How Siam Commercial Bank scooped top honours

Other winners in Thailand include Kasikorn Bank, Phatra Securities and Bualuang Securities, while Citi and Credit Suisse seal top international honours.

In May, FinanceAsia named the winners of its annual Country Awards for Achievement. Last month, winners were given ther awards at our annual awards dinner in Hong Kong. Today, we continue presenting the rationale for our decisions with a look at Thailand.

Best Bank, Best Investment Bank: Siam Commercial Bank

Thailand’s economy grew by 3.2% in 2016, up from 2.9% in 2015, according to the Asian Development Bank. But the economy is more fragile than a look at the numbers implies.

In 2015, Thailand experienced consumer price deflation, according to the World Bank. Last year, inflation was just 0.188%. All this created a tough operating environment for the country’s banks, which have struggled to deal with the spectre of rising non-performing loans.

But Siam Commercial Bank tackled the problem head on. After a sharp rise in its gross NPL ratio in 2015, the bank worked hard to get its loan book under control. Its NPLs totalled Bt57.6 billion ($1.69 billion) last year – pushing its NPL ratio down from 2.89% to 2.67%.

Short-term swings in NPL ratios do not always reflect great foresight from managers; they can be the result of an improving economic environment, or just plain luck. But analysts say that is not the case with Siam Commercial Bank. “It is more cautious on mortgage loans, focusing on top-tier developers and being very selective towards self-employed borrowers,” said Krunsri Securities analyst Jesada Techahusdin in a report on April 24. “The bank has tightened credit approval since 2015 and that is paying off as its asset quality is better than its peers.”

That is despite a sharp rise in lending at the bank. Siam Commercial Bank’s loans hit Bt1.94 trillion during the course of 2016, a 5.8% year-on-year increase. The bank grew its deposit base even further, achieving a 7.2% growth to hit Bt2.03 trillion in deposits.

Arthid Nanthawithaya, the bank’s chief executive since April 2015, launched a widespread transformation plan last year, aiming to make better use of technology across its business. This includes changes to its branch network, better mobile banking, improved training, and more efficient know-your-customer standards.

Siam Commercial Bank has also changed its branch model. The bank previously expected its branch staff to perform both service and sales functions. It has now split these functions to create specialists – and, one hopes, to make things easier for its clients.

The emphasis on technology has led to cuts in the bank’s branch network, which shrunk by around 50 branches last year. It has also led to more fintech investments – including a stake in Singapore’s Dymon Asia Ventures and the setting up of Digital Ventures, a $50 million fund.

On the investment banking side, Siam Commercial Bank just missed out on our best DCM house award. The bank worked on Bt122 billion of bonds for Berli Jucker, by far the largest deals of the year. It was sole bookrunner for Bt12 billion of issuance from CP All and on an Bt8 billion private placement for Bangkok Expressway Metro. The bank also missed out on the biggest equity deal of the deal, the Bt13.6 billion listing of Banpu Power. But it did manage to win IPO mandates from H-Reit, Sripanwa Reit and Sahakol Equipment, closing deals worth a combined Bt12.25 billion. Shortly after our awards period closed, Siam Commercial Bank also brought the Bt6 billion listing of WHA Utilities and Power.

But in M&A Siam Commercial Bank stood out from the crowd, advising on the $657 million management buyout of JAS – which it also helped to finance – and advising the Srivaddhanaprabha family on their  $225 million acquisition of Asia Aviation. Siam Commercial Bank has long been considered one of Thailand’s top-tier banks, proving adept at everything from retail banking to complex deal structuring. In 2016 the firm outlined a transformation – but its place among the country’s top banks hasn’t changed.

Best DCM House: Kasikorn Bank

Kasikorn Bank has proved time and time again that it has the flexibility to bring a variety of credits to Thailand’s domestic debt market. But even by its own high standards, the last 12 months have proved remarkable for the firm. 

The bank worked on all three mega-bonds from Berli Jucker, which sold Bt122 billion of debt between August and March. These deals helped the company to refinance a loan it used to fund the acquisition of Thai supermarket Big C,
helping Berli Jucker to slash its cost of funds, according to one local banker.

However, it wasn’t the only bank to work on these standout transactions –– so too did Kasikornbank, Krung Thai, Phatra, and Siam Commercial Bank. What tipped the scales in Kasikornbank’s favour was the breadth of its DCM business during the awards period.

It closed eye-catching deals for several state-linked corporations, including Siam Cement’s two Bt25 billion four-year bonds and Government Savings Bank’s Bt36 billion five-year bond. It also helped the Lao People’s Democratic Republic return with an Bt11 billion bond, overcoming a challenging approval environment.

