Awards for Achievement 2010: Day 4

Today we announce our major house awards, including Best Bank, Best Investment Bank, Best M&A House, Best Equity House and Best International Bond House.

The following banks will be honoured at an awards dinner at the Four Seasons hotel in Hong Kong on February 17. If you would like to book a table at the event, please contact Stephanie Cheung on +852 2122 5225 or [email protected].


Citi’s footprint in Asia – in 18 markets with 50,000 employees, 95% of whom are from Asia – makes it a perennial candidate for best commercial bank in the region. Once it wins this award, it’s a virtual shoo-in for the best bank prize, for which we look at both the commercial banking and the investment banking businesses. It helps that Citi isn’t dependent upon just one country – it has a well-balanced business across Asia-Pacific, with no one country contributing more than 13% of revenue. That makes Citi’s dominance hard to rival.

“We’re focused on building a sustainable annuity of growth,” we heard at the pitch. And in line with that strategy, Citi banks 85% of the Fortune 500 in Asia-Pacific and nearly 3,500 subsidiaries of 450 US parent companies in the region. Citi executives say this underlines how its global franchise that flows through the emerging markets helps multinationals expand internationally. As the bank’s top executives said during the pitch – this year was all about the clients’ business, their growth plans and how to help them.

In the first three quarters of the year, Citi reported revenues of close to $11 billion and profit of $3.5 billion in Asia-Pacific, equivalent to 22% and 28% of its global business, making Asia-Pacific the largest net income contributor for the bank globally -- as was the case in 2008 and 2009. Indeed, the region has played an important role in helping the bank company through the global financial crisis.

Citi continues to expand and grow. It hired across products – but most notably for China and wealth management, franchises that help generate additional business. Citi’s private bank has benefited from client migration and it prides itself on being the only bank with a wealth continuum. Executives said that unlike last year when a charm offensive was required, this year bankers were attracted to Citi because of the depth of the platform.

The bank added more than 400,000 retail clients in Asia in 2010 to reach 16.3 million. In the third quarter of 2010, its retail deposits hit $100 billion for the first time in its history. The bank opened 33 new branches in 2010 and now has more than 700 across the region – compared with fewer than 100 at the start of the decade. This includes a new branch on Hong Kong’s busy Nathan Road – indeed, Citi’s expansion in Hong Kong is among the fastest ever in a developed market. The bank aims to further increase its branch network by 50% by 2015. Institutional deposits in Asia are at an all-time high of more than $120 billion, as of the end of the third quarter.

Citi also helped Asia-Pacific clients raise more than $160 billion from the international capital markets this year, including sovereign issues for Indonesia and Vietnam. And it has been involved in some landmark equity offerings, including the largest-ever Hong Kong IPO (AIA), the largest-ever Singapore IPO (Global Logistics Properties), the largest India IPO (Coal India) and the largest Philippines IPO in dollar terms (Cebu Air).

The bank is set to end the year strong, and the pipeline is full. Or as one of the senior executives put it during the pitch: “We’re in our stride.”

Goldman Sachs

We went into the pitch season knowing that the bank that came out ahead in equities would have the advantage for our best investment bank award. Dealogic recently estimated that equities account for around 71% of investment banking revenues in the fourth quarter. Banks we’ve spoken to are largely in agreement about their own wallets, with estimates ranging from two-thirds to three-quarters in terms of how much of the overall revenues booked this year are derived from equities.
The decision was a close call between Morgan Stanley and Goldman Sachs. But the edge Goldman enjoyed to win best equities house, helped it emerge as the year’s best investment bank.
To its credit Goldman recognised early on that equities would be critical, so they brought onboard a team that could deliver for them. Goldman Sachs did more blocks this year -- by a multiple -- than it has ever done before, threatening the position of players such as UBS, which has traditionally enjoyed a quasi-monopoly on the business. Goldman is always known to be selective about business it signs up and it brought this philosophy to the blocks business as well, whether it was a big or small block it chose to place.
Another feature that is emerging across Asia is the proliferation of bookrunners on deals, which results in a whittling away of the fee pool. Goldman’s now well-documented strategy of focusing on relationships with a few clients is a good counter to this – on repeat business clients are more amenable to entrusting their business to a small number of tried and tested names, or even to give the entire business to just one bank.
What differentiated Goldman Sachs this year was execution, which translated into a meaningful role on the majority of mandates it worked on. And this is another counter to the multiple bookrunners. Clients are becoming more discretionary about apportioning fees – and about throwing in incentives for superior performance. Goldman benefited from this and booked a disproportionately higher share of fees than its competitors on multiple deals with joint execution.
The product that emerged as increasingly important this year was fixed income. Here too, Goldman has invested in building a franchise. The bank does not aspire to be the dominant force in debt, as it does in equities, but rather is seeking to be the “thought leader”. And it had a role on some of the more innovative debt deals this year. If debt actually starts driving a larger share of wallets next year, as many bankers forecast it will, Goldman will have to fight it out with a number of non-traditional competitors, but that is a story for 2011. At the end of 2010, we’re convinced this was Goldman’s year in investment banking.


