Awards for Achievement 2009: Day 4

Today we announce our major House Awards, including Best Bank, Best Investment Bank, Best M&A House and Best Equities House.

The following banks and our Borrower of the Year will be honoured at an awards dinner at the Conrad Hotel in Hong Kong on February 4. If you would like to book a table at the event, please contact Stephanie Cheung on +852 2122 5225 or [email protected].


Citi once again reclaims its title as the best bank in Asia. It had a difficult year -- explaining to clients and indeed bankers it recruited (and retained) that the difficulties Citi faced in the US were not affecting its Asia business. The bankers, from top to bottom, have the spiel down pat, evidence that they have needed to sell the story repeatedly, but the story is clearly true.

During the past 12 months (as of mid-November), Citi Asia Pacific reported revenues of $15 billion and a net income of $5 billion. The region contributed 30% of global revenues, which is now the largest net globally. Of course, that increased contribution to the overall bottom line is in part due to lower contributions elsewhere in the world, but the figures support the argument that Citi globally needs a strong Asia team -- which is why it is likely that Citi will continue to invest resources and use its balance sheet judiciously in the region. And Citi Asia needs its global franchise -- Citi's revenues from working with multinational companies in Asia have doubled in the past three years, underlining the importance of the bank's global platform to its clients.

Citi, which employs more than 50,000 people in 18 countries in Asia, has always had one of the largest and deepest footprints in the region. And it prides itself that its representation across the continent is through full-fledged offices and not suitcase banking as some of its competitors practice. Indeed, in many of the countries in which it operates, Citi benchmarks itself against local competition as its foreign counterparts are either absent completely or are just not on the same playing field. Citi's consumer franchise is large, well-entrenched and an integral part of its overall offering. All this is part of the reason Citi has won our best bank award nine years out of the past 10. (It has won the best commercial bank award since 1997; we introduced the best overall bank award, which includes commercial banking and investment banking, in December 2000.)

Importantly, Citi is continuing to invest in key markets in the region, which is borne out by its record net income in markets such as China with Rmb 1.3 billion ($190 million), Singapore with S$1.2 billion ($861 million) and Indonesia's Rp1.66 trillion ($176 million). Indeed, while others exited China investments, Citi invested, opening new branches and launching a rural lending company. It also gained an interbank bond licence. This year Citi also launched consumer banking in Vietnam, becoming the first US bank to offer such services.

Competitors have tried to argue that customers closed accounts at the bank late last year in a flight to perceived safer havens, but the bank disprove that accusation with data. By the end of the third quarter of 2009, Citi Asia Pacific had average deposits of $91.3 billion at its consumer bank (and that is excluding wealth management/private banking deposits, which it does not disclose), up from $84.8 billion in average deposits at the end of the fourth quarter 2008. And in the first half of 2009, the bank's Asia-Pacific institutional deposits hit the $100 billion barrier for the first time.

In addition to its strong commercial presence, Citi rebounded on the investment bank front too. It led the first Asian IPO in 2009 for Real Gold, which has won our best mid-cap equity deal this year. It helped herald in both the high-yield market with its Matahari bond exchange and the Asian corporate bond market with the $700 million Posco bond. It also worked on the highly complex dual A- and H-share listing for Metallurgical Corporation of China and was a joint global coordinator for the spinoff of casino play Sands China on the Hong Kong exchange. It has also raised more than $120 billion for clients this year, making it a go-to bank for many clients in the region.

Morgan Stanley

This has been an equity story year, while M&A only started to bubble in the second half of the year; and that too on the strength of buoyant equity capital markets. It was a standout debt year in Asia but in terms of revenue, equity mattered much, much more. So the banks that dominated equity issuance were obvious candidates for the best investment bank.

