BDO Unibank continues to stay ahead of its peers thanks to its strong business franchise, low-cost funding, quality assets and extensive distribution network. The bank booked record earnings growth during the review period after bolstering its presence across its businesses, broadening its coverage and strengthening its capital position.
Net income rose 36% year-on-year to Ps14.3 billion and easily beat the Ps12.5 billion earnings guidance. The bank earned more net interest income than any of its its peers, while fee-based service income also led the industry both in terms of absolute amount and percentage contribution to operating income.
At the end of the first quarter in 2013, BDO had leading market shares in total resources, gross customer loans, total deposits and assets under management. It is also the Philippines’ best capitalised bank after the infusion of Ps43 billion ($1 billion) in fresh capital from a rights offering in July last year.
The capital infusion provided BDO with added muscle to finance big-ticket infrastructure projects and positions it to play a major part in the country’s economic expansion.
It has also diversified its business, expanding into consumer lending and middle-market businesses to complement its strength in corporate banking.
BEST INVESTMENT BANK, BEST EQUITY HOUSE
In the 13 years since its establishment, BDO Capital has established itself as the market-leading investment bank in the Philippines. It is helped by the pedigree of its parent companies: BDO Unibank, the biggest bank in the Philippines, and SM Investments, its biggest shopping mall operator.
These relationships certainly make deal origination easier — BDO’s parents are also among its biggest clients. But the bank has plenty of pedigree in its own right and is the partner of choice for many international banks doing business in the Philippines. It has also done the majority of the equity and debt fund-raising exercises for the Andrew Tan group, as well as the Lopez, Ayala, Consunji, Metro Pacific and Aboitiz groups.
It has a solid DCM franchise despite not winning the bond house award, and its track record during the past year included underwriter roles on a Ps10 billion issue for Globe Telecom, a Ps7 billion deal for Filinvest and a Ps15 billion bond for SM Investments. It was also a co-issue manager on the Republic of the Philippines’ Ps188 billion retail treasury bonds.
With the support of its parent bank’s balance sheet, BDO has also made a push into the infrastructure sector. In December, it closed a Ps9.3 billion project finance facility for Sarangani Energy Corporation.
For the equity award, it had strong competition from last year’s winner, First Metro Investment Corp, but BDO Capital’s work on BDO Unibank’s $1 billion rights issue – the country’s largest-ever equity capital markets transaction – did win us over in the end. The fact that its parent gave it a role on the deal was no surprise, but that it would be mandated as issue manager and the sole domestic underwriter alongside four international underwriters on such a large deal was by no means a given. BDO Capital showed that its distribution capability was up to the task though and proved why it is frequently chosen as the preferred local partner by foreign banks.
Other deals it has worked on in the past 12 months include a tender offer in Alaska Milk Corporation; a rights offering for Empire East Land Holdings and the recent Ps7.6 billion ($176 million) IPO by Asia United Bank where it was a domestic lead underwriter together with First Metro. It also has a sizeable pipeline of deals.
Its ECM activities are supported by a secondary market presence via three brokerage firms that are wholly- or majority-owned by BDO Unibank. On a combined basis, the three firms have advanced from a ranking as number 110 in terms of trading volumes a few years ago to the 12th biggest player in 2012 and the 11th biggest in the first four months this year – a remarkable improvement, especially when considering that the three firms have only eight in-house traders between them.
BEST BOND HOUSE
First Metro Investment
First Metro’s success as a domestic bond house rests on its strengths in deal origination, structuring and execution. It also has strong distribution capability, thanks in part to its parent company, Metrobank, which operates 828 branches across the Philippines.
It topped Dealogic’s league tables during the period with a 13.9% market share. Its deals included a Ps10 billion bond for Ayala, a Ps15 billion deal for SM Investments, Ps16.5 billion of funding for PLDT through three separate issues and a debut Ps10 billion retail bond offering for GT Capital, which is the holding company of George Ty, the tycoon who controls First Metro.
The government is also a regular client. First Metro was a co-issue manager on the Republic’s $500 million onshore treasury bonds alongside Credit Suisse, Deutsche Bank and HSBC. The bank was instrumental in coming up with the structure, which is designed to take advantage of the excess dollar liquidity in the banking system and reduce the country’s reliance on offshore dollar borrowing.
An older government funding initiative is the retail treasury bond programme, in which First Metro and Metrobank are key participants. Both were co-issue managers on the Ps188 billion deal in October, which was the first to offer with a 25-year tenor, the longest tenor for a government security as prescribed by law.