To judge the best private bank we construct a hypothetical client situation. Our client this year was an ultra-high-net-worth (UHNW) Hong Kong tycoon with two daughters. She wanted to consolidate her private banking relationships from five advisers currently, to two. Each private bank would manage half her portfolio, and she and one daughter would be decision-makers. The selection of advisers was based on the understanding of the client, the advice on portfolio and how client migration was handled. The last point is something we’ve heard about constantly in the recent past as private banks have tightened their controls.  
Integrated banks took different approaches to how they positioned their investment bank. Some chose to stress the independence of their private bank. Others showcased the opportunities that would be available to a preferred wealth management client from the investment bank. The boutique private banks once again stressed their objectivity. We heard the term “open architecture” more than once but it carried more weight in some instances than others.
This year, Citi impressed us from the outset, which suggests the changes it has made to how it runs the private bank are coming together well. The questions the US bank asked about the client’s needs during the first interaction clearly showed they had worked hard to understand the issues. The assumptions it made about timeline and returns were insightful. Citi’s proposed asset allocation was smart and defensible. For example, it suggested that as the client’s business is Asia-centric, the investment portfolio should have a geographical diversification.
We also came away impressed with Citi’s approach to client migration. The bank was unapologetic about the procedure and the time that would be involved. We appreciated this – as we are sure many UHNW individuals do. From where we stand, it would seem to make sense to bank with someone who has stringent know-your-customer requirements to minimise the chances of contamination of all the bank’s clients due to a few bad eggs.

Morgan Stanley

Morgan Stanley wins this award for the second time in three years, claiming it back from Credit Suisse who ousted the US investment bank last year. However, this award is not a slam dunk this year as it is becoming an increasingly difficult category to judge. Some of the mega-deals this year saw the presence of boutique firms, which are becoming active in the region, especially in natural resources. On other large deals, lending banks were in the driver’s seat, a trend we expect to see more of going forward.
“M&A deals in Asia are still not generating meaningful fees,” complained one banker. And that is certainly true. The promise of Asian M&A has yet to be backed up by the numbers. But Morgan Stanley’s M&A strategy of chasing either the large clients or the innovative deals is a sound one. That strategy should have ensured good revenues and set the foundation for repeat business.
Morgan Stanley was the only investment bank to work on the $2.2 billion sale of Orient Overseas Developments to CapitaLand, a deal which competitors cited as the one they missed in real estate. It also worked on the $4 billion Guangzhou Auto-Denway privatisation and relisting, a trade which will spawn copycats. And it advised PetroChina on its joint venture with Shell to acquire Australia’s Arrow Energy.
Morgan Stanley also had a balanced regional portfolio. It closed deals in India, Korea, Singapore and Thailand, as well as the traditional strongholds of Hong Kong and China.
M&A deals are becoming harder to close as both regulatory scrutiny and unforeseen risks increase. Morgan Stanley had some failed deals, but our view is that banks which are active in M&A will always have to grapple with a few sticky situations.

Finally, we’d note that every bank we spoke to mentioned Morgan Stanley as a strong M&A franchise, with one even calling the US investment bank its “only credible competitor” this year.

Goldman Sachs

It would be wrong to say that other banks haven’t viewed Goldman Sachs as a competitor in the primary equities market in the past few years. They have. But mainly on individual deals. For years, Goldman’s focus on large, high-profile deals, often for well-established clients, meant it was always “up there” as one of the key players, but didn’t have the volume, depth or geographical breadth to be a serious contender for Best Equities House in Asia. This year it does.

