In May, FinanceAsia named the winners of its Country Banking Achievement Awards for domestic banking in countries across the Asia-Pacific region. Lists of winners are here, here and here.
The competition was extremely tight this year, with numerous financial institutions proving their resilience in a difficult regulatory and banking environment.
Here, we explain in detail the rationale behind the - often very difficult - decisions that our team of judges came to in the awards for Bangladesh, China and the two categories that we judge for Hong Kong. The remainder of the decisions will be explained over the next two days.
BEST BANK: DUTCH-BANGLA BANK
This award is difficult to judge given that Bangladesh has two very different banking systems – a conventional one and an Islamic one. It is a divide that hardened last summer when the government decided to bar conventional banks from converting into Islamic banks or providing Islamic windows, even if they kept client money separated.
Al-Arafah Islamic Bank is now a stronger contender given that its asset base has more than doubled since 2011 and it beats many of the conventional banks on a lot of financial metrics. It had a higher return on assets of 1.15% in 2015, lower cost-to-income ratio (36.48%), and a low non-performing loans ratio of 4.75% — a metric that Islamic banks always tend to score well on since loans are secured by hard assets.
Another testament to Al-Arafah’s growing success is the 10% stake taken by the private sector arm of the Saudi-based Islamic Development Bank earlier this year.
However, some of the bank’s other metrics have deteriorated as it’s got bigger.
So in the end we decided that Dutch-Bangla Bank deserved the award because of its track record for innovation and its very strong 2015 results, which saw it beat its private sector rivals on a lot of key metrics.
Special mention should be made of BRAC Bank, which also had a strong year and has carved out a very strong leadership position in mobile financial services.
It is estimated that only 40% of Bangladesh’s 160 million citizens have a bank account and only 20% of them use it to save money. But 25 million are now signed up for mobile financial services, according to a USAID report published last summer, which is five times what it was two years ago.
Dutch-Bangla is second to BRAC in this fast growing market, which the two dominate. But on an overall basis Dutch-Bangla led the way, with net income soaring 35.6% to $38.7 million and total assets pushing past the $3 billion mark for the first time.
As a result Dutch-Bangla was able to improve many of its key metrics, which are ahead of its peers. ROA rose to 1.36% from 1.12%, according to figures compiled by S&P Global Market Intelligence, while return on equity rose to 20.13% from 16.61%. Its net income margin was also strong at 4.81%, again an improvement on last year’s 4.69%.
And while its loan book has been expanding it has so far been able to keep NPLs under control. These as a proportion of total loans fell to 3.69% in 2015 from 4.4% in 2014.
The one metric where Dutch-Bangla does not rank so well is with its cost-to-income ratio, although again it was able to improve this in 2015 to 58.93% from 61.76% in 2014, based on data from S&P Global.
BEST BANK: INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ICBC)
ICBC managed to maintain its profit margins and a solid operating performance despite a slowing Chinese economy and narrower interest rate margins due to concerted monetary easing by the Chinese central bank.
The world’s largest lender by total assets last year posted a net profit of Rmb277 billion ($42 billion), up 0.5% on the previous year, while its total operating income rose by 5.3% to Rmb669 billion from Rmb635 billion over the same period.
Challenged by the slowing profit growth and the rise of its non-performing loan ratio (from 1.13% as of end of 2014 to 1.5% as of end of last year), the bank diversified its income mix.
For instance, income from fee and commission-related business reached Rmb143 million, up 8.2%, and accounted for 21.4% of its operating income last year, while net interest income rose just 2.9% to Rmb508 billion.
In retail banking, traditionally a strong area for the bank, ICBC had 496 million personal customers, whose financial assets totaled Rmb11.6 trillion as of the end of 2015. The bank is also a credit card powerhouse, issuing about 101 million credit cards, making it the biggest credit card issuer in the Asia-Pacific region and the third largest globally.
ICBC has beefed up its private banking arm in recent years. The number of its private banking customers reached 62,000 by the end of 2015, up 44.8% year-on-year, with assets under management exceeding Rmb1 trillion for the first time since the launch of the business in 2008. That makes ICBC the second-largest player by AUM in Chinese private banking, after China Merchants Bank with AUM of about Rmb1.3 trillion.