But most eye-catching of all was the Bt6 billion residential mortgage-backed securitisation issue that Kasikornbank helped managed for the state-owned Secondary Mortgage Corporation (SMC) in November.

It was a rare deal for a country that sees little in the way of asset-backed issuance. The deal’s partial guarantee –– a move away from previous SMC securitisations that required the company to offer a full guarantee –– showed investors are increasingly getting comfortable with the product.

By working on some of the biggest deals during our awards period, Kasikornbank proved it was a safe pair of hands for the country’s biggest corporations. But its work on the SMC securitisation, which included the addition of a crop of high-net-worth investors, showed the bank is also making a lasting impact to a market that has plenty of room for innovation in the years to come.

Best ECM House: Bualuang Securities

Bankers lamented something of a lost year in Thailand’s ECM market, after a series of postponed transactions shrunk volumes and revenues alike. The slowdown meant those few deals that did come were essential sources of business for the biggest firms in the market –– and one deal in particular overshadowed all others. The listing of Banpu Power, a subsidiary of mining and power company Banpu Group, came during the most volatile period of the year, according to bankers familiar with the deal. The IPO was launched in early October and priced on the same day Thailand’s king, who had ruled the country for more than 70 years, passed away.

But despite the difficult timing, not a single domestic investor pulled out during that week. The domestic tranche ended up more than eight times over-subscribed. Foreign investors also flocked to the deal, something that helped international bookrunner Credit Suisse pick up the best foreign bank award in the country.

Bualuang shared domestic book-building duties on the deal with Kasikorn Securities and Thanachart Securities. But only Bualuang and Thanachart were there from the start among the local players, helping to structure the deal, put the documentation in place, and work Banpu Power through the first steps on the road to an IPO.

The deal was undoubtedly the highlight of Bualuang Securities’s year. But Bualuang can also boast a handful of other, smaller deals. It was the sole bookrunner of a Bt735 million listing for After You, a dessert maker and catering business. It also took sole charge of an overnight placement in the shares of energy company Scan Inter, helping to raise Bt1.027 billion for the company’s president and chairman, Thanchart Kitpipit.

Bualuang is helped by its strong relationship with parent Bangkok Bank, which offers it a huge branch network it can use to distribute securities. But the firm’s 12,500 broker accounts show it has plenty of distribution capability of its own. Rival bankers sound a note of optimism about the year ahead, relying on deals delayed from last year to boost volumes in 2017. But when they look back at 2016, most can point only to a small list of tiny transactions. Bualuang can boast a role on the biggest – and arguably best – capital markets transaction of the year.

It should come as little surprise that the firm would be considered the stand-out ECM house in 2016.

Best Broker: Phatra Securities

Phatra Securities has long been one of the leading brokers in Thailand but the company’s recently expanded product offering is the envy of many local rivals. 
The firm has undoubtedly become stronger following its merger with Kiatnakin Bank, a small local lender, in 2012. Since then Phatra has worked hard to build its roster of high-net worth clients and that continued at the start of this year.

In 2015, Phatra became the first Thai firm to get regulatory approval to offer collateralised ‘Lombard loans’ to clients, and early in 2017, it added real estate to the list of assets it would accept for Lombard collateral.

In March 2017, the firm struck an agreement with Credit Suisse whereby the European bank would source external asset managers for Phatra clients, deepening an open architecture structure that already ensures its clients access to equities across Southeast Asia.

The brokerage firm teamed up with Bank of America Merrill Lynch to provide research, covering 92 domestic stocks. That may not seem much considering the 590 companies that are listed on Thailand’s stock exchange, but Phatra’s focus on large-cap stocks means its research covers more than 75% of the country’s market capitalisation.

Still, the firm made efforts to improve its research offering during our awards period, adding 17 small-cap stocks to its research list and adding two new analysts, bringing its total research team to nine people – four of whom have more than 20 years of experience.

The firm’s commission revenues vary month-by-month, but a rule of thumb is that Phatra derives around 60% of its commissions from institutional investors, with the rest coming from retail accounts. Around 75% of its commission earnings come from local accounts instead of foreign investors.

It was certainly not the easiest year for Thai brokers, as tepid primary volumes and unwelcome political news hurt demand and increased volatility. But Phatra has made investments for the long-term. It would be no surprise to see the firm compete for this award for many years to come.

Best Private Bank: Siam Commercial Bank

Siam Commercial Bank’s private wealth division is in the midst of a revolution. The private bank has created several new divisions, beefed up its digital platform, and moved closer to launching a fully-fledged family office.