Targeted hiring, including the addition of former UBS banker Steven Barg as co-head of ECM, a focus on a broader potential client base and a stated strategy to become more aggressive about winning block trades, have seen the US bank make significant strides with its equities business this year. It didn’t lose its grip on jumbo deals, which were obviously important in terms of fees – in fact it was on seven of the 10 largest equity transactions this year and had a leading role among the global coordinators on the IPOs for both Agricultural Bank of China and AIA. It also continued to deliver for its key clients, as shown by the $2 billion hybrid bond it arranged on a sole basis for Hutchison Whampoa. The deal attracted some criticism for being too large, but investors bought it and the well-crafted solution achieved the ratings treatment that Hutch was after.

But it also led numerous IPOs and follow-ons below $500 million, completed five convertible bond issues and closed deals across sectors and in eight markets. India remains a weak spot, but its work on Standard Chartered’s debut issue of Indian depositary receipts, a QIP for Yes Bank and follow-ons for Genpact and state-owned Power Grid Corp show that it is making progress here too.

For sure, Goldman wasn’t the only bank that had a good year in ECM. Morgan Stanley worked on almost as many jumbo deals; was on several of the transactions that we have singled out for our deal awards; and completed more IPOs than any other international bank (36 versus Goldman’s 20). However, we are impressed by the significant step-up by Goldman this year and note that in terms of overall ECM volumes it leads the league table by a margin of $2.2 billion, the greatest gap between the top two banks in the past five years.

Of course, Goldman also had one major controversial deal this year in the form of Vodafone’s $6.5 billion sell-down in China Mobile, where the three bookrunners were left holding a portion of the shares. But since it is impossible to know exactly how each bank treated the rump portion and since Morgan Stanley was also on the transaction, we don’t believe this one deal lessens the overall strength of either franchise. If anything, it shows how committed both banks are towards their key clients.

J.P. Morgan

The volume of convertible bond issuance in Asia doubled this year compared with 2009, thanks to 10 large-cap deals of $500 million or more outside of China’s domestic market. But the market also became highly competitive and in combination with a challenging market environment several issues traded down after being priced too aggressively, or had to be re-offered in order to clear at all.

Against that backdrop, each bank had deals that were either too generous towards investors or too issuer friendly, and no bank dominated. However, there were bright spots. Standard Chartered emerged from virtually nowhere to grab second place in the league table, despite focusing primarily on existing client relationships. And its clever structuring for Shui On Land to get around the earlier drawbacks of using equity swaps suggests it is one to watch for next year. Citi delivered an innovative collateralised CB for Ascendas Reit and made use of alternative structures such as loans plus warrants that, while not strictly convertible bonds, helped save money for issuers. Last year’s winner, Credit Suisse, deserves credit for getting Hon Hai Precision across the line (together with Standard Chartered) at a level that made money for investors from day one.

But when looking at the year as a whole, we feel that J.P. Morgan was more consistent. It worked on five large-cap deals, which was more than any other bank, but also helped weak credits like Indonesia’s Berlian Laju Tanker to raise much needed funding, and rather than push for the tightest possible price for the issuer, it worked with its clients to ensure a good take-up among investors. And it wasn’t afraid to walk away from deals that it felt were too aggressive.

It was also involved in the innovative perpetual convertible securities for Sino-Ocean Land and Franshion Properties that opened a new possibility for issuers that want their CBs to count as equity from day one. And it continued to support issuers through liability management transactions, including the first ever Asia CB conversion offer for Tata Motors.

So, while it wasn’t a flawless year for J.P. Morgan, we feel it was a year when its well-rounded CB franchise once again stood its ground against the competition.

Morgan Stanley

It would be easy to view this as a consolation prize for missing out on the award for Best Equities House, but that would be wrong. A strong mid-cap franchise is the foundation for a successful ECM platform and Morgan Stanley’s is consistently one of the best in the business. This year it has led 12 IPOs that qualify as mid-cap in our books, which means a deal size between $100 million and $300 million and a market cap for the issuer of no more than $1 billion. This puts it equal to J.P. Morgan and slightly behind UBS, which has completed 16 IPOs in this space.

