We have already explained some of the thinking behind many of this year's FinanceAsia China awards, including for best deals, best transaction banks and solutions, and best service providers.
We have shown how each helped with the development of China’s capital markets in the review period of July 1, 2018 to June 30, 2019.
Best Bank: ICBC
Yet again, Industrial and Commercial Bank of China (ICBC) has been named Best Bank of the Year. The world’s largest bank by market capitalisation has grown from strength to strength since July 1 last year.
Despite the squeeze on margins and threats posed by the US-China trade war, it posted a 4.7% rise in first-half profits to Rmb167.9 billion ($23.6 billion).
As a global systemically important bank, ICBC maintained a market share of around 10.9% in loans and 11.6% in deposits at the end of 2018. The bank’s capital position is stronger than most of its rivals too and stood at around 12% last year. As a result of holding customer deposits in excess of loans, ICBC has an ample liquidity cushion too – a hefty 41% of tangible banking assets at the end of last year, the majority of which is invested in government debt.
Crucially, it is on top of its non-performing loans too. The bank’s NPL ratio slipped from 1.55% to 1.52% at the end of last year.
ICBC also retains, for the third year in a row, a cost-to-income ratio below 30% thanks to its historically low operating cost base, as well as the bank’s large size, which helps enhance economies of scale.
It says much for the bank that of the 21 analysts that cover it, 14 of them have ICBC at "outperform" or "buy".
In an August report, when it compared the largest banks by assets in Brazil, Russia, India and China (BRIC), ratings agency Moody’s said there was only one winner. “China’s ICBC comes out on top, benefiting from both the country’s strong macroeconomic conditions and the bank’s own superior financial performance.”
Best Investment Bank: CICC
As an investment bank with Chinese roots and international reach, China International Capital Corporation (CICC) has straddled the equity and debt markets with ease and for the second year in a row has been named Best Investment Bank.
During the review period, from July 2018 to June 2019, it was the leading bookrunner for initial public offerings (IPO) and follow-ons for Chinese issuers in the domestic market. It was also the number one bookrunner for IPOs and follow-ons and convertible bonds for Chinese issuers in Hong Kong and the US.
Two deals immediately come to mind – the A-share Rmb6 billion ($871 million) IPO of PICC in November last year, the year’s largest A-share IPO for a financial enterprise, and the Hong Kong IPO of China Tower in August, which was last year's largest IPO by a Chinese enterprise.
But the bank also stood out for innovative deals too, such as the €278.3 million ($320 million) IPO for Shanghai-listed Qingdao Haier, the first D-share IPO in Frankfurt.
CICC has also been a solid player in both the domestic and the overseas bond markets. It helped 181 companies to issue 1,043 domestic bonds, raising Rmb500.7 billion in the process. This includes plain-vanilla bonds, convertible bonds, enterprise bonds, exchangeable bonds, green bonds, financial bonds, Tier 2 bonds, preferred shares, medium term notes, commercial paper, private placement notes and collateralised loan obligations.
Standout deals include the Rmb5 billion three-year green bond for Bank of Guangzhou, with an oversubscription rate of 2.5 times and a record-breaking coupon of 3.65%. Another is the $1.85 billion Tier 2 issue for China Construction Bank, the first from a Chinese bank in more than three years. Orders of more than $6 billion from 217 investors allowed the issuance’s final price to narrow by 32 basis points.
The bank has a particularly strong M&A business (FinanceAsia named it Best M&A House). It also has a strong structured finance team – FinanceAsia named its Rmb4.9 billion Suning Yunchuang ABS deal for electrical appliance retailer Suning Appliance Group “Best Structured Finance Deal”.
A sign of how solidly the bank has performed is that in a credit option in June, ratings agency Moody’s praised its “strong investment banking and wealth management franchise in the onshore and offshore markets” and “abundant liquidity and diversified funding”.
Best Private Bank: China Merchants Bank
China Merchants Bank (CMB) officially launched its private bank in August 2007 to provide wealth management services for high-end customers with assets of more than Rmb10 million ($1.4 million). In the 12 years since it has grown at more than 10% a year to more than 75,000 clients with Rmb2.16 trillion under management.
Its stable and comprehensive product system covers cash management, fixed-income investment, equity investment, alternatives, insurance and financing.
It has always led the way in private banking. In August 2012, it launched a family studio service for ultra-high net worth clients, followed up a year later by its wealth inheritance family studio to help with family trusts, wealth inheritance, tax planning, legal consultation and insurance planning.
At the heart of its success as a private bank is its global asset allocation system. This helped CMB last year to increase the number of its private clients by 6.5% to 71,776 and boost its AUM by 6.8% to Rmb2 trillion.
There has been no slow down in 2019. In the first half of the year, profits for the bank as a whole were up 13% to Rmb50.6 billion.