BEST FOREIGN COMMERCIAL BANK
Citi reported a 24% increase in pre-tax profits to Ps5.9 billion during 2012 despite facing some tough challenges globally. This was partly a result of improved efficiency, which allowed the bank to reduce its cost-to-income ratio even as headcount grew across all businesses in the country.
It has more than 6,400 employees in the Philippines and is also the only foreign bank that has entered and consistently ranks among the top 10 commercial banks in the country.
The bank continues to bring innovative products to the market, such as its Prepaid Cards platform for cash management clients — an area in which it is a clear leader, providing the most comprehensive and advanced range of cash management, trade services and global securities and funds services.
Citi also launched a Smart Banking flagship branch that offers the latest technology and customer experience, enhancing a consumer banking presence that spans leadership in credit cards and wealth management, and a growing franchise in consumer finance. The bank has more than 1 million credit cards in the market with a share of 22% in issuing sales.
In addition to its strong investment banking franchise, Citi also runs local risk and trading desks, and a corporate sales and structuring team that provides comprehensive coverage to local and multinational corporations and financial institutions.
BEST FOREIGN INVESTMENT BANK
By showing a strong commitment to the country at a time when the volume of deal activity was viewed by most other major investment banks as little more than a rounding error, UBS has carved out a niche for itself in the Philippines. According to Dealogic, it made $40 million of revenues there in the past year, which is more than twice that of its closest competitor.
On the equity side in particular, there are few significant deals getting done these days where UBS isn’t involved. In the past 12 months it has worked on 13 deals and has a remarkable 57.3% market share in terms of deal values. Noteworthy transactions include the $920 million re-IPO of LT Group for which it was the sole bookrunner; the $333 million re-IPO for Melco Crown (Philippines) Resort; and two top-up placements in Ayala Land that raised a combined $625 million.
But it is also strong in debt and participated in six of the nine international corporate DCM deals in the past 12 months. This puts it at the top of the Dealogic league table for corporate G3 bonds with $840 million of issuance. Including deals by the government and the Asian Development Bank, it ranks fourth.
There are few pure M&A transactions in the Philippines and the league tables are somewhat obscured by asset injections as part of group restructurings. But UBS worked on three deals during the review period, including Ayala Corp’s $617 million acquisition of DBS’s minority stake in the Bank of Philippine Islands where it advised the buyer, and CVC’s acquisition of SPI Global from PLDT, where it acted both as the exclusive sell-side adviser and the sole lead arranger and bookrunner for the $225 million term loan, working capital and bridge loan facilities for CVC.
BEST BANK, BEST FOREIGN EXCHANGE BANK
Siam Commercial Bank
Thailand’s banks have moved into trickier times, with concerns over rising private sector leverage and slower-than-expected GDP growth during the first quarter of 2013. However, Siam Commercial Bank wins the best bank award this year again thanks to its solid universal banking franchise. The bank held on to its leading position based on a number of key metrics. During the first quarter of 2013, it had the highest return-on-equity, net profit and return-on-assets among its peers. The bank also continues to have the most bank branches and ATMs among its peers –which points to its strong on the ground presence.
Siam Commercial Bank’s first quarter 2013 earnings beat estimates, with growth seen in its non-interest and fee income. The bank has focused heavily on cross-selling and this strategy has borne fruit. During the first quarter, Siam Commercial Bank posted solid loan growth of 18.2% year-on-year, much of it attributed to the bank’s strategy to focus on market share growth in small-and-medium enterprises, auto and housing loans. It also has a strong retail franchise — which contributed to slightly over half the bank’s revenues during the first quarter. Siam Commercial Bank topped the syndicated loan league tables for Thailand during the period under review, but it is also worth noting that its non-performing loans dropped to 2.06% of total loans during the first quarter of 2013, the lowest level post the 1997 crisis.
On the foreign exchange front, Siam Commercial Bank has improved its market share in the forex market during the past year from 12.7% in 2011 to 14% in 2012 — driven mainly by top tier companies in Thailand and its profit from foreign exchange outstrips its peers.