However, Morgan Stanley gets credit for picking several investor favourites among its line-up of deals this year and for achieving superior valuations for many of its mid-cap clients. The most popular deals included Goodbaby, a maker of baby strollers and other children’s products, and Besunyen, which produces therapeutic and diet teas. The former was heavily oversubscribed by retail investors and attracted a large number of institutional investors, while the latter saw less euphoria and more solid demand. A well-thought out marketing strategy for Besunyen allowed the price to be fixed at a premium to its key comps.

The Nasdaq IPO of TAL Education, a Chinese provider of after-school tutoring services, also achieved a premium valuation on the back of strong demand from more than 350 institutional investors. In spite of that, the stock gained 50% on the first day of trading.

Morgan Stanley also worked on the Singapore IPO of Tiger Airways, which was the first IPO to price in 2010 and which we awarded as the Best Mid-cap Equity Deal this year. And in a display of its broad geographical spread it priced an IPO in Thailand for Indorama Ventures at around the same time as the listing of Tiger, and brought a couple of mid-cap IPOs in India for hotel operator Oberoi Realty and Hathaway Cable & Datacom.

Deutsche Bank

This was a tough category to judge this year. It was an intensely competitive year and no bank ticked every single box. It was also a watershed year for Asia ex-Japan G3 bonds with issuance volumes hitting a historical high.
The two top contenders, Deutsche Bank and HSBC, were neck to neck in the league tables. Based on volumes alone, HSBC had an edge over Deutsche Bank, with a 9.5% market share versus the latter’s 8.9%. But digging deeper, Deutsche Bank stood out for its high-yield franchise, its leadership on deals and its structuring capabilities. Deutsche Bank also shone in the Asian G3 FIG space, which it dominated. Although it lacked balance sheet, it more than made up for this with its strong distribution platform.
2010 was very much defined by the return of the high-yield market. As of early December, volumes were at a historical high of $16.7 billion, nearly double the 2009 issuance, according to Dealogic. No other bank, in our view, captured this theme as well as Deutsche Bank.
With its well-oiled global risk syndicate platform, Deutsche Bank also captured a significant chunk of the high-yield wallet.
In 2010, the bank brought to market 15 Asian high-yield bonds and was a global co-ordinator or left lead on four of those. And it topped the high-yield league table with a market share of 11.1%, just ahead of rival UBS, which had a market share of 10.8%.
Execution was not entirely flawless. The bank was on a number of deals that were deferred or pulled, including US dollar bonds for Glorious Property and China Medical Technologies. Early in the year, the bank also lost a few members of its DCM team, who left the firm for rival Bank of America Merrill Lynch
However, Deutsche Bank proved it could still lead on transactions and that it was as aggressive as ever. The bank took on a joint bookrunner role on China Forestry’s $300 million debut bond at the eleventh hour, alongside Standard Chartered and UBS, pirating the deal away from Citi. It also helped shepherd debut issuers such as Travellers International and Petron Corp to the international bond market.
Among the deals that stood out in 2010 was the Republic of the Philippines’ highly successful $1 billion equivalent peso global, for which Deutsche was a joint global co-ordinator. The deal was the first peso synthetic from an Asian sovereign sold to international investors.
Deutsche Bank also tapped windows of opportunity, bringing to market a diverse group of high-yield issuers, including Stats ChipPac, Berau, Chandra Asri and Indosat.
Its leadership role was highlighted by deals such as Central China Real Estate’s $300 million bond and China Oriental’s $550 million senior notes. It was a sole global co-ordinator on both deals.
Also notable, was Deutsche Bank’s role as the sole global coordinator for Bumi Resources’ $700 million high-yield bond. Credit Suisse, a long-time house bank for Bumi, played a more secondary bookrunner role alongside J.P. Morgan on the deal.

Barclays Capital

Historically low US interest rates and investor demand worldwide for incremental yield meant that few emerging Asian countries were priced out of the international bond market. Many took the opportunity to lock in cheap funding and several gave Barclays Capital the mandate to manage their issues.

