CSFB wins symbolic Fubon mandate

CSFB bounces back from its expulsion from the Unicom equity deal by picking up a key mandate in Taiwan.

In the contentious world of Asian investment banking, few mandates can have as much symbolism as Wednesday's award by the Fubon Group of Taiwan of a significant M&A mandate to CSFB.

The mandate is to advise the Fubon Group on the share swap ratios that need to be decided for the merger of the five financial services arms of the group. The five companies are Fubon Insurance, Fubon Bank, Fubon Life Assurance, Fubon Securities and Fubon Securities Investment Trust. These five will be merged into one financial services giant which will dominate the financial scene in what China terms a renegade province.

Citigroup owns 15% of the Fubon Group and has been a key promoter of the merger of the financial subsidiaries. It is unclear what role Citigroup had in awarding the mandate.

The mandate comes after CSFB was removed from the underwriting group for mainland telecom company China Unicom's secondary share offering for "political misconduct". The firm had the misfortune to be chosen to lead an invesment roadshow for Taiwanese companies around Europe. The roadshow was to include some government ministers and as such was seen by Chinese authorities as promoting Taiwanese sovereignty.

The Fubon deal is striking because it could presage a new either/or situation in Asian investment banking: either you do deals for China, or you do deals for Taiwan. In terms of fees, this year Taiwan has easily delivered more than China. But last year China easily delivered more and crucially is likely to deliver far more in the future.

Chinese officials have said that investment banks can still do commercial deals with Taiwanese companies, they just should not mess around with politics. Still, invesment bankers are not known for taking risks when it comes to key clients and few will risk potential China mandates for a few Taiwanese deals.

CSFB seems to have been rather unnecessarily picked out by the authorities for punishment. Most banks have been at the shredding machines for days destroying documents that show they too have at some time referred to Taiwan as a country. Some banks have even been forwarding evidence of their competitors' semantic sins to members of the media.

Perhaps the Chinese regulators were playing a game of catching up with the Joneses. CSFB is in trouble with regulators in nearly every time zone in Asia except the Beijing time zone. If CSFB is good - or bad - enough for the regulators in New Zealand, Japan and India, then its bad enough for Beijing.

By acting on the roadshow CSFB did show some political naievete. But by winning the Fubon mandate, the bank has shown its mettle.