Its asset management division, a particularly innovative part of its business, has been growing strongly too, with the balance of ICBC’s wealth management products rising by 32% to Rmb2.62 trillion.
In addition, ICBC has been actively involved in some of the government’s national strategies, notably the “One Belt, One Road” initiative. It financially supported more than 200 OBOR-related projects last year and runs 123 branches in 18 OBOR-covered countries.
Last year, it also provided $42.7 billion in loans to support 170 “Going Global” projects.
As a banking pillar of the Chinese economy, ICBC said it focused on supporting the country’s real economy and entrepreneurialism, in particular by providing loans to micro-, small- and medium-sized enterprises. Outstanding loans to such companies stood at Rmb4.7 trillion, accounting for 43.5% of ICBC’s total loans.
The bank has aggressively expanded its foothold overseas, with a presence in 42 countries, the widest coverage of any Chinese bank, which in return has increasingly helped to boost its profits.
In its cross-border renminbi clearing business, for instance, the net earnings of its overseas entities (excluding the newly acquired ICBC Standard Bank and ICBC Turkey) increased by 12.2%.
BEST INVESTMENT BANK: CHINA INTERNATIONAL CAPITAL CORPORATION (CICC)
China International Capital Corporation, the country’s first joint venture investment bank, is FinanceAsia’s top Chinese investment bank thanks to its leading M&A franchise as well as a solid performance in both debt and equity capital markets during the period under review.
The past year saw CICC pass another milestone in China-related mergers and acquisitions, advising on $65 billion worth of outbound deals and $101 billion worth of domestic deals, according to Dealogic data.
It topped the country’s M&A league table with market shares of 34.4% and 17% in outbound and domestic transactions, respectively, Dealogic data shows.
Landmark deals include ChemChina’s $48 billion planned acquisition of Swiss agrochemicals firm Syngenta, which once completed is set to be the largest-ever outbound purchase by a Chinese firm, and HNA’s acquisition of Ingram Micro for $6.3 billion, the largest Chinese takeover of an American information technology firm. CICC also played a key advisory role in Qingdao Haier’s $5.4 billion acquisition of General Electric’s home appliance unit and Dalian Wanda’s purchase of Legendary Entertainment for $3.5 billion.
Beijing-based CICC was traditionally best known for winning lucrative mandates for initial public offerings. The investment bank also listed itself, raising $811 from its Hong Kong IPO in November 2015.
But in recent years CICC has also strengthened its fixed income division. It executed 88 onshore debt capital markets deals worth $27 billion for a diverse range of issuers during the awards period, up from 50 deals worth $19 billion in the previous corresponding period, Dealogic data shows.
CICC posted Rmb9.5 billion in gross revenues in 2015, up 54.4% year-on-year, and a 74.6% improvement in net profit to Rmb1.9 billion, mainly thanks to strong growth in fee and commission income from its M&A and brokerage businesses.
BEST DCM HOUSE: CHINA SECURITIES
China Securities is FinanceAsia’s Best DCM House in China because of both the scale and diversity of its fixed income capabilities.
In the period under review the broker ranked second in the onshore debt capital markets league table, with a 6.2% market share, up from seventh and a share of 3.3% in the last corresponding period, according to Dealogic.
It underwrote 165 domestic bonds worth $47 billion, up from 90 deals totaling $19 billion a year earlier, Dealogic data shows. In addition, it was top for Chinese corporate bond offerings after underwriting 109 deals worth Rmb142 billion ($21.6 billion) in the period under review, according to Bloomberg data.
Jumbo deals include a $7 billion corporate bond issued by Industrial & Commercial Bank of China, the largest onshore corporate bond of 2015, China Railway Corporation’s $3.2 billion enterprise bond, the largest onshore enterprise bond last year, and Bank of Beijing’s $4.7 billion bond, the third-largest domestic financial bond last year, according to Dealogic.
Established in 2005 on the back of Huaxia Securities, one of the country’s first brokerage houses, China Securities soon developed into a leading full-service brokerage and has built up a solid fixed income operation platform with integrated origination, structuring, syndication and trading divisions.
