Best Cash Management Bank
After years of tight fees and slim margins, cash management banks have hit a purple patch fertilized by upward trending interest rates and increased client interest in new products. Asian corporate treasurers emerging from a period of low earnings are now looking for ways to concentrate their account structures and manage regional balances from a single hub. When it comes to regional banking, Citigroup excels. The bank manages more than 60 shared services centres for clients in Asia, and this year picked up regional cash mandates from Dow Chemical and BAT among others. It claims to have won 80% of all regional deals that it bid for. Up to November Citigroup had accumulated cash mandates valued at about $96 million in annualized revenue, translating to an 18% increase in client acquisition on last year.
The power of its CitiDirect internet banking platform gives customers the ability to manage accounts centrally with functions including single payment file generation and consolidated reporting. Usage of the platform increased by 66% over the year with more than $920 billion worth of transactions conducted online.
With its understanding of local markets, Citigroup has the ability to offer global companies cost-effective back office solutions. This year it set up a global shared services centre for Oracle in Bangalore that will handle transaction processing for 57 countries. Another tick on Citigroup's scorecard this year is its purchase of KorAm Bank in Korea which gives it access to 7,000 new customers, mostly SMEs. Citigroup has also been busy building collections capabilities - signing deals with Circle K in Hong Kong, 7-Eleven stores in the Philippines, and Thailand Post.
Best Cash Management Solutions Bank
Bank of America for China Airlines
This new award category honours the efforts made by a bank to streamline the payments and cash management operations of a client that has significant business in Asia. While there were many good cases presented to our judges, none stood out more than the unravelling of China Airlines' disparate global treasury network. The Taiwanese carrier presented Bank of America with the challenge of consolidating and simplifying its banking processes in Asia, Europe and the US. That meant decommissioning a patchwork of treasury offices in individual countries that were responsible for duplicating activities, slowing down processes and pushing up costs.
The bank identified six key objectives including automating payables and receivables data, improving internal controls and creating a single point of contact. The solution involved, among other things, the establishment of concentration accounts in US dollars and euro, real-time global sweeping of pooled balances, providing a single bulk payment file, and monitoring of positions via the internet. Essentially the airline's home office was put back in control.
Implementation of the solution took just one month. More importantly, the new structure is saving China Airlines money. Less than six months after implementation, the company is claiming a liquidity management saving of $350,000 generated by eliminating deficits and surpluses in cash accounts. It also says the average cost of making a payment has dropped by 75%. And with vendors being paid faster and receiving enhanced remittance information, China Airlines' accounts department is fielding fewer calls from disgruntled suppliers.
Best Trade Finance Bank
HSBC holds tightly to the award of best trade finance bank negotiating three times more letters of credit in the year to end September than its nearest competitor. Trade volumes are up 22.8% on last year, with the bank processing $107.3 billion in imports and exports. This business comes from big and small traders alike. While HSBC in Asia obtains over $5 billion of volume from its top five clients (compared with $4 billion for the top five customers of its top rival) its extensive franchise means that this is a lower proportion of its overall business. Expanding its customer base continued with an 8% growth in customer acquisition over the year.
HSBC continues to win some big accounts from rivals including BSEA, the wholly owned subsidiary of chemical company BASF, who picked the bank to provide a financial supply chain solution. HSBC will handle the order-to-cash cycle from LC advising and document preparation to document transit and payment.
In 2004 HSBC spent time building its China franchise ready to capture the lion's share of trade flows as regulations on foreign banks are relaxed. With seven out of 10 branches licensed to provide renminbi services, HSBC has the biggest foreign branch franchise on the mainland. Chinese customers are already using the bank to expand their businesses around the region. Zhang Wen Feng, general manager of Tianjin Pipe, says: "HSBC has provided us with value-added services such as document preparation training, export DC advising and Document Express. With the assistance of the global network of HSBC, we have successfully enlarged our market in different corners of the globe."
Best Trade Finance Solutions Bank
JPMorgan for Lucent Technologies
This first time award goes to JPMorgan for a highly structured trade finance solution in a risky sector where cash flow is troublesome. Lucent Technologies wanted medium-term financing for a telecommunications project in India. The $30 million deal that ensued gave the importer three-year financing in both US dollar and Indian rupee. The one-year commitment sees JPMorgan confirming and discounting letters of credit issued by a group of 12 banks on behalf of Lucent's customers.
Essentially JPMorgan is pre-underwriting the group of banks for both dollar-based and rupee-based credits. The bank is managing the risk around the transaction by distributing the paper in the secondary market and using credit default swaps - an instrument regularly issued by JPMorgan's capital markets division. The deal was signed in April and by late November about 60% of the facility had been used.
Ken Wong, Lucent's managing director of credit and finance solutions, says the structure is the first of its kind for the company and that JPMorgan worked quickly to resolve some technical issues relating to the transaction. He says the multi-currency nature of the facility was useful. "Flexibility was also important," says Wong. "Applicants are able to select from a number of different issuing banks." In another twist, the discounting fee is being divided between the buyer and the seller.
The Lucent deal is testimony to JPMorgan's trade finance solutions capabilities because it meets the customer's complex cash flow needs, and offers flexible multi-currency funding with an attractive tenor. Lucent is so happy that it is considering signing another one-year facility with JPMorgan, this time in excess of $100 million and with a tenor likely to be three to five years.
Best Global Custodian
JPMorgan regains the best global custodian title this year in part due to its success in attracting new China business. Assets under custody are up 87% in the burgeoning Chinese market. Though the bank is reasonably tight lipped about it successes, and not surprisingly given that it is breaking new ground with every deal that it signs. Having banking licenses in the country has helped, and some of its new clients in China this year include the large state-owned banks. Clients on the mainland are benefiting from the same product set as clients in more established markets including the roll out in 2004 of a reporting service that allows treasurers to view their funds as a consolidated pool.
JPMorgan faired well in other markets too, increasing assets under custody in Japan from $128 billion to $192 billion and successfully unseating incumbents to win accounts like Challenger Financial Services in Australia. In all, it claims to have won over 80% of all business tended for.
JPMorgan continues to generate significant income (25% of all revenues) from businesses other than custody, having one of the largest securities lending portfolios and providing middle office outsourcing services to 12 clients in Asia. This year the custody division formalized its connection with the bank's treasury services unit, offering cash management and liquidity optimization products to customers. This will help fund managers improve cash flows and account structures, allowing them to extract incremental, but very welcome, returns.
2004 saw HSBC move into a class of its own in the sub-custody world. Over the course of the year, the bank increased its Asian assets under custody by 45% to $440 billion with 60% of assets coming from new clients. In Japan HSBC has doubled its book within two years and in China it has the lion's share of QFII business. A growing number of global custodians are choosing the bank to provide multi-market services.
As SG Global Banking says: "Recently we consolidated our services in the Middle East and Asia with HSBC and this has been driven by the following factors: extensive network; comprehensive products and services; advanced systems and technology; good market information; and committed staff resulting in high levels of service quality."
But more than this, HSBC is proving that it is a quality provider of value added services. With the purchase of Bank of Bermuda completed in February this year the bank has adopted additional sophisticated systems and increased its transfer agency business. It is also sharpening its pencil in securities lending and fund administration - a move further evidenced by its acquisition of AMTeK in Korea last year.
"Our strategy involves utilizing the assets under our custody to derive more revenue for ourselves as well as our clients," says Nick Bryan, who heads the custody and clearing business. This fresh strategy could see potential overlap between the activities of the bank and some of its global custodian clients. Bryan is working overtime to ensure they don't become conflicts of interest.