Mervyn Chow and Edwin Low took the top Asia-Pacific investment banking roles at Credit Suisse a month after the Swiss bank said it wanted to double its profits in the region by 2018. It is a challenge they are determined to meet.
In their first interview since their promotion on November 17, Chow and Low outline where they see fees growing, their thoughts on retaining talent, and how they view the bank's new specific focus on entrepreneurs as career Credit Suisse dealmakers who have enjoyed a wide-ranging remit and a variety of clients.
Asked if investment banking now played second fiddle to the private bank, Low said he did not see it that way: “We don’t demarcate between investment banking and private banking, we support the owner.”
So far the strategy is bearing fruit. Credit Suisse reported record nine-month results for Asia Pacific, with revenues rising 17% year-on-year to CHF3 billion ($2.95 billion) and pre-tax income up 48% at CHF1.1 billion. The bank said the increase was driven partly by integrating private banking, wealth management, and investment banking products.
Credit Suisse is in the midst of root-and-branch reform to see the pivot towards focusing more on entrepreneurs through. Low and Chow were promoted after Vikram Malhotra left the role to run a newly created unit targeting ultra high net worth entrepreneurs, according to an internal memo seen by FinanceAsia.
China build out
Chow and Low are still working out the details of how best to deploy their resources but they agree on rolling out the tried and tested model of banking billionaires across South East Asia into China.
One aspect of that is helping China’s entrepreneurs raise capital.
“There are a lot more product offerings available to help owners in China, from liquid and illiquid financing to cross-border acquisitions,” said Chow, who is based in Hong Kong and was most recently regional head of Credit Suisse’s global markets solutions group. This division oversees equity capital markets, debt capital markets, convertibles, and corporate equity derivatives in the region.
At most major investment banks, fees from arranging private financing and structured solutions are growing faster than revenues generated from publicly marketed deals. A 40:60 or 50:50 public to private split in investment banking revenues is not unusual, according to industry sources.
“Private financing for both corporates and shareholders is now becoming a bigger revenue driver for investment banks,” said Chow who believes the Swiss bank could keep its edge in this field. “Credit Suisse was a pioneer in private financing,” he said.
Credit Suisse was joint financial adviser on Didi Kuaidi’s $2 billion fund raising, the largest ever by a private company at the time, outpacing even Facebook's capital raise before it was listed. The injection of capital in the Chinese taxi hailing app company and up-and-coming Uber rival valued Didi Kuaidi at $15 billion.
Valuations in private transactions soared earlier this year but are now starting to come back into line with public deals.
“Pricing is already adjusting between the private and public markets and we expect that it will reach a more healthy equilibrium,” said Chow.
Credit Suisse has lost some high profile bankers to rivals and corporates in recent months.
Notable departures this year include: David Cheng, the bank’s Asia head of corporate finance; Jan Metzger, the Asia-Pacific head of technology, media and telecommunications who went to Citi; and Zhang Liping, co-chief executive officer for Greater China, who joined Blackstone.
They also include Catherine Liu, head of media and technology coverage for China, who has joined an as-yet-unknown technology company.
But the haemorrhaging of talent could be coming to an end, the two bankers hope. “The trend of investment bankers leaving for tech start ups is slowing down,” said Chow.
Credit Suisse has also been hiring. It added a new head of technology for Asia from Morgan Stanley, Alain Lam, and a senior hire for its Greater China corporate finance team from Standard Chartered, Richard Kao.
Earlier this year, Credit Suisse also said it was expanding equity research capabilities in China, adding headcount to meet growing demand for in-depth analysis of the country’s A-share market.
Chow and Low emphasised their long history with the bank, which they said is important for client relationships and would help encourage more junior staff to stick with the firm.
Chow, who is 43 years old, was born in the US but grew up in Hong Kong and speaks Mandarin. He joined Credit Suisse in 1998.
From 1995 to 1998, Chow worked for BZW Asia which was acquired by Credit Suisse First Boston.
“We are home-grown and have worked through a few cycles such as the Asian financial crisis,” said Malaysia-born Low, who joined Credit Suisse in 1996 and is based in Singapore.
“Under the new structure we can take a longer-term view,” Low.
Having co-heads can lead to conflict but Low’s background as a coverage banker in Southeast Asia complements Chow’s product expertise and China experience.
Southeast Asia has long been the engine of Credit Suisse’s franchise in Asia -- something underlined by the recent appointment of Helman Sitohang to the bank's executive board. Sitohang is Credit Suisse's chief executive officer for the Asia-Pacific region and the former country head of Indonesia.
Credit Suisse has this year picked up various investment banking roles such as joint bookrunner on an accelerated placement in Keppel Infrastructure Trust.
At the time of pricing, the sale was the largest equity placement in Singapore since 2013 and the largest equity transaction in the Lion City this year.
The firm also worked on Philip Morris International's partial stake sale of Indonesian cigarette maker PT Hanjaya Mandala Sampoerna in October.
In addition, Credit Suisse was joint global coordinator on Malakoff Corporation Berhad's initial public offering, the year's second-largest equity offering at the time of pricing in Southeast Asia.
Looking ahead Low is optimistic that markets and fees will pick up next year.
“We have a strong pipeline across Southeast Asia,” said Low, who was previously co-head of Southeast Asia Investment Banking at Credit Suisse and has also run Singaporean and Malaysian coverage for the firm.
This story was updated on November 21 to add recent hires