Its fast development is partially thanks to strong backing from Beijing State-Owned Capital Operation and Management Center and Central Huijin Investment, which own 45% and 40% of the company, respectively.
Headquartered in Beijing, China Securities has set up 205 securities brokerage branches across the country and has about 3.6 million clients. In 2012, it expanded its foothold offshore by establishing an office in Hong Kong.
BEST BROKER: GUOTAI JUNAN SECURITIES
Guotai Junan Securities, one of China’s leading brokerages, wins the country’s best broker award thanks to its outstanding broking performance and solid research capabilities.
Last year, Shanghai-based Guotai Junan Securities posted a net profit of Rmb15.7 billion ($2.4 billion), up 132% year-on-year, and a 110% jump in revenues to Rmb37.6 billion.The strong gains were mainly due to higher brokerage commission fees, which grew more than 160% year-on-year and accounted for almost half of the broker’s annual income.
Guotai Junan Securities has about 136 industry analysts and economists covering more than 35 sectors, its website shows. In addition, the brokerage organised about 2,700 roadshows last year to help educate investors and provide clients greater access to companies.
It has also climbed the onshore league table and was in second place for A-share equity capital market transactions with a market share of 7.1% during the period under review. That compares with fifth and a share of 4.2% in the previous review period, according to Dealogic.
Aside from being the second-most active ECM player after Citic Securities, Guotai Junan Securities has also made great strides in debt capital markets, rising from 10th to third in the onshore DCM league table with a market share of 4.8%, according to Dealogic.
For Hong Kong winners, see page two
BEST BANK, BEST INVESTMENT BANK, BEST DCM HOUSE, BEST ECM HOUSE, BEST BROKER: HSBC
HSBC remains at the forefront of finance in Hong Kong, at the vanguard of several key trends including the internationalisation of the renminbi, and has made the most of the Territory’s position as the gateway to China with its expansion into the Pearl River Delta.
Across the bank’s services, from commercial banking to capital markets, HSBC helped its clients to grapple with the new challenges thrown up by China’s economic slowdown and by enhanced currency controls.
To be sure, less demand for credit hit HSBC’s profitability, but only in line with its peers.
HSBC reported that its first-quarter pretax profit in Hong Kong dropped in 2016 to $2.089 billion from $2.771 billion a year earlier as many of its clients sat on the sidelines. HSBC did respond though by keeping a tight rein on costs, with a 39% cost-efficiency ratio in Hong Kong.
In 2015, HSBC’s pretax profit in Hong Kong grew to $9.8 billion from $8.1 billion in 2014. Profits edged higher across the bank’s three main divisions of retail, commercial banking, and global banking and markets.
Revenue from current and savings accounts in Hong Kong continued to grow. Customer accounts expanded to $421.5 billion in 2015 from $389.1 billion in 2014 and continued to climb in the first quarter to $436.96 billion.
Not to be left out of the fintech revolution, HSBC also started to offer e-Cheque services and launched live-chat online customer service in Hong Kong.
In broking early last year HSBC benefited more than most from the popularity of the Shanghai-Hong Kong Stock Connect programme, not least by offering plenty of margin lending. Revenues have since dipped in 2016 but by no more than the industry average.
HSBC is also positioning itself effectively to take advantage of emerging trends in corporate finance such as green bonds.
Collaboration between the commercial bank and global markets enhanced HSBC's ability to win mandates on deals last year across M&A, ECM and DCM during the period.
Cheung Kong and Hutchison mandated HSBC on three major M&A deals in 2015.
HSBC also acted as the sole financial advisor on Biostime’s $1.2 billion strategic acquisition of a majority stake in Swisse Wellness.
In debt, HSBC in general continued to dominate It excelled in the bank capital and hybrid bond space and impressed with its liability management, especially for high yield property issuers.
In terms of Hong Kong-based borrowers, it brought investors CK Hutchison’s €2 billion 7/12-year senior bonds, the company’s first issue since announcing its restructuring. It also brought to market New World Development’s $950 million seven-year senior bond, the largest unrated transaction from Asia of 2015.