BEST BOND HOUSE
Bangkok Bank was dominant on the baht bonds front during the period under review, topping league tables. It established its relationship with Thailand’s Ministry of Finance, arranging its first amortising bond and its second inflation-linked bond. The MoF raised Bt30 billion with its 25-year amortising bond — an ambitious new structure for Thailand and the largest and longest-tenor local currency amortised bond to be issued in an Asean country. Notably, Bangkok Bank was the only domestic arranger on the deal, alongside Deutsche Bank and HSBC. While the foreign banks structured the deal, Bangkok Bank proved its distribution strength, helping to place the bonds to onshore pension funds and life insurers, broadening the MoF’s investor base for long-dated bonds. For the inflation-linked bond, Bangkok Bank was one of two local banks, the other being Krung Thai Bank. Baht bonds tend to feature a heavy underwriter group — but Bangkok Bank has also acted as sole arranger for a number of bonds for Easy Buy and Bangkok Dusit Medical Services. On a joint basis, it has arranged chunky bonds for major companies including PTT and Siam Cement.
BEST EQUITY HOUSE/BEST INVESTMENT BANK
Phatra continues to stand out among local houses, having arranged most of the major equity transactions, even though it faces growing competition from Bualuang and Siam Commercial Bank. Big deals tend to move the needle in Thai equities and that’s where Phatra made its mark. It featured on PTTEP’s preferential offering — which raised $3 billion and was the largest equity offering in Thai capital markets history. It was also an arranger on the BTS Rail Mass Transit Growth Infrastructure Fund — the biggest IPO and first infrastructure fund in the kingdom. Phatra was on these two big-ticket deals and both PTTEP and BTS Skytrain are repeat clients.
Phatra is also active in the share placement market, having completed placements in CP All, Robinson Department Store and Bangkok Dusit Hospital. It has distribution strength thanks to its high-net-worth client base, which have become a bigger part of its brokerage business and have generated significant demand for its equity offerings. Phatra is also known for its research capabilities, which caters to institutional investors is co-branded with Bank of America Merrill Lynch. The best investment bank award is a tough category in Thailand, where much of the M&A advisory activity is driven by the foreign banks. While Phatra was less active on the M&A front during the past year, it continues to have an unrivalled equity presence, which helped it bag the investment bank award.
BEST FOREIGN COMMERCIAL BANK
Standard Chartered bags the best commercial bank award in Thailand thanks to its strong retail presence in Thailand, with some 24 branches in greater Bangkok and three in other major cities. It is one of the few foreign banks to provide universal banking services to retail and corporate customers. It has a somewhat unique hybrid structure, having bought a majority stake in Nakornthon Bank in 1999 and later integrated it. Standard Chartered (Thai) holds a local bank licence, but continues to be 99.87%-owned by Standard Chartered group.
The bank has a strong consumer franchise in Thailand. It saw total assets rise 7% in 2012 and its unsecured lending portfolio was buoyed by strong demand for instalment loans and the launch of Smart Cash Platinum — a product which combines the benefits of an instalment loan and revolving credit offerings. Its credit card business was also boosted by a 15% cash back offer for every card transaction at restaurants and hotels worldwide and overall, card spending hit a record high in 2012.
It has capacity to extend more balance sheet and lend to its clients than most of its foreign peers and Standard Chartered is well capitalised in Thailand with a capital adequacy ratio of 17.08% at the end of 2012.
BEST FOREIGN INVESTMENT BANK
Competition for the award intensified this year but Morgan Stanley continues to stand out for its balanced business — across equities, M&A and debt. On the equities front, the bank was a joint global coordinator and bookrunner on BTS Rail Mass Transit Growth Infrastructure Fund’s $2.1 billion IPO — the biggest IPO in Thailand and the first infrastructure fund in the kingdom. It was also a sole bookrunner for GE Capital’s sell-down of Bank Ayudhya and a joint bookrunner for Temasek’s sell-down of Shin Corp.
Thai tycoons have been active on the M&A front and Morgan Stanley has played a role too. It acted as financial adviser to TCC Assets for its landmark acquisition of Fraser & Neave — convincing the OCBC/Lee family to sell its 22% stake in F&N. Notably, the US bank acted as a financial adviser alongside DBS and UOB, but unlike the two Singapore banks, it did not lend– an indication that it tends to be hired for its advisory abilities. On the debt front, Morgan Stanley proved its strong relationships — arranging a $1.2 billion bond offering for Bangkok Bank on a sole basis. Few deals in Asia are arranged on a sole basis, but Morgan Stanley has a longstanding relationship with Bangkok Bank, which is a repeat client for the bank.
Vietnam’s fourth-biggest bank by assets closed the sale of 15% of its equity to Mizuho Corporate Bank in April 2012, a deal first announced in 2011. That has provided the support Vietcombank requires in a difficult environment.
How tough is it now for Vietnamese banks? Moody's Investors Service downgraded the entire sector in September, citing the mountain of bad debts hobbling banks and their ability to provide credit. The industry hit a nadir in September when the CEO at Asia Commercial Bank, 15% owned by Standard Chartered, was arrested for alleged “economic crimes”.
