In May, we announced the winners of this year's Country Awards. Today, we are pleased to announce the rationale for our decisions covering Pakistan, the Philippines, Singapore, South Korea and Sri Lanka.
Details of the winners for: Bangladesh, China, CLM (Cambodia, Laos and Myanmar) and Hong Kong, including Hong Kong's Chinese financial institutions, can be viewed here; India, Indonesia, Malaysia and Mongolia can be viewed here; and Taiwan, Thailand and Vietnam can be viewed here.
Congratulations to all the winners.
BEST BANK: MCB Bank
It is not Pakistan’s most profitable bank, but it has the most superior profitability. So after a year away from the top, MCB is back to where it belongs and its achievement is well deserved.
The bank regularly features at the top of analysts’ picks among the banking sector thanks to its efficiency ratios, strong capital buffers, high asset quality and strategic focus. Throughout most of FinanceAsia’s awards period, it had the highest valuation of any listed Pakistani bank, at just over one times book.
In a year when many banks suffered, it was noticeable just how well MCB did. S&P Global Market Intelligence data reveals industry-leading metrics across pretty much every single ratio.
MCB recorded an ROAE of 16.02% above Allied Bank’s 15.15%, an ROAE of 1.69% above Allied’s 1.29% and a NIM of 4.68% above Habib Bank’s 4.07%.
It also brought costs further under control with its cost-to-income ratio improving from 47.48% in 2019 to 40.75% in 2020. Bank officials point to the success of MCB’s digitalisation drive in helping to improve this ratio.
For the first time, more than 50% of client banked online during 2020 (56%) and this had risen to 65% by the end of the first quarter. It offered a raft of new solutions including receiving bank balances via WhatsApp.
MCB’s digitalisation drive also extended to corporate clients. One big initiative was developing Pakistan’s first-ever solution to electronically manage bank guarantees. It provided this for Engro Fertilizers and plans to roll it out to other clients.
For MCB, 2020 was a continuation of a very successful strategy. It aggressively targets low cost deposits and consequently ended 2020 with a 92.96% CASA ratio. This enables it to keep its cost of funds very low and so far it has been able to do so without losing market share.
BEST INVESTMENT BANK: Habib Bank
It is very hard for its competitors to break Habib Bank’s (HBL) dominance of this award because it has the advantage of being able to put its hefty balance sheet to work in service of its investment banking franchise.
It was another strong year for the bank, marked by financings totalling $1.576 billion equivalent. These were led by ongoing project financings for Punjab Thermal Power and ThalNova Power, which totalled just over $1 billion between them.
Pakistan is still heavily reliant on coal-fired power, but HBL is spearheading the move into the renewables field. In 2020, its landmark transaction was a 100MW wind power project for Atlas Group’s Zhenfa Pakistan New Energy.
The $58 million project was structured with an 80/20 debt-to-equity split. The financing was completed on a very tight timeline and also included participation from the UK-based CDC group.
HBL acted as the exclusive mandated lead arranger for a PRs3.3 billion ($20.8 million) loan that comprised the local debt component. This amounted to 40% of the overall debt financing.
The bank has a strong book of repeat clients and one of its key ones is power utility K-Electric. In July 2020, it arranged a PRs28.3 billion ($179 million) bridge facility for a 900MW combined cycle RLNG-based power plant to tide the group over before a syndicated project finance facility closed.
The bank also provided PRs10.4 billion in acquisition finance for Searle so that the pharmaceutical company could acquire OBS Pakistan.
HBL was also active in the equity markets largely thanks to its work for Shell Pakistan. The company appointed HBL for a two-phase advisory mandate.
The first phase comprised a balance sheet recapitalisation plan, followed by a capital raise during the second phase. The latter comprised a PRs11.6 billion rights offering, which achieved a 99% subscription ratio. As a lead manager, HBL also provided an underwriting commitment of PRs1.7 billion.
BEST BROKER: Arif Habib
It was a very good year to be a broker in Pakistan and Arif Habib took full advantage.
The Karachi Stock Exchange’s KSE100 Index staged a quite remarkable turnaround from its low of just under 26,000 in late March 2020. One year later it had almost doubled.
Pakistan’s currency has also traded very well against the US dollar, but the country’s traditional foreign investor base missed the rally with their attention diverted elsewhere.
In their place came another type of foreign investor, overseas Pakistanis. One of Prime Minister Imran Khan’s signature policies was the launch of Roshan Digital accounts last September. These allowed non-resident Pakistanis to open a bank account anywhere in world.
A lot of the money has flowed in to the stock market. Retail investors have also ploughed in after the central bank cut its policy rate from 13.25% at the beginning of 2020 to 7% over the space of the year.
During the course of FinanceAsia’s awards period, Arif Habib averaged an 8.86% market share in line with the market’s top brokers. Breaking this down further, it averaged 9.82% in retail, 9.63% among domestic institutions and 6.62% foreign investors.
But what really stood out for the judging panel was the large number of blocks it placed through the market. These totalled $446 million equivalent via 14 deals.
Its largest tranches of shares was a $152 million equivalent placement for Hub Power and a $45 million one for Oil & Gas Development Co (ONGC).
BEST INVESTMENT BANK: Credit Suisse
There was never really any doubt about which bank would win this award. Credit Suisse is part of the furniture in Pakistan and has been for many years. No other international bank can touch it in terms of longevity or commitment.