Despite lower underwriting fee income in Hong Kong last year due to reduced ECM activity, HSBC still advised on some interesting deals. It was the active joint bookrunner and joint dealer manager for the $1.5 billion exchangeable bond offering by China Overseas Finance Investment.
HSBC was also active in helping investors meet promising companies. In 2015, it put on over 400 roadshows, 250 investor trips, 15 conferences, and 100 expert events.
What’s more, the firm’s research analysts put out some solid calls to investors. Notable among them is Neale Anderson's contrarian “reduce” rating on China Mobile in 2015 proved prescient as the stock fell through the year.
HONG KONG – CHINESE FINANCIAL INSTITUTIONS
BEST BANK: BANK OF CHINA (HONG KONG)
Bank of China (Hong Kong) strengthened its well-established franchise during the awards period and made several moves to further reposition itself as the regional arm of BOC Group.
Despite low interest rates, the bank’s profits hit a new high of HK$26.8 billion ($3.45 billion) in 2015, up 9% on a year earlier, helped by a surge in mainland Chinese enterprises going global and requiring additional financial services.
It also built upon its ability to leverage off the internationalisation of the renminbi and China’s One Belt, One Road initiative, while maintaining a strong balance sheet.
Recent market volatility does not seem to have dampened BOCHK’s expansion in the Asean region. It won approval to set up a branch in Brunei Darussalam, the first Chinese financial institution to establish such a presence in the tiny nation state.
It sold Nanyang Commercial Bank to China Cinda Asset Management for HK$68 billion, freeing up capital to buy assets elsewhere in the region. Bank of China also plans to transfer some of its Asean assets to BOCHK.
BOCHK completed the world’s first repo transaction as an offshore renminbi business participating bank in the interbank bond market on the mainland. It also issued the first renminbi bond, a so-called panda bond, by an international commercial bank in the mainland interbank bond market.
BEST INVESTMENT BANK: CICC
CICC, China’s first joint-venture investment bank, took a major step forward in November with its overseas strategy as a result of its $811 million IPO in Hong Kong.
In recent years the Beijing-headquartered bank has broadened its base of Chinese state-owned enterprises seeking a listing to help mainland clients expand internationally and raise capital from overseas investors.
So it seems fitting that CICC followed its clients by reaching out overseas through its listing in Hong Kong. The IPO will also help to broaden its product offering in areas such as fixed income, currencies, and commodities as well as equity derivatives.
Founded in 1995, it now boasts offices in Hong Kong, Singapore, New York, and London.
Evidence of its determination to strengthen its bond and structured financing capabilities was its poaching last year of a team of 10 fixed income bankers from Standard Chartered, according to a person familiar with the matter.
Aside from the more traditional lines of investment banking, CICC has been a major player in private placements, helping fast-growing companies to tap capital sources without venturing into volatile public markets. CICC was one of the lead advisers on a $4.5 billion private funding round for Ant Financial, Alibaba's financial affiliate.
Last year, CICC’s gross revenues jumped by 54.4% year-on-year to Rmb9.5 billion ($1.5 billion). Net profit soared 74.6% to Rmb1.9 billion over the same period, thanks to strong growth in fee and commission income from its M&A and brokerage businesses.
In terms of offshore investment banking revenue (excluding self-mandated deals) CICC ranked second, according to Dealogic, just behind Morgan Stanley.
CICC has been sponsor on several notable IPOs in Hong Kong, including those of Legend Holdings, China Re, China Huarong, and China Energy Engineering Corp. In addition, it helped on several other eye-catching IPO deals, including IMAX China, 3SBio, and Red Star Macalline.
It has also been broadening its follow-on expertise with deals such as Galaxy Securities, China Taiping and China Resources Land.
In debt, CICC worked on China Life Insurance’s $1.28 billion tier-2 capital securities, the largest-ever international fixed income issue by a Chinese insurer. Also notable was its role on China Railway Construction Corporation’s $500 million convertible bond, the first H-share US dollar convertible bond issued by a Chinese company overseas since China’s National Development and Reform Commission relaxed its approval system with its Circular 2044.