At the same time, as our cover story indicates, 2009 was a year of spotting trends: the first half of the year was characterised by multiple rights issues and foreign banks monetising their stakes in Chinese banks -- and Morgan Stanley was on these deals. The second half of the year was dominated by both the primary bond market and the IPO market, and we once again saw Morgan Stanley, frequently. Put simply, Morgan Stanley has led most phases of the year, be it the DBS rights issue or the Bank of China/Royal Bank of Scotland follow-on, the Temasek bond or the Metallurgical Corp of China IPO. While other houses had stronger debt deals this year, Morgan Stanley had the best overall franchise -- across equity, M&A and debt.

Indeed, if you turn to our data pages, you will see that Morgan Stanley is the only bank in the top five for equity capital markets, debt capital markets and M&A activity in the first 11 months of 2009, according to Dealogic. It had completed 128 M&A, equity and debt deals as of the time we went to press. But as we say often, if league tables were all that mattered, our award selection task would be easier. Morgan Stanley has also distinguished itself by winning a role as a trusted adviser to leading multinationals (from AIG to RBS to GE Capital), through its proven track record in quality execution and for achieving high valuations on IPOs.

For this award we also look at the presence of the investment bank in deals across geographies -- while a one-country focused strategy can be profitable, we don't believe it represents an Asia-wide franchise. Morgan Stanley has demonstrated strength across markets. In China it was busy with landmark IPOs and M&A activity in the resources space. In a brief period of time it has made a splash in India, executing key equity deals this year. And with many of its competitors gearing up for more India activity in the year to come, Morgan Stanley's recent track record should see it well-positioned to compete. As for Southeast Asia, it may have missed the Indonesia high-yield bond trend, but Morgan Stanley made up for it in Singapore, with the DBS rights issue and by being on three of Temasek's divestitures. It maintained its presence in Korea on a series of fronts -- the KB Financial rights issue, the LG Display block and bonds for both Kexim and Industrial Bank of Korea. At the same time, it has been active in Taiwan, particularly in the financial sector.

Globally, 2009 was a year when banks with stronger balance sheets, which had capital to deploy, started to gain share on their rivals. That trend is repeating itself in Asia, albeit more gradually, and Morgan Stanley is well-positioned on that front as well.

Julius Baer

Our hypothetical client this year was a professor who had come into a windfall by way of inheriting a residential building on her mother's death. The seven-storey building was located in Hong Kong's trendy Star Street area in Wan Chai. She was seeking advice on whether to monetise her inheritance or redevelop it. We asked the private banks pitching to us to take a view on something that everyone in Hong Kong likes to speculate about -- the property market. We added in liquidity requirements related to future needs for university education for the professor's children.

As in previous years, each pitch had some noteworthy elements. Citi brought an interesting proposal for joint development from a real estate fund, complete with a letter of interest from the fund. UBS highlighted the consideration that our professor should invest in portable insurance to cover eventualities that could arise after she is no longer comprehensively insured by her employer.

But the focus of each of the pitches was on the property and the approach taken differed. All our contenders accurately gauged that the client had no prior exposure to the vagaries of the Hong Kong property market and thus would favour a simple solution. But the Julius Baer proposal to convert the building into a block of serviced apartments, despite not being the simplest, was compelling, both in terms of rationale and returns. Julius Baer had identified the segment of the serviced apartment market that yields highest returns, namely one-bedroom residences. The boutique Swiss bank also recommended taking some leverage against the currently unleveraged property, both to finance the renovations and create some liquidity for an investment portfolio. The investment portfolio was intended to provide some diversification to the client.

Not surprisingly, given the client's profile as well as the volatility the stock market is exhibiting, all the private banks advised creating a portfolio mostly invested in fixed income.

The Julius Baer pitch ultimately got our vote for demonstrating innovation and creativity in structuring a solution for the property. For example, it factored in a revenue stream from renting out car parks, given that most, if not all, residents of serviced apartments will not own vehicles.

We'd note that we were somewhat surprised that none of the private banks suggested it could be a good time to invest in property in one of the severely subprime-affected markets such as London or the US, given relative valuations and to maintain the exposure to the overall asset class.