It is only international bank that produces regular research on the country’s leading companies and it has two leading rainmakers who have very deep relationships: Rehan Anwer its head of frontier markets and head of investment banking and capital markets for South-east Asia, plus Babur Rais, its frontier markets MD.
The piece de resistance came right at the end of the awards period, when the sovereign returned to the international bond markets for the first time since 2017. And it came with a splash raising $2.5 billion in its largest-ever deal.
This had three tranches: a five-year, 10-year and a 30-year tranche that represented its longest-ever tenor. All three tranches traded up very quickly and very strongly in the secondary market.
Prior to this, Credit Suisse arranged its 12th and 13th syndicated loans for the Ministry of Finance: a $115 million 12-month deal in October 2020 and an $85 million 12-month one in March 2021.
The Swiss bank has a number of other ongoing mandates in the country including the privatisation of two LNG-fired power plants: Haveli Bahadur Shah and Balloki power plants. A dozen interested buyers were pre-qualified for bidding at the end of 2020.
BEST BANK: BDO Unibank
The Philippines had one of the toughest years in Asia when it came to Covid-19, but BDO Unibank was easily able to maintain its industry leadership, ending the year with 23% of system loans, 18% of deposits and 38% of trust assets.
Indeed, BDO Unibank was the chief beneficiary of a flight to quality, as investors ploughed money into deposits. The bank’s already high CASA ratio climbed even higher still during the 2020 Financial Year from 73% to 81%.
BDO Unibank took advantage of this to expand its trading activity then book the profits, wisely using the proceeds to bolster its provisioning levels. FinanceAsia’s judges and the wider financial analyst community applauded the bank’s decision to adopt a conservative approach to its clients’ re-payment difficulties, allocating P30.2 billion ($630 million) in pre-emptive provisions during the course of the financial year.
BDO Unibank must have been particularly pleased to see that NPLs remained well below its 3% end-2020 forecast even into the first quarter of 2021. They hit 2.8% at the end of March 2021.
All of this has enabled BDO Unibank to continue pursuing its long-term strategy. This includes expanding financial inclusion through its rural banking arm BDO Network and tapping the mass affluent sector more effectively by deepening its wealth management and insurance businesses.
Insurance sales, for example, have been growing by a compound annual growth rate (CAGR) of about 20% over the past few years. In 2020, they were flat, but activity came roaring back during the first quarter of 2021, registering 31% growth year-on-year.
BDO Unibank also continued to ramp up its digitalisation efforts, launching its own digital wallet, BDO Pay, this spring. This instantly notched up strong growth, becoming the third most popular app on the Apple Store during the first quarter, not far behind the bank’s mobile app, which held the top spot.
The bank ended the awards period in a very strong position. Costs have been contained, with the bank’s cost-to-income ratio improving from 56.51% in 2019 to 52.60% in 2020 according to S&P Global Market Intelligence data. Its NIM also rose from 3.91% to 4.05%.
When the Philippines comes out on the other side of Covid-19, BDO Unibank is well positioned to take advantage of the economic rebound.
BEST SUSTAINABLE BANK: Bank of the Philippine Islands
In every Asian country there is typically one bank that has made ESG its own. In the Philippines that is the Bank of the Philippine Islands (BPI) and it wins this new award for the second year running.
In July 2020, BPI was also rewarded with an upgrade from MSCI to achieve a coveted A rating in the latter’s ESG scale. This puts the bank in a completely different league to its domestic peers, which are typically double-B to triple-B rated and have generally seen their ratings decline rather than improve over the past couple of years.
The Ayala group as a whole takes sustainability extremely seriously and in 2020, BPI established a board-approved sustainability agenda. This has two main pillars: responsible banking (covering financial inclusion, financing sustainable development and supporting nation-building); and responsible operations (including environmental sustainability and social responsibility).
One major initiative was an Environmental Risk Assessment, which involved mapping and evaluating assets in relation to environmental and climate change risks.
When it comes to financing sustainable developments, BPI has also made big strides. SDG-related loans have risen from 31% of its corporate and SME loan portfolio in 2016 to 47% in 2020. It is also transitioning away from financing the coal sector and aims to have zero exposure by 2037.
Its role as an ESG champion positions BPI as the go-to advisor for companies looking to raise sustainable funds or establish an ESG framework. In this respect, BPI’s investment banking arm is an ESG leader on a regional as well as a national basis.
However, BPI’s landmark bond in 2020 was one the bank issued itself. Last August, it launched the country’s first peso-denominated bond to provide Covid-19 related aid. Proceeds from the P21.5 billion ($450 million) BPI Covid Action Response (CARE) bond were allocated to 3,225 eligible micro, small and medium-sized enterprises (MSMEs).
In 2021, the bank has begun turning its attention to its retail portfolio and is mapping this for ESG risks too.
BPI also places strong emphasis on financial inclusion by committing to expanding access to banking and financial services to 25% of the Philippines’ underbanked population. Its microfinance arm, BPI Direct BanKo, has become the nation’s second largest in the space of less than three years, holding a 16% market share as of 2019.
It currently serves over 145,000 small borrowers but aims to reach 360,000 by 2023 and 600,000 by 2025.
BEST INVESTMENT BANK, BEST ECM HOUSE, BEST DCM HOUSE: BPI Capital
There was never any doubt about which bank would come out on top this year. BPI Capital had an incredibly strong year even by its own high standards.
The investment bank clearly benefits from its relationship with the Ayala Group. But what stands out, time and time again, is the innovation and structuring skills that it brings to bear across M&A, ECM and DCM – whoever the client.