China Merchants Bank has private banking and private wealth management centres in seven core cities: Hong Kong, New York, Singapore, London, Sydney, Luxembourg and Los Angeles.
Best Digital Bank: MYBank
For the second year in a row and founded only four years ago, Hangzhou-based MYbank – backed by the Alibaba affiliate, Ant Financial, and conglomerate Fosun International – is changing small business finance and the way that companies interact with lenders.
According to its annual report, the bank worked with 12.3 million small and medium-sized enterprises last year – the sort of companies that generate 60% of China’s growth. Last year its average loan size was Rmb26,000 and to date it has lent Rmb2 trillion to almost 16 million small businesses.
An industry disrupter, MYBank claims to process loan applications in only a couple of minutes versus traditional lenders who can take up to a month. And the default rate so far is an enviable 1%.
The reason for MYBank’s success is that in many ways it can be called a technology company as much as a finance house. Thanks to Ant Financial, which holds a 30% stake in the bank, MYBank is able to use data and cloud-computing expertise to analyse financial transactions of potential borrowers to build up a very detailed picture of how to reliable they are. This level of data analysis means MYBank approves four times as many loans as traditional lenders.
The bank remains on a high. It posted profits of Rmb670 million last year on revenues of Rmb6.3 billion. And its capital adequacy ratio remains comfortably above the required 10.5%, at 12.1% as of the end of last year.
MYBank is currently looking to raise about Rmb6 billion in its maiden fundraising, which values the online lender at Rmb24 billion, according to a July report from Bloomberg. No one doubts for a moment that it will be an overwhelming success.
Best M&A House: CICC
China International Capital Corporation (CICC) remains a leading driving force in Chinese M&A.
As China’s first joint-venture investment bank, it dominates the financial advisors’ league table with 60 deals worth a total of $57.5 billion – or 9.5% of the total deal value announced and completed in China during the review period.
CICC has advised on a broad range of M&A deals, including outbound acquisitions, inbound investments, asset exchanges, share repurchases and restructurings of listed companies.
Highlights of the year include BAIC BJEV’s restructuring of Qianfeng and German auto manufacturer BMW’s purchase of a stake in its Chinese joint venture, BMW Brilliance.
But its expertise came to the fore with pharmaceutical firm Yunnan Baiyao’s merger with its parent Baiyao Holdings in early July. It was the largest completed M&A of A-share companies in a year, the largest M&A in China’s pharmaceutical sector in the past decade, and it set both an example and a benchmark for mixed-ownership reform of state-owned enterprises.
Striking at the right time, CICC locked in the issuance and cash option exercise price before volatility disrupted the A-share market to ensure the transaction could be completed successfully.
It also introduced innovative transaction structuring to protect all parties. There was a capital reduction at the level of Baiyao Holdings to achieve equal stakes in the listed company held by Yunnan SASAC and New Huadu, an all-cash option, and a cash option price adjustment mechanism to avoid market volatility while protecting the interests of minority shareholders.
More to the point, the merger went through quickly. Thanks to CICC’s regulatory expertise, it took only 110 working days from the moment trading was halted in September last year to when approval was secured.
Best Equity House: Citic Securities
Despite a difficult year for IPOs and equity refinancing, Citic Securities ranked first last year in terms of both the amount and number of lead underwriting projects it managed – a total of 54 A-share lead underwriting projects with an aggregate lead underwriting amount of Rmb181.7 billion.
Of these, 11 were IPOs with an aggregate lead underwriting amount of Rmb12.8 billion, while 43 were refinancing issuances projects with a total lead underwriting amount of Rmb168.9 billion.
This momentum has carried through to this year. In the first half of 2019, Citic completed A-share equity financing projects worth Rmb22.2 billion, of which IPO proceeds amounted to Rmb15.1 billion and refinancings reached Rmb107.1 billion.
Highlights of the review period include Ningxia Baofeng Energy Group’s Rmb8.15 billion Shanghai IPO – the largest A-Share IPO for a domestic private enterprise since the foundation of the Shanghai Stock Exchange. It was also winner of FinanceAsia’s Best IPO award.
It was also joint sponsor and joint bookrunner in March on China Citic Bank’s record-breaking Rmb40 billion six-year convertible bond.
From the issuer’s point of view, it was a fantastic deal that reduced the cost of capital dramatically. The issue was structured to bear interest at the rate of 0.3% in the first year, 0.8% in the second year, 1.5% in the third year, 2.3% in the fourth year, 3.2% in the fifth year and 4.0% in the sixth year. The redemption price at maturity is 111% of the face value (including the final year’s interest).
Citic Securities exceeded expectations with its execution. In terms of the roadshow arrangements, the project team covered investors from large to small ones and gave the old shareholders priority to subscribe the bonds. This was needed as the issue achieved the largest issuing scale of convertible bonds in the A-share market since 2011, with the Rmb10.5 billion public tranche covered a whopping 5,497 times.
