M-Star Semiconductor, which include several foreign banks on both sides. It also advised US-based Synopsys on its acquisition of Taiwan-listed electronic design company SpringSoft.
No other securities firm is as consistent across products, making Yuanta a fairly easy choice for our Best Investment Bank award this year.
BEST FOREIGN INVESTMENT BANK
Goldman Sachs
As always, this was a competitive category, mainly because of the small number of deals but also because several banks brought deals to the market that were interesting in one way or another. Citi and J.P. Morgan both deserve a mention.
But the award this year goes to Goldman Sachs, which had a slight edge over the other two in terms of the number of equity deals it worked on and also in terms of the outsized economics that it claims to have received on most of its joint-bookrun transactions. It also managed to complete two M&A deals in the past 12 months, while other international banks had to settle for just one each.
Its equity deals were well-diversified across products and included convertible bonds, GDRs and block trades. Among them was the first sale by the chairman of waste management company Cleanaway since its IPO in 2011. The deal was small in absolute terms – it raised $137 million – but accounted for close to 20% of the company and helped attract new international funds to the stock. The deal highlighted the fact that Goldman doesn’t just go after the elephant deals for long-term relationship clients, but does also spend time identifying new and unique equity stories for global investors to consider.
Goldman was also the sole bookrunner for a $1.5 billion dual-tranche bond issued by Taiwan Semiconductor Manufacturing Corp (TSMC), which was the company’s first-ever debt issue in the dollar market. Aside from the size, the deal stood out because the three-year tranche actually achieved a tighter pricing than could have been expected in the domestic market.
On the M&A side, Goldman worked with Micron on its $325 million acquisition of a stake in Rexchip Electronics and it is also advising M-Star on the $3.8 billion tender offer by Mediatek, which is awaiting approvals but is set to become the largest Taiwan M&A in the TMT sector since 2010. A number of international banks are involved on both sides of this transformational transaction, but sources say most of the credit should really go to the two principals.
BEST FOREIGN COMMERCIAL BANK
Citi
Citi’s earnings and assets in Taiwan did fall last year amid a challenging operating environment, but it continues to grow its business in terms of products and services on offer. In the past 12 months it has also increased its number of SME clients to about 2,500 from 2,300 while its multinational and large corporate clients edged up slightly to 610. This gives it a level of corporate access that is envied and unrivalled by its foreign peers. Citi backs this up with an on-the-ground workforce of almost 5,000 people, including 45 professionals focusing specifically on corporate and investment banking.
And even if its 2012 pre-tax profit fell close to 12% year-on-year to $547 million, its pre-tax return-on-equity decreased to 16.5% from 19.9% and its non-performing loan ratio edged up to 0.42% from 0.23%, it is still well ahead of its foreign peers. It also ranks as the strongest and best capitalised bank in the country, including domestic lenders. Its ROE compares to a market average of 10.4% and its 1.9% return-on-assets is well ahead of the market average of 0.7%.
The US bank remains a key partner for local and international companies when it comes to cash management and trade finance and it was at the forefront when the regulator eased its restrictions on the renminbi earlier this year, completing the first cross-border renminbi settlement in the Taiwan market shortly afterwards. It also helped clients including AU Optronics, Far Eastern International Bank, Foxconn and E.Sun Financial to raise more than $4 billion from the domestic and international capital markets.
On the consumer banking side, it upgraded another five branches to “smart branches” and became the first bank in Taiwan to launch online trading in Hong Kong and US stocks. In October last year it re-launched its Citi Privileges credit card, which is co-branded by multiple partners and led to a 200% increase in the number of new accounts in just three months. It currently has 387,000 card accounts and ranks as the number one card issuer in Taiwan in terms of the amount of spending per card.