BPI Capital is the only domestic investment bank with an extremely well-defined international footprint and it expanded this further in 2020 after acting as a co-manager on the Indonesian bond deal that won FinanceAsia’s Best ESG deal of the year during our 2020 Achievement Awards – Star Energy Geothermal Salak-Darajat’s $1.1 billion eight-and-half year, non-call three-and-a half year offering.
The bank faced close competition from China Bank Capital Corporation for Best DCM House, but what swung the award BPI Capital’s way was twofold.
First, the bank has a balanced approach to G3 and peso-denominated transactions, unlike any of its domestic competitors. Secondly, a number of its deals were very clearly landmark transactions particularly in the ESG space.
BPI Capital was also right at the heart of the dollar fundraising splurge during the summer of 2020 when one Filipino corporate after another accessed the international bond markets. It was a joint lead on Jollibee $600 million five-and-half and 10-year transaction in June, then Globe Telecom’s $600 million 10- and 15-year transaction in late July.
When it comes to ESG, BPI is not only a leader within a Philippines context but also across Asia as a whole. This year was yet one another marked by a string of interesting transactions that set benchmarks for others to come after.
These included Manila Water’s $500 million 10-year, non-call five-year offering in July. This represented the first Asean sustainability bond by a corporate issuer from the Philippines.
Then in November, AC Energy executed a $300 million perpetual non-call five fixed-for-life green deal alongside a $187 million tender offer. BPI was sole global co-ordinator for a first-ever liability management exercise combined with a fixed-for-life perp.
In the domestic bond market, BPI Capital also took the first steps to encourage greater investment in the ESG space. Notably, last August it brought the country’s first peso-denominated issue in direct response to the Covid-19 pandemic.
A P21.5 billion ($450 million) 3.5% Covid Action Response (CARe) bond for its parent bank ended up being seven times its P3 billion initial target size. One of the main reasons for this was strong demand from both retail and institutional investors. Over half the paper went to retail investors, while proceeds were used to support micro, small and medium enterprises (MSMEs) lending.
Indeed, one of the defining trends in the Philippines capital markets is greater participation by retail investors across the board. Working from home has accelerated existing digitalisation schemes and prompted many more retail investors to become active in the market.
It bodes extremely well for the market’s longer-term development. BPI Capital’s landmark flotation of AREIT also demonstrated this pioneering spirit in action during 2020. The P13.57 billion IPO ranked as one of only three winners in the South-east Asian category for our 2020 Achievement Awards (including DCM and M&A).
It was extremely well deserved. It has taken years to get Reits off the ground in the Philippines. The Ayala deal was priced at P27 last August and traded around issue price for a number of months while brokers updated their trading systems to accommodate the regulator’s rules governing Reits.
However, once they’d done this, trading took off and a lot of that is down to a big increase in retail involvement: from 6,000 investors at IPO to around 35,000 this spring. Investment bankers also believe that investors have gained confidence after seeing Ayala make good on its promises to inject new projects into the Reit (existing and announced injections should expand the asset base by over 70%).
AREIT is another demonstration of BPI’s structuring skills and has opened the door for more Reits from the country.
The bank was also the sole local co-ordinator for one of the Philippines largest-ever IPOs on a local currency basis last year – Converge ICT Solutions P25 billion IPO in October. A punchy valuation at 13 times EV/Ebitda did not initially lead to strong secondary market trading. But this turned around at the beginning of 2021 and since then, the stock has outperformed the broader market and risen back above IPO price.
On the M&A front, BPI’s main deal involved Philippines Coastal Storage and Pipelines, owned by Metro Pacific Investments. It introduced Singapore’s Keppel Infrastructure Trust to the group.
The resulting $445 million equivalent transaction (by equity value) provides Asia’s largest listed infrastructure trust with a strategically important asset in the oil and gas supply chain as the company accounts for 36% of the Philippines total import storage capacity.
Last but by no means least is BPI Capital’s work on a $900 million business transformation of Cebu Air. The debt restructuring and equity-linked offering provide a showcase for BPI’s skills across all the investment banking disciplines.
Perhaps more importantly, the exercise has not only helped Cebu Air to survive but to also hopefully to thrive in a post-pandemic world. Success in finding a financial solution to Covid-19 induced woes contrasts sharply with the travails of the country’s national carrier, Philippines Airlines (PAL), which appears to be heading into Chapter 11 bankruptcy.
What emerged was: a P16 billion 10-year senior unsecured syndicated loan and a P12.5 billion 6% mandatorily convertible preference share rights offering. JG Summit took up its full rights giving the government the confidence to support the syndicated loan and ensuring take-up among minority investors on the equity side (91% allocated during the first round and remaining 9% during the second round).
BPI also helped Cebu Air to defer principal on its peso-denominated loans, which amounted to more than $150 million. The whole exercise has stretched out Cebu Air’s maturity profile by three-years and given it a two-year liquidity buffer (at current burn rates).
BEST BROKER: BDO Securities
One of the defining features of the Covid-19 pandemic has been a seismic shift in equity trading patterns across Asia. A combination of easily accessible digital platforms with a population base working from home has led to an explosion of retail investors signing up for brokerage accounts.
In the Philippines, the biggest beneficiary of all has been BDO Unibank and its brokerage subsidiary BDO Securities. The parent’s large branch network provides a great launch pad for the brokerage arm to market its wares.