This level of ambition can lead to prolonged weakness, as new teams struggle to integrate and new ideas take a while to bear fruit. But Siam Commercial Bank appears to have got the balance right.

One major change at the bank was the creation of a CIO office in 2015 to come up with investment ideas and help source products from other banks. This forms part of its plan to ramp up the sophistication of its investment and product offerings, catering in particular to an ultra high-net-worth investor base that increasingly wants structured products as well as old-fashioned equities.

The firm has also made moves to beef up its digital platform. This includes the launch in early 2017 of iPort, an online application that makes it much easier for private bank clients to manage their investment portfolios in real time. iPlan, launched at the same time, offers a similar service for insurance contracts.

But perhaps the biggest change at the firm has come from its aggressive hiring of relationship managers. From around 40 two years ago, the firm now has around 100 full-time client managers. The next target is to double that.

Even more impressive is the fact that the bulk of this new headcount has come from its own training programme after Siam Commercial Bank set up an academy in 2015.

The private bank closed the year with AUM of Bt510 billion, up 15.65% from the year before, which kept on rising in 2017, hitting Bt600 billion by the end of March.

That helped the firm’s fee revenues grow from Bt1.46 billion at the end of 2015 to Bt2.7 billion in early 2017. If the private bank can keep up the momentum, helped by Siam Commercial Bank’s continued investment, it will be just the beginning of this eye-catching success story.

Best International Bank: Citi

Citi has remained committed to Thailand even as some of its rivals have taken a step back from the country. The US bank has now been in the country for 50 years and its commitment is paying off.

The main focus of Citi’s Thai arm is the bread-and-butter business of transaction banking, cash management, and trade finance. These unglamorous but highly profitable segments play to Citi’s strengths, in particular the global reach that has made it the go-to bank for European and US companies operating in Thailand.

But although Citi gets plenty of revenue from multinationals, it has not neglected domestic champions. The bank has won cash management mandates from Thailand’s Government Pension Fund, Siam City Cement, and Thai Airways.

The relationship with Thai Airways, which has picked Citi as its sole global cash management bank, is a good demonstration of the way in which Citi tries to connect the dots between different parts of its business. The corporate banking relationship has aided its consumer arm, with the launch of a co-branded credit card that helps its customers earn air miles more quickly.

Citi had some highlights in investment banking, helping Thai banks and corporations head offshore amid a tepid deal environment at home. Among noteworthy deals were Citi advising Central Bank on its acquisition of Big C Vietnam and teaming up with Deutsche Bank to manage Kasikornbank’s $500 million 5.5-year bond in September.

But it was Citi’s focus on corporate banking that made it stand out from its local rivals in Thailand during our awards period. For both multinational corporations and local players, the bank remains the obvious choice.

Best International Investment Bank: Credit Suisse

Foreign investment banks were not gifted with a raft of glamorous deals to fight for in Thailand last year. There were a handful of major acquisitions, a small amount of notable bonds both offshore and onshore, and just one landmark IPO.

It was not, in other words, a year in which banks could stand out simply by the quantity of deals. But when it came to the quality of its transactions, Credit Suisse emerged as the clear winner.

The Swiss bank was the sole foreign bank to work on Banpu Power’s Bt13.6 billion IPO, although it was joined by local firm Quant Group on the international tranche.

Credit Suisse played an essential role in securing an international bid that local bankers said dwarfed recent deals. The bookrunners priced the deal on the same day Thailand’s king died, and after several days of rumours about an announcement from the palace. The uncertainty caused a spike in volatility but Credit Suisse convinced investors to take a long view and ended up working on by far the biggest Thai listing of the year.

Banpu Power considered a Who’s Who of international banks to manage the IPO, meeting a mix of European and US investment banks after asking for proposals. In the end, Banpu Power decided to rely on Credit Suisse for bookbuilding – a wise decision, as it turned out.

That deal was the most impressive Thai transaction Credit Suisse worked on during our awards period. But it was not the most complex. The bank also acted as the sole financial advisor to Sri Trang Agro-Industry on the demerger of a variety of businesses from Semperit.

The two companies had signed multiple joint venture agreements, meaning Credit Suisse had to juggle many moving parts when carving out a deal. But it took the bank just under three months from announcement to completion, an impressive turnaround for a deal that required shareholder approval.

Credit Suisse has had plenty of success in Thailand in the past. Its work advising French supermarket Casino on its sale Big C fell just outside our awards period. But even in the difficult 12 months that we considered, Credit Suisse showed it had the pulling power to win the glamorous mandates – and the savvy to manage the complex ones. 

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