Best Bond House: Citic Securities
Fixed income has always been a key business for Citic Securities and last year it led the field with Rmb767.1 billion in underwriting volume. Not only was this first among its peers, it was more than Rmb160 billion ahead of its nearest rival.
It is also in a leading position in both the exchange bond market and the inter-bank bond market with financial bonds, corporate bonds, non-financial institution debt instruments, exchangeable bonds, local government bonds and asset-backed securities.
In terms of volume, Citic is ranked first for financial bonds, local government bonds and ABS, and in the top three for corporate bonds, non-financial institution debt instruments and exchangeable bonds. It is notable too that it also participated in the completion of the first batch of credit default swaps on the Shanghai and Shenzhen stock exchanges.
Citics leads in the issuance of US dollar bonds in the offshore market for onshore companies and for the issuance of Panda bonds for offshore companies. Last year it underwrote $13.7 billion in US dollar bonds in Asia ex-Japan.
Notable deals during the review period include the $2.5 billion offering by China Cinda Asset Management and the $1.4 billion offshore preference shares from Zhongyuan Bank.
In the Panda bond market last year it underwrote $16.2 billion of bonds, including those from Sun Hung Kai Properties, China Water Affairs Group, CITIC Pacific, Mizuho Bank, China Resources Land, and China Gas Holdings.
It carried this expertise through into this year when it underwrote BMW’s Rmb3 billion three-year paper, the first European corporate deal issued under new Panda Bond guidelines and a deal FinanceAsia named as Best Panda bond.
Best Broker: Huatai Securities
Established in 1991, Huatai Securities is the largest integrated securities group in China, with a substantial customer base, a leading e-platform, an international reach and a highly collaborative full-service business model.
In terms of online strategy, the company uses its one-stop wealth management solutions mobile platform ZhangLe Fortune Path, which had 7.49 million users in the first six months of this year –more than any other securities house.
Offline, Huatai has 241 business branches and more than 2,000 investment advisors to provide diversified and targeted asset allocation services for customers.
According to the Securities Association of China, the company’s investment advisors accounted for almost a third of its total staff – the highest proportion in the industry.
It is one of the leading national debt futures market makers on the China Financial Futures Exchange. Huatai is also the main market maker on the Shanghai Stock Exchange.
In terms of over-the-counter derivatives trading, it is ranked third in the industry, according to the China Securities Association.
The company is also increasingly international. It has established a new layout for international development with regional connectivity and strategic synergy between mainland China, Hong Kong and the US. It obtained a broker-dealer licence for the US in June, and a month later its US turnkey asset management platform listed on NYSE.
Huatai priced own London stock market in June this year to raise $1.5 billion, the first company to trade via the long-awaited London-Shanghai stock connect project.
Best Belt and Road Bank: Bank of China
No bank has done more for the Chinese government’s Belt and Road initiative than Bank of China.
From Asia to Eastern Europe and Africa, the grand project to recreate a new network of Silk Roads for the 21st century covers 71 countries that account for half the world’s population and a quarter of global GDP.
What Bank of China has done since July last year has been to help fund this expansion. It has done so handsomely and in multiple currencies to make it easy for Chinese companies to grow overseas. It stands joint first as Belt and Road issuer, according to Dealogic, with five issues valued at $461.2 million.
The bank drew a line in the sand in November last year with its $1.83 billion, multi-currency, multi-tranche offshore bond to support the Greater Bay Area (GBA), comprising Guangdong, Hong Kong and Macau.
The bank’s first GBA bond offering came in renminbi, US dollars, Hong Kong dollars and Macau pacatas with three maturities: two, three and five years.
The issue emerged just two weeks after the formal opening of the world’s longest bridge, connecting Hong Kong to Zhuhai and Macau on October 23. This is one of Beijing’s clear priorities – to integrate Hong Kong and Macau with nine major cities in Guangdong: Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing.
It was no one-off. In April, Bank of China followed that up with a $3.8 billion eight-tranche issue in multiple currencies in Frankfurt, Luxembourg, Sydney, Hong Kong and Macau.
To support Chinese companies venturing abroad, it aims to expand its overseas business to 40% of total assets term from 26% last summer, according to a report from Fitch Ratings. This was confirmed by a summer report from Moody’s that said: “We expect the bank’s overseas operations to steadily contribute more to its total profit”.
Best Panda Bond House: Bank of China
Ever since the take-off of China’s bond market in 2014, Bank of China has led most of the major Panda bond deals in the market since 2016. According to Dealogic, it had an 8.5% share of the table with 19 issues raising $3.4 billion during the review period.
What makes Bank of China stand out, in particular, is that it worked on deals for sovereigns, financial institutions and corporates.