As a result, the securities arm now has roughly one quarter of the country’s 1.2 million retail investors on its books. It estimates that it signed up about 200 new accounts per day during 2020.
This resulted in a jump from 200,000 active accounts in 2019 to 350,000 at the end of 2020. Unsurprisingly, this helped it to zoom up the stock exchange’s league tables from a mid-teens position in 2019 to third in 2020 behind online brokerage platform COL Financial and China’s CLSA.
These shifting dynamics have significant implications for the country’s equity capital markets. In the past, foreign investors typically accounted for up to 70% of a benchmark deal’s allocation.
That ratio is now falling and bankers predict a 50/50 split between domestic and international investors in the future. If that ratio remains stable, then local companies will have a much more reliable equity funding base to tap.
However, the main danger is what happens if a sudden market downturn burns the country’s new army of retail investors. BDO is trying to forestall this eventuality by ramping up its online lectures and materials to match account opening with investor education.
Its analysts also now cover 43 companies, accounting for over 60% of the $310 billion market cap as at end-March 2021.
BEST PRIVATE BANK: BDO Private Bank
It has been another strong year for BDO Private Bank and in many ways the Covid-19 pandemic helped it to win more business from international private bank competitors whose relationship managers were unable to get on a plane to Manila.
The high death toll in the Philippines also helped to concentrate the minds of clients that had been putting off succession planning. So it was not that surprising to see high growth in the bank’s trust business.
Trust AUM grew 41% during 2020 to P504 billion ($10.55 billion). This helped the bank’s overall AUM climb from P451.69 billion at the end of 2019 to P600.44 billion at the end of 2020.
Clients also rose from 8,397 to 8,513 during the course of the calendar year. BDO re-organised internally to provide a stronger platform to serve this fast-growing business segment in the coming years.
It rebranded and expanded its family office practise into the Corporate Services Unit, which will serve as a central connection point for clients, lawyers, accountants and other trust consultants.
At the end of the year, what is likely to have pleased BDO, more than anything else, is passing an important profitability milestone; its net profits touched P1 billion for the first time.
The bank runs an open architecture platform with a strong emphasis on foreign currency products. In 2019 it forged a tie-up with Allfunds, the Spanish-based fund supermarket.
This gave BDO access to a platform with 200 international fund managers and their products. It came into its own during the pandemic when clients wanted more exposure to offshore income alternatives, plus technology-focused and Covid-proof stocks.
BDO Private Bank is also expanding offshore to serve its onshore clients better. Just before the pandemic BDO Unibank opened up a branch in Singapore, which is currently offering deposits and loans. However, it plans to upgrade this to offer investment accounts as well.
The bank’s hold on this award grows stronger by the year.
BEST BANK: Citi
The bank has been a fixture of the Philippines’ banking system since 1902, reflecting the country’s strategic importance to the US over the past century. Citi has experienced many changes as the decades come and go, yet continued to thrive through them all.
This year will see it execute a major new shift in direction as it sheds its consumer banking franchise in the country. However, it will continue to plough resources into wealth management and its corporate business.
The bank is a multinational powerhouse with over 950 clients on its books, not to mention its 100 local ones. This helps to underpin, what ranks as the largest asset base among foreign banks.
S&P Global Financial Market data shows that assets rose from P327 billion ($6.46 billion) in 2019 to P354 billion in 2020.
The bank continues to have an enviable hold over flows. It has been the sole settlement bank of the Philippines Domestic Dollar Transfer System (PDDTS) for the past quarter of a century.
It is also a leader in the PesoNet clearing system (the central bank’s interbank funds transfer service). It ranks first in value with a 25% market share.
Citi is always right at the top of the league tables when it comes to DCM and 2020 was a banner year with a big uptick in activity. Citi was at the helm of nine deals totalling $4.8 billion in face value. Clients included the Asian Development Bank (ADB), International Container Services Inc (ICTSI), Manila Water, Megaworld, UnionBank and the sovereign itself.
BEST INVESTMENT BANK: UBS
This award feels like it belongs to UBS. It’s one that other banks have to get exceptionally lucky to win in any particular year.
The Philippines has long been the jewel in the crown of the bank’s regional capital markets business. UBS nearly always occupies top spot in the country’s landmark transactions and has a strong roster of repeat clients whose loyalty has been built up over many years.
In large part this is due to having such a seasoned rainmaker in Lauro Baja. He not only runs the Philippines franchise but is also the head of the Swiss bank’s global capital markets business for the whole of Asia Pacific.
So how did this play out in 2020? In FinanceAsia’s mind, the two particular standout transactions came from the equity markets.
Towards, the end of the year, UBS was a joint global co-ordinator on the P25 billion ($523 million) IPO for Converge ICT Solutions. This represented one of the country’s largest-ever IPOs on a local currency basis.
More significantly still, it was the sole international co-ordinator for AREIT’s pioneering P13.57 billion IPO. Over the years, FinanceAsia has written numerous articles about the country’s struggles to get a Reit sector off the ground.
AREIT was the deal that finally opened the door and after a slow start, secondary market trading has gone from strength to strength. It has paved the way for other property groups to create Reit vehicles and expand their financing avenues and investors’ investment opportunities.
UBS also had an active M&A year relative to its peers, with three transactions in Dealogic’s top 10. These were led by a P8.4 billion equity funding round for Globe Fintech Innovations, completed in January.