But not all banks are the same, and Vietcombank actually enjoyed a credit upgrade by Standard & Poor’s. It leads the industry in terms of dealing with non-performing loans, keeping its bad debt at 2.4% of loans (the industry average is closer to 10%). It is also rare in growing its profitability, albeit a mere 0.7% increase for the year 2012. It has also increased total assets, and its loan growth has been modest compared to peers — making it more sustainable, according to S&P.
Now the bank is starting to benefit from its strategic relationship with Mizuho. If last year was about closing the deal, the past 12 months have focused on technical support and collaboration in areas such as treasury, credit, trade finance and payment. Amid a sea of banking troubles, Vietcombank is headed for better shores.
BEST EQUITY HOUSE
Viet Capital Securities
It has been a relatively quiet year for ECM activity, as several banks pitching for this award pointed out. But one firm stands out for having completed meaningful transactions.
Viet Capital served as sole adviser to An Duong Thao Dien’s $50 million IPO in September. No other Vietnamese firm comes close to successfully transacting a deal of this size. The construction and real-estate company is a rare example of a property developer without liquidity problems, and its market cap has nearly doubled since its listing.
The firm also served as adviser to two secondary offerings, including a mandate by UK Prudential’s Vietnam unit to sell a 40% stake in livestock company Procono to the private-sector conglomerate Masan Group. The $96 million placement was fully subscribed. Viet Capital served as lead adviser as well on PV Drilling’s private placement of 18 million shares, valued at $40 million, to a strategic investor.
BEST BOND HOUSE
VPBank Securities has been the leader in corporate bonds. In the past 12 months it successfully advised two bond deals which were successfully subscribed, both around $24 million each: a three-year unsecured structure for Vietnam Steel and a two-year collaterised deal for Nha Hoang Phuc, a developer.
In addition to ECM and advice, the firm is a leader in the local trading markets. Over the course of 2012-2013, VPBank Securities climbed its way to the number-one market share position in Vietnamese bonds, with 38% market share by the end of March.
At a time when capital markets in Vietnam are struggling, this ability to provide liquidity demonstrates leadership and commitment. Indeed, the firm’s CEO, Dung Nguyen, is a founding member of the Vietnam Bond Market Association, and is helping drive transparency.
BEST INVESTMENT BANK
Viet Capital Securities
This firm has been strong across the board: ECM, DCM and M&A. No other Vietnamese firm has the same breadth.
In equities, Viet Capital secured the $50 million IPO of developer An Duong Thai Dien, the biggest ECM deal in the period under review. It also helped Proconco and PV Drilling with a combined $136 million of secondary offerings.
In the bond space, it had a single but relatively large deal, a $105 million straight bond for conglomerate Masan Group, for which it served as sole advisor. That closed in May and set a new rate for corporate bond yields, coming in around 25% lower rates than average.
Crucially, it is the only domestic firm to have actually closed an M&A deal, as opposed to others that can boast plenty of mandates but no ink on the dotted line. Viet Securities acted as sole adviser to Vicem HaiVan Cement’s $40 million acquisition of a cement plant, which will give the company access to clinker (raw material).
BEST FOREIGN EXCHANGE BANK
Once known as the Commercial Bank for Foreign Trade of Vietnam, Vietcombank is increasingly reliant on foreign exchange for its profitability. In May, it reported FX trading profits had increased by 34.8% year on year, making this the major force behind positive earnings.
Indeed, total FX volumes rose to $44 billion and FX revenues increased to $24 billion, making Vietcombank the leader in foreign exchange. Among the areas it continues to expand and innovate are FX derivatives.
This is supported by the bank’s leading role in international payments, where it enjoyed annual turnover of $39 billion last year, giving it a 17% market share. As the only bank in Vietnam to provide six major global credit cards, it leads the market in international debit and credit card issuance and volumes, which further underscores the FX volumes that such cards require.
BEST FOREIGN COMMERCIAL BANK
Citi has consolidated its lead for institutional business in Vietnam with a number of landmark transactions for local clients, both corporate and state.
These include Vietnam Airlines’ $120 million ECA-backed term loan facility (to acquire two Airbus planes); National Power Transmission’s $225 million ECA-backed term loan facility (to finance a quartet of projects); PetroVietnam’s $1 billion multi-tranche term loan (for a 1,200 MW power plant); another $700 million loan to PetroVietnam to develop gas fields; and Vinacomin’s $300 million Japanese-insured term loan facility.