Credit Suisse

As was the case last year, Credit Suisse and Morgan Stanley have been neck and neck in terms of the value of the deals they have closed for much of the year. In volume terms, Credit Suisse closed far fewer deals than Morgan Stanley, which is to say that Credit Suisse achieves its position through being on a smaller number of high-value deals that defined the year -- a winning strategy in our opinion.

Credit Suisse advised Sinopec on its $9 billion acquisition of Addax, our best China deal. This was a remunerative deal for Credit Suisse and cited to us by others as the big M&A deal they missed in 2009. It leveraged this deal to win a mandate from Sinopec and oil producer CNOOC for a $1.3 billion acquisition of a 20% stake in an Angolan oil field. It also worked with Sichuan Tenzhong on the acquisition of the Hummer brand and assets from General Motors.

In deciding this award, we lay store by completed deals, especially given the uncertainties announced deals still face before closure, and we exclude independent fairness opinions, but we do look at announced deals as an indicator of the pipeline, because some deals are not closed due to technicality only, or deserve credit even for getting announced.

On the financial sponsors' side, Credit Suisse was mandated on three deals that have not yet closed. It worked with GCL-Poly Energy Holdings on a HK$5.5 billion ($710 million) investment by China Investment Corporation and Chinese retail chain Wumart Stores on a $213 million investment by private equity firm Texas Pacific Group and China's Legend Holdings. And it was sole adviser to Abu Dhabi-based Advanced Technology Investment Corporation on its deal to buy 100% of Singapore-based foundry Chartered Semiconductor Manufacturing for a firm value of S$5.6 billion ($4 billion), perhaps the most significant investment by a Middle Eastern firm in Asia this year. As with the Sinopec-Addax deal, this deal was cited by others because the economics on the buy side were very remunerative. A significant miss for Credit Suisse in the private equity arena was a role on the Anheuser Busch InBev sale in Korea.

Credit Suisse worked with the Australia and New Zealand Banking Group (ANZ) on its $550 million acquisition of select businesses of the Royal Bank of Scotland, a transformational deal for ANZ.

This has not been an M&A year; revenues from M&A have been slight compared to those from capital markets. But Credit Suisse distinguished itself by placing its bets well, using its resources effectively and focusing on profitable deals.

Morgan Stanley

This was one of the toughest categories to judge this year, partly because issuers chose to include more bookrunners on each deal as they tried to achieve greater certainty of success. The top two contenders, Morgan Stanley and UBS, both captured the key trends this year -- the sell-downs and recapitalisations in the first half, and the resumption of growth capital-raisings that took over the agenda in the second half. Both banks were active throughout the year, printed transactions in most countries and brought several landmark deals to the market -- many of them as joint bookrunners. And when it came to volumes, UBS had a slight edge over its US rival.

But when we dig deeper, Morgan Stanley stands out. The US bank has shaken off a reputation for being focused mainly on China, bringing several rights issues in Singapore, Malaysia and Indonesia, and noteworthy transactions in both Korea and Taiwan. But most impressively, two years after achieving its operating licence Morgan Stanley has made a huge leap in India during a period when this market has been both reasonably active and (according to bankers at several firms) relevant in terms of fees. The bank was a bookrunner on three of the nine IPOs above $100 million and was involved in numerous follow-ons and qualified institutional placements (QIPs), including the first of the year, for property developer Unitech.

In China it was involved in Sinopharm's successful IPO, and led Metallurgical Corporation of China's highly complex dual A- and H-share listing as the sole global coordinator. But it also demonstrated its client range with the $63 million IPO for small-cap wind farm operator Greens, pushing an alternative energy theme that the bank is a strong believer in.