The bank also advised Metro Pacific on its acquisition of a 29.45% stake in Thailand’s Don Muang Tollway for $149 million equivalent and FAST Logistics for a $125 million investment by CVC.
Last year, was also an active one across the board for international bond deals, and UBS was in the thick of the action acting as a joint bookrunner for the sovereign and a slew of the country’s top corporates including: AC Energy, Filinvest, JG Summit, Jolibee, Metrobank, PLDT and SMC Global Power.
BEST BANK, BEST SUSTAINABLE BANK, BEST INVESTMENT BANK, BEST ECM HOUSE, BEST DCM HOUSE, BEST PRIVATE BANK: DBS
When it comes to FinanceAsia’s Country Awards, there are Asian banks and then there’s DBS. Each year, it becomes increasingly apparent just how far ahead it is not just on a regional basis, but also increasingly on a global one as well.
Whatever the emerging megatrend, DBS always appears to be a few steps ahead in the conversation. That speaks volumes about the bank’s ethos and the way it is run.
Singapore is famously a top-down society. But DBS has put experimentation and entrepreneurship at the heart of its operations for a while and it is now paying a lot of dividends.
DBS is pioneering. But it also makes sure that it executes its good ideas well.
This stood out very clearly during 2020, an enormously difficult year across many traditional banking sectors thanks to Covid-19.
Perhaps the most obvious example is the DBS Digital Exchange, launched in December 2020. This enables institutional and accredited investors to access a fully integrated tokenisation, trading and custody ecosystem for digital assets.
This is such a new area that even the world’s largest and most sophisticated institutional investors have no idea how to, for example, tokenise real estate, or borrow against crypto assets. So the bank has also been undertaking a lot of educational work.
DBS also completed the Contour Beta Network’s first fully digital end-to-end secured Letter of Credit between Nanjing Iron & Steel, Singapore’s Jinteng International and Hope Downs (a joint venture between Rio Tinto and Hancok Prospecting).
Digitalisation has been a driving force for all banks across Asia and it accelerated during the pandemic. But here again, DBS has a more nuanced focus because it is already so advanced in terms of customer reach and electronic engagement.
The strategy is essentially twofold: on-boarding the remaining tail of hard-to-reach Singapore-based residents and eliminating cash and cheque usage. The bank reports that one fifth less cheques were written and 40% less cash used during 2020.
When it comes to the unbanked, a good example concerns Singapore’s migrant workforce. At the start of the pandemic, DBS worked with the government to open roughly 60,000 digital bank accounts in the space of just three months.
It held educational sessions for its mobile app POSB Jolly (available in the five languages most commonly spoken by Singapore’s migrant workers). The app enables them to perform essential digital banking services, including checking account balances, paying bills, and remitting money.
There was also a drive to get Singapore’s famous hawker community to give up cash in favour of digital banking. More broadly, DBS helped about 1,000 food and beverage businesses to create an online presence, such as uploading their menus. This digital relief package was subsequently enhanced to include digital collections and payments as well.
DBS also used AI and machine learning (ML) to enhance the functionality of many of its existing products and/or help customers to make more informed decisions about their money.
In April 2020, it launched DBS NAV Planner. Customers were happy because this provided them with digital tools to help them to set financial goals and manage budgets. By the end of the year, it had delivered more than 30 million financial planning insights and helped more than 400,000 customers to become net savers.
In December 2020, DBS supercharged these capabilities with the launch of SG FinDEX, the world’s first public-private open banking initiative. This allowed the bank to reach an even wider pool of customers in Singapore.
DBS wants to enable customers to help themselves. This is also evident in its wealth management division.
These clients don’t have the luxury of their own relationship manager. But the latest iteration of DBS iWealth has AI and ML driven smart triggers, which provide personalised investment insights and prompts.
The private banking arm adopts the same approach. More clients are executing their own trades, freeing relationship managers to spend more time talking to them about tax and wealth planning.
When we wrote about DBS for our Country Awards last year, the main focus was the bank’s efforts to lead Asia’s ESG transition. This accelerated further during 2020 and into 2021.
Like many banks, DBS has clear targets to improve its ESG footprint. It’s aiming for net zero carbon in its own operations by 2022, for example.
What’s new is a more refined and quantifiable assessment about the ESG risks in its lending portfolio. In June 2020, it unveiled a Sustainable and Transition Finance Framework to do just that.
This will not only guide its client relationships, but also provide borrowers with a transparent reference guide to help them on their own ESG journey. Last year, the bank drilled down to understand its exposure to five high impact sectors: oil and gas, power, automotive, cement and metals and mining.
It has created a Climate Resilience Dashboard to assess climate resilience in carbon intensive industries and understand if and how clients are addressing climate change.
However, this is just one aspect. Others include child labour and job creation. This year it plans to set hard lending targets.
ESG-related lending is also ramping up very quickly. Last year, it executed sustainable financing transactions amounting to about S$9.6 billion ($7.15 billion), up 81% from 2019.
This comprised approximately S$4.2 billion in sustainability-linked loans, S$597 million in renewable and clean energy-related loans, and S$4.8 billion in green loans.
DBS also underwrote S$4.4 billion in social bonds and S$5.3 billion in green bonds. One of those green bonds was FinanceAsia’s ESG deal of the year for our 2020 Achievement Awards – Star Energy Geothermal’s $1.1 billion dual-tranche green project bond.
Other landmark deals included PSA Marine’s three-year €30 million ($36 million) sustainability-linked loan, and an €500 million Covid-19 social bond for Housing Finance Corporation.