The company’s relatively large exposure to investment banking and asset management, as well as its institutional client base, helped it to navigate China’s choppy financial markets over the past 12 months better than rivals more exposed to broking.
While one brokerage after another was hauled over the coals for regulatory failings in China last year, CICC stayed out of the limelight in comparison.
BEST DCM HOUSE: BANK OF CHINA
Bank of China and BOC International not only dominate the league tables but have also brought interesting deals to investors that have furthered the development of mainland China’s capital markets.
Bank of China and BOC International in April worked with Asia’s leading oil refiner, Sinopec, which completed the largest offshore bond of the year from Asia ex-Japan, raising $3 billion from a four-tranche offering. Sinopec likes setting records, having last tapped bond markets almost a year ago with a $6.4 billion five-tranche bond that at the time was Asia’s second-largest corporate bond on record, behind Alibaba’s $8 billion deal. Bank of China and BOCI both worked on that too.
In July, Bank of China priced Goldwind’s Reg S $300 million green bond with a three-year tenor yielding 2.5%, the first green bond offering by a Chinese corporate issuer.
In October BOC International worked on the first sale of aircraft to an ABS vehicle by an Asia-based aircraft leasing company. BOC Aviation has the highest credit ratings (A-/A- by Standard & Poor’s/Fitch) among major global aircraft leasing companies.
To be sure, there needs to be greater coordination between Bank of China’s offshore teams -- Bank of China, BOC International and Bank of China (Hong Kong) -- which is slowly happening. But in the meantime, the group goes go from strength to strength.
Bank of China and BOC International both worked on Bank Of China group's landmark Silk Road bond issue, which raised $3.55 billion. Although this was their own group we felt it was still noteworthy because it was the first bond simultaneously offered in four different currencies and listed on five exchanges. The deal was also bang on a prominent theme of the year, China's Belt and Road initiative.
BEST ECM HOUSE: HAITONG INTERNATIONAL
With one of the most aggressive overseas business plans among China’s listed brokers, Haitong International is now the largest Hong Kong-based Chinese broker in terms of assets and equity, bolstered recently by a rights issue and syndicated loans.
This extra capital can be used to help mainland Chinese clients finance their overseas expansion and will be helpful to Haitong International during times of market stress.
Haitong International thrived during 2015, showing enviable revenue and profit growth, despite a marked risk aversion among investors during the latter part of the year. In equity capital markets it had very strong league table positions.
In ECM, Haitong International brought an array of new names to investors, across several sectors. Rather than just concentrate on the elephant deals coming to market it also worked on smaller deals, thereby widening the choice for investors.
It acted as sole sponsor on a number of deals including SMIT Holdings, Chinney Kin Wang, and Vital Mobile and handled the largest share placement by Evergrande since its listing in 2009.
The ECM team has worked to build partnerships to help ensure its onshore clients continue to have access to offshore securities through the Qualified Domestic Institutional Investor scheme.
Haitong International now has a 30-strong analyst team based in Hong Kong and Tokyo, helped by its acquisition of Ji ASIA (Japaninvest) in March 2015. Its Small Cap Network team works to provide investors access to fast-growing businesses by way of 600 visits, on average, per year.
It has also benefited from the investigations into Citic Securities, Haitong International’s larger broking rival on the Chinese mainland.
BEST BROKER: CLSA
Investors and reporters have fretted about whether CLSA would be able to maintain its independent voice ever since its acquisition by Citic Securities. So far those worries seem premature as the firm continues to craft thought-provoking research in a witty style.
Its broking business continues to provide solid sales and execution services to institutional investors and provides them access to equity markets in 62 countries.
To date CLSA, which maintains its own branding, looks to have shrugged off the regulatory travails of its parent.
Meanwhile CLSA’s investor forums, running since 1994, continue to be boisterous, informative, and fun. CLSA now runs five investor forums in Asia annually, attracting about 4,600 global institutional investors, corporate attendees and speakers.
Its research teams also boast over 190 specialised analysts covering over 1,320 listed companies in 18 sectors.