Take Portugal, the first eurozone sovereign to issue onshore in China. At the beginning of June, Bank of China was lead bookrunner and joint lead underwriter for its the Rmb2 billion Panda bond.
Despite market volatility during the execution week, Portugal managed to price the paper towards the lower end of the 3.90% to 4.50% range to yield 4.09% (only 74bp over China Development Bank’s curve) thanks to a final order book that was more than three times oversubscribed.
And in March, it was lead underwriter and lead bookrunner for United Overseas Bank's inaugural Panda bond in the China interbank bond market. It was also Singapore's debut Panda bond.
The Rmb2 billion three-year issue priced at 3.49%, which was the second-lowest coupon ever for a financial Panda bond.
And in the corporate space, Bank of China was lead underwriter for BMW’s Rmb3 billion three-year paper, the first European corporate deal issued under new Panda Bond guidelines.
Best International Bank: Citi
In the last 12 months, Citi has made strong progress in China across banking, capital markets and advisory. During the review period, it executed 45 equity transactions originated out of China and raised $16.4 billion for Chinese issuers. It also announced five China cross-border M&A deals with a total volume of $9 billion and executed China investment-grade bond issuance with a total value of $4 billion.
In equity capital markets, it was joint sponsor for a number of standout deals for Chinese companies that listed in Hong Kong. These include Hansoh Pharmaceutical’s $1 billion IPO in June, the largest pharmaceutical to list in Hong Kong since 2016, Jiangxi Ganfeng Lithium’s $421 million IPO in October last year, and Hope Education’s $408 million IPO in July last year.
In debt capital markets, Citi’s deals were the big and complicated ones. It was joint global coordinator, joint bookrunner and joint lead manager on Bank of China’s $3.8 billion, eight-tranche, five-currency bond in April – this year’s largest bond offering from an Asia-Pacific financial institution. It held the same positions on China Railway Construction Corporation’s $1 billion perpetual bond, which returned to bond markets for the first time in five years.
Although Citi worked on a number of major M&A deals during the review period, the bank stood out as exclusive financial advisor to the Anta Sport investor consortium, which acquired Amer Sports for $6.3 billion (itself FinanceAsia’s Deal of the Year). It also acted as exclusive financial advisor to the investor consortium and joint global coordinator, arranger and agent on the recourse debt financing to that same deal.
What made the difference was the way Citi helped with negotiations to get the deal over the line. It devised a strategy to help the investor consortium in negotiating the pre-conditions to convince Amer Sports’ Board to allow due diligence to commence. It also worked with the investor consortium to clear all of Amer Sports board’s concerns.
Best International Investment Bank: Goldman Sachs
For the second year in a row, Goldman Sachs has been named best international investment bank.
During the review period, it was the leading international bank in A-share equity and equity-linked league tables and the leading international bank for all equity issuance by Chinese companies, breaking a number of records in the process. It distinguished itself in the debt markets with innovative debt transactions and it carved a path in M&A work as advisor to China’s cross-border transactions.
Onshore, it was joint bookrunner for China CITIC Bank $6 billion A-share convertible bond in February – the largest A-share convertible bond ever. It was also joint bookrunner on Peoples Insurance Company’s $872 million A-share IPO in November – the largest H-share to A-share IPO since 2010.
Internationally, Goldman distinguished itself as joint sponsor, joint global coordinator, joint bookrunner, joint lead manager and sole stabilisation agent for China Tower’s $6.9 billion IPO in Hong Kong in August last year – the largest IPO since 2015.
It was also joint sponsor, lead left global coordinator, bookrunner and stabilisation agent for Meituan Dianping’s $4.2 billion IPO in September – the largest ever internet IPO on the Hong Kong Stock Exchange. And it was lead left bookrunner and stabilisation agent for Pinduoduo’s $1.7 billion IPO on Nasdaq and then its $1.4 billion first follow-on offering in February.
In the debt markets, it was joint global coordinator for Tencent’s largest-ever bond sale – a $6 billion multi-tranche senior note issue that was the largest-ever US dollar-denominated 144A/Reg S offering by a corporate issuer in Asia. And it was joint global coordinator and joint bookrunner for China National Chemical Corporation’s $2.3 billion multi-tranche senior notes in June, the largest US bond issuance by a state-owned enterprise so far this year.
But the bank’s skill in relationships shone through when it was left lead bookrunner for Baidu’s $1 billion dual-tranche senior notes in November. Goldman Sachs has led every one of the technology company’s bond sales.
The bank also advised on 18 announced M&A transactions involving Chinese companies – more than any other international bank. These include the $6.3 billion sale of Amer Sports to a consortium led by Anta Sport (FinanceAsia's Deal of the Year) and the $4.2 billion sale of Brilliance’s 25% Stake in BMW Brilliance to BMW in October last year.