To push itself even further, DBS has raised its sustainable finance target to S$50 billion by 2024, more than double the S$20 billion it had initially committed to.
ESG is one of the DCM department’s trump cards. Under the leadership of Clifford Lee, it has won a growing number of high profile clients across the region and a very important one closer to home.
DBS and Temasek have understandably close links, but the former has had to fight long and hard to be appointed as a bookrunner on the latter’s dollar-denominated deals. In 2020, DBS finally made it, helping to show the government-owned investment company that an Asian bank’s local clients can help to generate pricing tension with US investors even at the long end of the maturity spectrum (in this case 50 years).
In terms of broader investment banking, one of the main themes in 2020 was the way that DBS was there for key clients in their time of need during the pandemic. Heading that particular pack was the national flag carrier, Singapore Airlines.
DBS was the sole financial advisor for an S$8.8 billion rights issue, the largest in the City State’s history. The bank can feel justifiably proud of delivering this deal within a two-and-a-half month timeframe and working round the clock to set up a structure allowing for rights acceptance via PayNow (Singapore’s secure funds transfer service).
Another example is the S$700 million buyout of Soilbuild Business Space Reit. The business parks and industrial space Reit was knocked by Covid-19 and hired DBS to find a buyer: Blackstone and Soilbuild co-founder Lim Chap Huat.
In the ECM markets, Reits always feature very heavily in any DBS awards pitch. This past year has been no different. During the awards period, DBS raised $3.4 billion from 14 deals, giving it an overwhelming 98.1% market share of funds raised.
But it continues to diversify, with two notable deals under its belt. One was the IPO of G.H.Y Culture & Media, which represented the first Chinese media company to list in Singapore. The other was the IPO of data communications group, Aztech Global.
Last but very certainly not least, is the private banking arm. It had a very good 2020. Assets grew 7% to S$264 billion. Some of them came from a surprising source.
It is well known that DBS has been gaining clients from across Asia for some time, notably China. Tax exemptions and a potential work permit are two big draws.
But during 2020, DBS was also fielding a lot of calls from the US. These clients view the bank as a trustworthy gateway into Asia. In pandemic-ravaged times, Singapore was also one of the few places they could land their private jets.
The bank’s family office business doubled in volume during the course of the year. It also saw a lot more traction in ESG investment.
Back in 2018, it executed its first ESG Outperformance trade, attracting S$95 million. In October 2020, its second one raised over S$690 million.
The bank wants to encourage far more ESG investment and has set a target of growing its sustainable investments to more than 50% of AUM by 2023. That comprises investments with an MSCI ESG rating above BBB.
It’s an ambitious target, but DBS is a bank that is very good at delivering them.
BEST BROKER: CSG-CIMB Securities
It is always good to be the number one broker in terms of market share. During 2020, CGS-CIMB captured 14.18% of trading on the SGX. That was a strong plus point in winning this award.
But what makes CGS-CIMB stand out is its international footprint in this most international of Asian jurisdictions. The brokerage is unique amongst its Asian peers in the way that its ownership spans North Asia (China Galaxy Securities) and Asean (CIMB).
In 2020, it added a whole raft of new international partnerships to create a truly global platform. It added new partnerships with Dai Nam (Vietnam) Liberum (Europe), Okasan (Japan) and Raymond James (US).
This builds on existing ones with Capital Securities (Taiwan), Incred Capital Wealth (India and Sri Lanka) Morgans (Australia) and SB Equities (Philippines).
In 2021, CGS-CIMB has used this platform to better serve an important and growing investors constituency: millennials. This March saw the launch of ProsperUs, which serves their international mindset by providing an investment service covering 30 exchanges across 20 markets and eight asset classes. The brokerage plans to roll it out to Malaysia next.
All across Asia, retail investors became more active during 2020 as lockdowns kept them home and digitalisation enabled them to easily trade from there. CGS-CIMB also saw this shift in terms of its own trading volumes.
In 2019, its Singapore business had a split 36% retail and 64% institutional. In 2020, the respective ratios were 46% and 54%.
There was also a tilt back to local institutions, which accounted for 65% of its trading volumes in 2020, up from 56% the previous year. Over the coming year, it hopes to attract more of their business as it rolls out its ESG strategy.
This forms an important plank of its Vision 2025 strategy. It has a new ESG head and will launch its first institutionally targeted product this summer.
BEST LAW FIRM: Allen & Gledhill
Strength and balance across the firm’s three main practice areas (ECM, DCM and M&A) plus increasing geographical diversity equal a winning mix for Allen & Gledhill. The law firm is now based in five Asian jurisdictions after adding Vietnam to the list in the 2020.
In addition to its home base in Singapore, the others are: Malaysia (through associate firm Rahmat Lim & Partners), Myanmar and Indonesia where it has a strategic partnership with Soemadipradja & Taher.
Allen & Gledhill was on many of the key transactions. One of the most important was recapitalisation of Singapore Airlines so that it could weather Covid-19.
The national carrier’s S$8.8 billion ($6.55 billion) rights issue represented the largest in the City State’s history. The law firm advised the issuer on what represented the first rights issue of mandatory convertible bonds and first concurrent rights issue of shares and convertibles by a main board listed company.
Another jumbo and complex transaction was the S$10.3 billion strategic restructuring and demerger of CapitaLand’s investment management platforms. This is the first time that a local entity has tried to execute a demerger, a listing by way of spin-off and a take private in the same transaction.