In addition to arranging financing, Citi has innovated the use of swaps to help companies achieve better pricing and liquidity on trade financing and other deals.
Although equity swaps are routinely traded offshore, Citi has worked with the regulators and stock exchanges to bring these tools onshore, with the underlying asset denominated in dong and a lien placed on the local shares. Citi assumes the foreign exchange risk to provide dollar-denominated financing, and allows companies to generate liquidity on the back of their local shares — thereby creating cheaper financing than may be available traditionally.
BEST FOREIGN INVESTMENT BANK
Credit Suisse closed more than $1 billion worth of transactions during the period under review. Most of this comes from the M&A world, but unlike rivals, the firm was also able to close deals in the capital markets.
It is not the league-table leader in M&A (it ranks third) but in every case, it represented Vietnamese clients. Rivals’ portfolio of business was mixed, but often involved foreign clients coming into the country.
CS was also at the heart of the most important deals closed during the past 12 months, such as advising conglomerate Masan Group on its $200 million sale of a consumer unit to KKR. It won the deal having impressed Masan by representing KKR in 2011 when the private-equity group initially took a stake in Masan. The challenge was to convince KKR to accept a 44% premium on what KKR had initially paid for its Masan stake, which required the adviser to argue the price was based on growth and on regional sector comparisons — although it was also helped by the scarcity of consumer deals available in Asia.
Its $100 million structured repo financing for Lien Viet Post Bank was innovative, allowing the bank to generate liquidity from investments that otherwise hobble its credit. The deal also benefits Credit Suisse’s trading desk by creating a source of flow, so that the firm can provide leverage against credit-linked notes for future counterparties — at a rate cheaper than referencing CDS swaps.
In the ECM world, Credit Suisse helped VinGroup issue a $115 convertible bond, making this the largest capital-market issuance by any corporate issuer from Vietnam. Credit Suisse’s bankers say this opens the door to more CB deals in the coming 12 months.
Trade and Development Bank
After being in business for 23 years, TDB is the oldest bank in Mongolia and, with assets of $2 billion, it is also one of the biggest. However, across the entirety of the frontier markets it is an upstart minnow. But banking in these types of countries is not about size or pedigree. It is about potential.
Mongolia has been one of the fastest-growing countries in the world during the past decade and the huge Oyu Tolgoi copper and gold project could boost the country’s GDP by another 30%.
TDB is privately owned and has even attracted the attention of Goldman Sachs, which is an investor.
At the end of March 2013, TDB was sitting on about a quarter of Mongolia’s banking assets. It also has a strong earnings track record that has grown from $10 million in 2009 to $45 million in 2012.
In 2004, TDB became the first bank in Mongolia to receive investment from the ADB and IFC. In 2006, it was the first commercial bank in the country rated by an international rating agency and it is Mongolia’s only issuer of international publicly traded debt.
The bank successfully raised $300 million in senior unsecured notes in September last year, which was the fourth time it has tapped the international bond markets, underscoring the market’s confidence in TDB’s strategy, financial strength and management.
BEST FOREIGN COMMERCIAL BANK
Standard Chartered is often thought of as an emerging-market franchise, but the bank prefers to describe itself as being focused on Asia, Africa and the Middle East — a geographic area that also includes more mature markets such as Hong Kong, Singapore, Taiwan and Korea.
There are a host of banks that can get deals done in these established markets, but very few that have boots on the ground and the appetite for deals in places such as Pakistan, Bangladesh, Sri Lanka, Cambodia, Laos, Mongolia or Myanmar. And Standard Chartered is one of those few, if not the only one.
Since the financial crisis, StanChart’s main rivals in these markets — Citi and HSBC — have pulled back somewhat, with Citi focusing more on key multinational clients and HSBC adopting a narrower wholesale banking approach (epitomised by its withdrawal from Thai retail banking).
But StanChart has stayed firm. “This is what we do,” said one banker. “Transaction banking is what we're all about — the good old-fashioned banking, the basic blocking and tackling of commerce. We embrace that. It’s a core competency. It's not very sexy but it’s absolutely critical.”
Even so, the bank’s presence across these frontier markets varies hugely. It has been in Pakistan for 150 years and has 45,000 staff working in 121 branches, whereas it just re-opened in Myanmar in February after the easing of international sanctions.
It was undoubtedly a turbulent year for many banks, but Standard Chartered stayed financially strong and fully committed to supporting its clients in these important markets by improving efficiency and managing risks proactively. It remains the foremost foreign bank in these emerging markets.