Execution hasn't been flawless, but in an oftentimes volatile market Morgan Stanley has delivered a combination of premium valuations and stellar aftermarket performance on a large proportion of its IPOs -- often thanks to efficient stabilisation in the first month of trading. On follow-ons and sell-downs it has achieved tight discounts for its clients, sometimes by timing a trade to take advantage of improving sentiment for a particular sector or trend. An example of the latter was the $2.4 billion sell-down of Bank of China shares by the Royal Bank of Scotland in early January, which improved on the 11.9% discount achieved on Bank of America's sale of China Construction Bank shares a week earlier to price just 7.6% below market.

Notable follow-ons include a $300 million capital-raising for China National Building Materials in early February and a $587 million three-legged placement for G-Resources in June, which enabled that company's transformation into a gold and silver miner.

And in a nod to its careful selection of clients, whether small-, mid- or large-cap, Morgan Stanley has been associated with none of the market newcomers that after listing, warranted or not, have become the subject of speculation and negative headlines related to questionable practices.

Credit Suisse

A category that has been very close over the past few years turned out to be one of the easiest to award this year. Credit Suisse has dominated the sector in terms of the number of deals, printing almost twice as many as J.P. Morgan and more than three times the transactions completed by Citi and Deutsche Bank -- the three banks that have led this asset class during the past few years. A couple of large deals led by other banks made its lead less eye-catching in terms of deal value, but this does little to distract from the momentum enjoyed by the Swiss bank this year.

While not exactly a newcomer to the asset class, its rise to the top spot in the league table this year, from eighth in 2008, is definitely noteworthy. It has accomplished this turnaround without the use of bait-and-switch tactics, winning deals on terms that it was able to stick by and deliver, earning the respect of rival banks in the process. Most important, it has churned out a series of well-executed deals that have done well by its clients, and been liked by investors at the same time. It has printed trades in six different countries and it has been on none of the deals that were considered major failures this year.

Its $832 million equivalent CB for CapitaLand, which it led on a sole basis, did attract a fair amount of scrutiny, however, and questions of whether that deal was fully distributed on the night are unlikely to go away. However, rival bankers note that Credit Suisse's win of this important mandate -- the CapitaLand group is virtually a house account of J.P. Morgan's and a frequent issuer in the capital markets -- would have been worth taking on a bit of extra risk, if indeed it did do so.

The 13 deals that it had completed by early December (nine on a sole-book basis) also include a couple of innovatively structured deals for Bumi Resources and Daewoo International, which helped the issuers achieve specific targets, such as limited equity dilution and low annual interest cost; a couple of CB/equity combinations; and the first ever international CB for a Vietnamese issuer. Credit Suisse was also quick to pick up on the shift in the CB investor base this year -- outright buyers have stepped in to replace the hedge funds, many of which have been sidelined by the financial crisis -- a move that helped it achieve good pricings for companies with limited or no stock borrow.

Credit Suisse

Like the other banks that were in contention for this award, Credit Suisse doesn't specialise in mid-cap companies and it has certainly done its fair share of large deals this year. But it has done a good job in the mid-cap space in terms of helping these lesser-known companies raise capital and in a post-financial crisis year when risk aversion were still pretty high, that often involved a great deal of investor education and pro-active positioning of the equity story.

Credit Suisse brought five mid-cap IPOs during the year (more than all other international banks, although Macquarie has done as many), including Chinese online gaming provider, which raised $138 million in the first Nasdaq listing of the year in early April. It also introduced thenardite -- an important raw material for the production of powder detergents, dyes, textiles, glass, kraft pulp and pharmaceutical products -- to the broader investment community when it took Lumena Resources public in June through a $171 million IPO. In September it helped Tong Yang become the first life insurer to list in Korea and the first Korean company to go public in 2009. Tong Yang raised $290 million, just about squeezing into the $100 million to $300 million deal range that we use to define a mid-cap deal.