In the DCM space, Allen & Gledhill also spearheaded the ESG revolution acting as legal advisor to Ascendas Reit on the issuance of a green bond under its newly established green finance framework. This also marked the first time that an Asian Reit issued a green perpetual.
It also demonstrated that it is good at building client loyalty by advising on an ECM offering by Ascendas Reit – its S$1.2 billion private placement equity fundraising in December 2020.
BEST BANK: Citi
Citi has won this award for many years, which is unsurprising given that it is the biggest foreign bank in the City State with higher assets and profitability than other D-SIBs (domestic systemically important bank) HSBC, Maybank and Standard Chartered.
During the 2020 Financial Year, assets continued growing strongly. S&P Global Market Intelligence data records a 13.4% rise from S$41.1 billion ($30.5 billion) to S$46.5 billion.
The bank has announced sweeping strategic changes to its Asian operations, pulling out of many regional retail markets. However, this should benefit its operations in Singapore, which will remain a global priority market and become one of two regional hubs (the other being Hong Kong).
The bank plans to make a strong push into wealth management, with ambitions to triple AUM by 2025. It is hiring 1,500 new staff to help achieve it.
It also has very firm foundations serving regional treasury centres based in Singapore. Its foreign exchange, commodities and fixed income businesses are firmly anchored there and are equipped to provide clients with access to 650 currency crosses and expertise to over 80 local markets trading desks.
Citi was also a chief contender to win Best International Investment Bank in Singapore with strength in depth across M&A, ECM and DCM. This was particularly evident last year.
There were three large M&A deals. One was the S$700 million privatisation of Soilbuild Business Space Reit. Citi acted as the buy side financial advisor to co-founder Lim Chap Huat and Blackstone.
In ECM, Citi brought its considerable tech expertise to bear in acting as lead manager on the largest non-Reit IPOs of the year, the S$510 million flotation of Nanofilm Technologies.
DCM is always one of its strongest suits and it was front and centre of many of benchmark deals including Temasek’s maturity-stretching $2.75 billion 30.5- and 50-year bond, plus OCBC’s $1 billion Basel III compliant Tier 2 bond that achieved the lowest-ever coupon globally.
BEST INVESTMENT BANK: Credit Suisse
This was one of the most difficult awards calls that FinanceAsia had to make. Singaporean clients are hotly contested and highly prized.
This year, Citi, Goldman Sachs, JP Morgan and Morgan Stanley had a strong roster of business and clutch of landmark transactions each. But the judges unanimously opted for Credit Suisse.
What proved to be a winning combination was its strength across M&A and ECM in Singapore, plus the advisory work it undertook helping Temasek and GIC to expand their Asian investment portfolios. Examples of the latter include Temasek and GIC’s separate investments in Vietnam’s Vingroup.
In Singapore itself, Credit Suisse advised Temasek on the second largest M&A transaction during the awards period: the S$2.1 billion ($1.5 billion) recapitalisation of Sembcorp Marine and demerger from Sembcorp Industries. Separating Sembcorp Marine from its parent was a complex transaction, but one that helped the latter to unlock some value after being dragged down by ongoing problems in the offshore oil and gas sector.
In ECM, Credit Suisse was a bookrunner on one of the most interesting IPOs of the year, not least because it offered diversification from the steady stream of Reits that come to market.
This was the S$510 million flotation of Nanofilm Technologies. Investors loved it and by July 2021, the stock had almost doubled in price.
Other ECM deals included a €242 million ($287 million) zero coupon convertible for the SGX and an S$143 million rights issue for IREIT Global.
Credit Suisse is very active in bringing special purpose acquisition companies (SPACs) to market and in 2020 it executed two notable New York listed deals by Singaporean sponsors: the $276 million IPO of Tiga Acquisition Corp; and the $225 million IPO of Aspirational Consumer Lifestyle Corp.
DCM was quieter but the bank had a notable presence in the domestic bond market, led by its role on the S$740 million triple-tranche deal for Temasek offshoot Astrea VI.
BEST BANK, BEST SUSTAINABLE BANK: Shinhan Bank
Anyone who wants to understand where the banking industry is heading should always make South Korea a first pit stop. The country’s tech sector is a global leader and nowhere is this more apparent than in the banking industry where digital banks like KakaoBank and K-Bank have made huge inroads in a short space of time.
They have been so successful, in fact, that the country’s leading commercial banks are now hoping to set up fully-owned digital subsidiaries of their own to try and keep pace. In the meantime, the banks are all pushing digitalisation very hard, especially at Shinhan Bank.
This is one of the main reasons why it has won the award for Best Bank in South Korea for the second year running. The bank now generates 70% of its deposits and 60% of its loans online.
It is spearheading digital innovation right across the bank and beyond. Earlier this year, for example, it launched O2O (on-and-offline), which it is describing as a company within a bank.
The business group is tasked with developing data based businesses that complement Shinhan’s traditional banking ones. First off the blocks is likely to be a food delivery app.
Shinhan’s card unit has also been working with Hanyang University to develop biometrics technology to access services. The bank has also partnered with SK Telecoms to use the latter’s cryptography technology to put a quantum random number-based security system in place for its mobile app.
It has also forged a partnership with fintech Kakao to establish a private key management solution business for blockchain service operators.
Shinhan’s digital leadership has a mirror in its ESG leadership. It is the only South Korean bank with a double-A ESG rating from MSCI.