The UK bank headed the Asia ex-Japan G3 sovereign bond league table, with a 27% market share, and was a book runner for most of the significant transactions. These included a $2 billion 10-year bond for Indonesia, which was the third consecutive issue that Barclays led for the republic. Launch and execution was swift, and Indonesia, still sub-investment grade, achieved its lowest ever coupon of 5.875%. Barclays also lead managed a dual-tranche issue for another regular borrower, the Philippines. The $1.5 billion deal was the first Asian sovereign in 2010, was priced at a negligible premium to the Philippine secondary curve and attracted an order book worth almost $10 billion.

But, Barclays didn’t just manage deals for repeat borrowers. It brought the long-awaited 10-year issue for Vietnam, helping to place $1 billion of notes with a wide range of investors at a yield flat to the secondary curve. Vietnam’s issue was the third Asian sovereign that Barclays managed during a one-month period at the beginning of the year. Another notable transaction was the $1.25 billion five-year Malaysia sukuk, which was only the second bond launched by an emerging economy in the past five years to have a yield below 4%, and the first by an emerging country in Asia. It was the first sukuk by Malaysia in eight years and, despite the complications involved in structuring Islamic finance deals, the preparation and execution process was rapid.

Barclays had a strong year in general in the Asian debt capital markets, and a preeminent one for managing sovereign deals.


Asia’s domestic bond markets continued to grow in size and to develop depth and structure in 2010. Yield curves lengthened – most notably in Singapore – and new instruments such as the Philippine global peso bond were launched. Perhaps most significantly for the long term, the Chinese onshore bond market opened up to greater foreign participation and a nascent offshore renminbi “dim sum” market appeared in Hong Kong. HSBC was prominent in all these developments.

Although HSBC didn’t head the league tables for volume – that prize went to Standard Chartered – its execution of approximately 140 issues valued at more than $8 billion was still impressive. The UK-based lender ranked top among international banks in several individual markets, and executed deals in nine Asian currencies. It also maintained its dominant position for cross-border transactions, completing deals worth more than $3 billion.

HSBC was a leading international bond house in the Philippines, Malaysia, Singapore and Thailand. In Malaysia, it led the first ringgit-denominated project financing and sukuk by a foreign issuer (National Bank of Abu Dhabi); in Singapore, it brought deals for issuers from seven different countries; in Indonesia, it led the only offshore rupiah deal in 2010 (Inter-American Development Bank); and in Thailand, it launched the first baht-denominated transaction for an overseas borrower (Export-Import Bank of Korea). Of course, HSBC also has a dominant franchise in Hong Kong – similar to the one enjoyed by Standard Chartered in India.

In recent years, HSBC has been involved in all new measures to nurture offshore renminbi financing, such as interest rate swaps, the non-deliverable forward FX market and trade settlement facilities. A key feature in 2010 was the birth and growth of the offshore renminbi bond market, where HSBC arranged and led deals for the Asian Development Bank and for China Development Bank.

Despite lower volumes than its main rival, HSBC takes this award in 2010 because of its range of innovative transactions and landmark deals.

Reliance Industries

Savvy Reliance Industries was impressive this year for the volume of its fund-raising as well as its ability to tap diverse asset classes and currencies with ease. Year-to-date, the Indian borrower has embarked on an impressive $7.4 billion financing plan across the loan and bond markets. This represents the largest financing in Reliance Industries’ corporate history.

The borrower was certainly active in the syndicated loan market this year and scored top marks with its $1 billion dual-tranche five- and seven-year syndicated loan in August. The deal featured the first seven-year bullet loan out of Asia after the 2008 financial crisis and was notable for the length of its tenor. The loan was a blowout success and was one of the most widely syndicated loans this year, with participation from 31 banks.

Shortly after that, in November, Reliance Industries’ telecom subsidiary Infotel Broadband Services was in the market with a dual-tranche $1.5 billion syndicated loan, which was upsized due to strong interest from banks. The deal was originally announced at a size of $500 million, but was increased first to $1 billion and then to $1.5 billion in a short span of two weeks.

The borrower also brought to market a $1.5 billion dual-tranche 10- and 30-year bond, which stood out as a landmark transaction in the Asian G3 bond market. The deal was the first US dollar 30-year private corporate bond out of Asia since 2003 and also the largest ever corporate bond out of India. It gathered a massive order book of $11.6 billion.

The company also raised funds by tapping the rupee bond market at tight levels.


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