But the Swiss bank has also been instrumental in helping already listed mid-cap companies such as Air Asia, Indian infrastructure developer Lanco Infratech, Trina Solar and Chinese developer SRE Group, to recapitalise through the use of follow-on offerings or indeed through convertible bonds, which has been another strong-point for the bank this year.


The year in international bond markets can be divided into two unequal parts. Until mid-way through the second quarter, primary issuance was sparse and borrowers were forced to pay high yields and spread premiums to get deals done; but a sustained rally in credit markets throughout the world for the rest of the year allowed issuers from all sectors to tap strong investor demand. In Asia, HSBC was the leading bank throughout both periods, participating in timely benchmark offerings, arranging landmark deals, running issues for repeat borrowers and creating complex structures appropriate for the prevailing market conditions.

Only Deutsche Bank seriously rivalled HSBC, ranking first for the number and value of deals compared with HSBC's second, but the UK-based bank has the edge for product innovation and diversity, and boasts an almost flawless execution record, confirmed by the strong secondary market performance of its lead-managed issues. It delivered all-in financing packages and was creative in providing liability management solutions.

HSBC was a bookrunner for 10 out of the first 13 international bonds from Asian borrowers after the Lehman collapse, helping them access scarce liquidity and restoring investor confidence. It led transactions from all sectors -- sovereigns, state-owned entities, corporates and financials -- and was a constant presence among Korea's prolific issuers. HSBC executed structures that were new to the region, such as the first Asian government-guaranteed bond for Hana Bank, the first Asia-Pacific covered bond -- a $1 billion transaction for Kookmin Bank -- and a debut US dollar sukuk for Indonesia.

HSBC scored well in terms of geographical breadth too. It lead-managed the only two Indian transactions during the year, for State Bank of India and ICICI Bank, and was a bookrunner for Sri Lanka's $500 million five-year issue, which was its first since 2007. Other notable deals include the 25-year bond for the Philippines, an $850 million 10-year transaction for the Noble Group, which had just gained investment grade status from all three main rating agencies, and its repeat business for Hutchison Whampoa, including the prized $3 billion two-tranche offering and even an opportunistic €1.75 billion seven-year bond in November. And although HSBC wasn't a major presence in the high-yield market, it led one of the most successful deals in that category: a $300 million issue for China's Agile Property. Deutsche ran them close, but overall HSBC's DCM team was a dominating force in Asia's international bond markets during 2009, across sectors, countries and products.

Credit Suisse

Global financial crises hardly provide the best conditions for high-yield bond issuance, but the seven sub-investment grade new issues in non-Japan Asia in 2009 were a significant improvement on the lone deal in 2008 -- and, by the end of the year, secondary market spreads had tightened dramatically, suggesting a fuller pipeline in 2010.

Many analysts expected the year to be dominated by distressed debt restructurings as cash-strapped companies struggled to meet interest payments or refinance maturing bonds. Although nothing like the volumes predicted, restructurings did take place, and Credit Suisse was a prominent player in that market, while also lead-managing two high-yield Indonesian coal mining deals, including the highly praised $800 million 10-year issue for Adaro, which paid what barely qualified as a high yield of just 7.625%. The second miner, Bumi Resources, had to pay a much larger 12% yield for a $300 million seven-year transaction, but Credit Suisse and the other lead manager (Deutsche Bank) had to sell the deal in early November when credit markets were weak, explain the complexity of subsidiary guarantees, and allay fears among investors about the issuer's status as a holding company, rather than an operating company.

On the other hand, Credit Suisse's launch of Lumena Resource's $250 million five-year deal, which was a debut for the Chinese thenardite mining company and should have been a highlight, had a disappointing secondary market performance and blighted a record that also included a bookrunner position in the two 10-year global issues for the Philippines. But that one blip was easily over-shadowed by the success of the Adaro and Bumi deals.

Credit Suisse's work in the liability management sector was also impressive, demonstrated by its arrangement of exchange offers and consent solicitations for Sino-Forest and Gajah Tunggal. Sino-Forest, a forestry products company listed in Canada with substantial operations in China, proposed that holders of its 2011 bonds swap them into new 2014 bonds, and at the same time agreed to pay a consent fee to any bondholders who voted in favour of covenant amendments. About 70% of them chose to exchange the old bonds, and Credit Suisse was vindicated in its recommendation to run the exchange offer and consent concurrently. The bank also acted as sole adviser to Gajah Tunggal, an Indonesian tyre maker with cash-flow difficulties, which successfully exchanged all of its 2010 bonds for step-up callable secured bonds maturing in 2014.

Standard Chartered

The same two banks once again competed closely for this award. Standard Chartered and last year's winner, HSBC, overwhelmingly dominated the wide range of Asian local currency bond markets, achieving similar volumes and number of deals and yet each having particular country strengths. But Standard Chartered stood out for the diversity and quality of the complex structures it either devised or applied in volatile markets, as well as its energetic entry into new markets.

Its products included synthetic bonds, asset-backed securities and debt instruments embedded with derivatives devised to enhance its clients' risk exposures. Its country-based debt teams justifiably pride themselves on their superior structuring capability and their application of a full spectrum of funding and liability management solutions. Standard Chartered's achievements included completing the first ever mortgage securitisation transactions in Indonesia and the Philippines, and the first series bond in Thailand, which was launched by Bangkok Mass Transit System; other firsts were a bond buy-back for Pakistan Mobile, a Hong Kong dollar issue by a Korean quasi-sovereign corporate (Korea Water Resources), and an offshore renminbi floating-rate note in Hong Kong for a Chinese bank, China Development Bank.

Standard Chartered even set landmarks with Islamic finance transactions, establishing a local sukuk programme for the Monetary Authority of Singapore, which was the first by a non-Muslim majority country, and then raised Singapore dollars for Islamic Development Bank in the city-state's biggest sukuk issue so far. As well as innovation, Standard Chartered can boast having arranged the biggest capital markets issuance in the Philippines for a corporate with its San Miguel deal and the largest corporate bond issue in Thailand, issued by PTT Exploration & Production. It also capitalised on its dominant position in India, by arranging large deals for domestic corporates, while also introducing two microfinance institutions to the bond markets.

HSBC could, of course, claim a similar record of imaginative structures, new products and significant deals. But, perhaps the decisive factor was Standard Chartered's market colonisation. Already dominant in India, Thailand and Taiwan, the bank surged to the top of the league table in South Korea in 2009 with a 20% market share, despite operating there for just one year.

Noble Group

Noble was impressive and active, not only in the volume of its capital raising but also with the variety of instruments and channels it used. It issued two large, over-subscribed bank loans, launched an up-sized bond deal that was its first as an issuer with investment-grade ratings from all three major credit rating agencies and completed two equity transactions, including a capital injection by China Investment Corporation.

In total, Noble raised $4.05 billion in debt and $742 million in equity during the year. Its completion of a $2.4 billion revolving credit facility, which attracted the participation of 63 banks from 26 countries, was particularly impressive and was the biggest US dollar syndicated corporate loan in Asia-Pacific during 2009. Early in the year, it extended an existing $700 million standby letter of credit and guarantee facility to 2011 and was able to increase the size by an extra $100 million; and an $80 million syndicated murabaha facility arranged in August represented the first Islamic funding deal concluded by a Hong Kong borrower.

An impressive credit migration in 2009 saw upgrades from both Moody's and Standard & Poor's, allowing Noble to launch its biggest ever bond issue with an $850 million 10-year deal priced at the tight end of initial guidance. The 6.875% yield on the notes was equivalent to just 344.5bp over the US Treasury yield, and appealed to a substantial number of US investors. It has been a tough year for many borrowers, but Noble, an integrated global commodities supply chain manager, was able to extend its maturity profile, access different sources for funding, grow its banking group and improve its credit ratings.

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