The bank has set itself a 2050 carbon neutral target. Last September, it signed up to the Equator Principles. What is especially interesting is the fact that it is not just rolling these out in South Korea but also in Vietnam (a country not yet known for its ESG adherence), where Shinhan has a sizeable presence.
In March, Shinhan announced that it would no longer finance coal as part of its Zero Carbon Drive. To encourage other companies to improve their ESG credentials, it has also launched the snappily titled Shinhan ESG Excellent Win-Win Support Loan offering preferential interest rates.
Shinhan was also a pioneer in the international bond markets last year, bringing two Covid-19 related bonds. In July, its parent Shinhan Financial Group was one of a spate of issuers to bring Covid-19 social bonds.
Then in September, it diversified into Aussie dollars, raising A$400 million ($303 million) through a Kangaroo deal that represented the Aussie dollar marks first Covid-19 bond.
BEST INVESTMENT BANK, BEST ECM HOUSE: Korea Investment & Securities
This award is always a close call between Korea Investment & Securities (KI&S) and NH Investment & Securities (NHI&S). This year, however, KI&S managed to put a little bit more water between itself and its nearest competitor in ECM where the two compete most heavily.
KI&S had a 13.04% market share during the awards period and NHI&S 10.9% according to Dealogic data. The two were both on large number of deals together most notably two rights offerings from Korean Airlines.
The national carrier shored up its Covid-ravaged balance sheet with a W1.1 trillion ($937 million) deal in July 2020 and then an even larger W3.3 trillion deal this March.
The two securities houses were also both on South Korea’s largest domestic IPO of the year. In March, SK Biosciences raised W1.49 trillion.
South Korean equity markets have been red hot and hitting record highs. This deal exemplified that with a retail order book that closed 300 times oversubscribed. Unsurprisingly, the stock has since doubled in the secondary market.
The judges felt that what ultimately set KI&S apart is the fact that it was on every single domestic IPO in Dealogic’s top 20. It has forged a firm hold of the Reit sector and in December it worked alongside Citi and Morgan Stanley to bring ESR Kendall Square Reit to the Korean Stock Exchange (KOSE).
The W357 billion offering represented the market’s third and largest Reit to date. It was well received.
Reits are not renowned for spectacular secondary market performance, but this one bucked the trend. During the first six months of 2021, it rose almost 50% in in line with Korea’s broader market bull un.
Rounding off KI&S’s clutch of benchmark IPOs was the W384 billion Kosdaq listing of Kakao Games Corp. This has also doubled in price since its flotation last September.
Where DCM was concerned, KI&S executed 127 corporate bond deals according to Dealogic data. Its largest transaction was also the market’s – a triple-tranche offering for Kia Motors, which raised W480 billion in three-year money, W50 billion in five-year and W70 billion in seven-year.
BEST DCM HOUSE: KB Financial
KB Financial wins this award year in, year out and has ranked as the most active domestic underwriter for a decade. During the current awards period, it was on five of the top 10 domestic deals according to Dealogic data.
But it was a much closer run race than normal with NH Investment & Securities (NHI&S). The latter was not that far behind with a 13.22% market share compared to KB Financial’s 13.69%. In total, KB Financial executed 168 deals raising $7.867 billion equivalent compared to NHI&S’ 153 deals and $7.59 billion equivalent.
It is rare to come across a domestic bond deal that does not feature KB Financial on the syndicate. It has a close relationship with all of the chaebols and the only time it tends to be missing is on deals for competitor financial groups.
During the current awards period, Hyundai group entities were particularly active and KB Financial led deals for Hyundai Motor, Hyundai Steel and Hyundai Engineering. It was also the lead on SK group deals for SK Energy, SK Innovation and SK Global. Then there was S-Oil and Samsung Card.
KB Financial is now setting its sights on the offshore market after expanding its DCM desk in Hong Kong. South Korean financial entities do not have a good track record when it comes to breaking into bookrunner roles in the international capital markets. A decade ago, Samsung Securities made a big push that fizzled out.
This time, the investment banking arms have a far more solid base given their parent banks have expanded into a fair few countries around the region. However, the first step is likely to be trying to win more lead manager roles on their own country’s G3 bond deals.
Korea Development Bank (KDB) is already on a fair few and last year, KB Financial also broke into the market acting as a bookrunner on the Export Import Bank of Korea’s (Kexim) $1.5 billion triple-tranche deal in February.
BEST BROKER: Mirae Asset Securities
It has been a big year for Mirae Asset Securities, which is now operating under a new brand name after dropping Daewoo from its name in the spring.
The securities house continues to be on a roll and became the first brokerage to record operating profits above the W1 trillion ($887 million) mark during the 2020 Financial Year. Net profit came in at W818 billion, up 27% year-on-year.
The brokerage house is going from strength to strength for two main reasons. First, it is accruing a lot of online business domestic, and secondly, it has been highly successful in creating an international brokerage platform.
Its Indonesian offshore, PT Mirae Assets Sekuritas, ended 2020 as the most active broker in the country. It is also now the second largest margin lender in Vietnam.
In total, Mirae Asset has 33 international bases across 15 regions. No other South Korean brokerage comes close in terms of geographical diversification.
It has been having a good 2021, not least because Korean equity markets are on fire, with the KOSE hitting a record high in June and the Kospi passing the 1,000 level for the first time in two years this April.
As a result, first quarter earnings have been strong. The group recorded net profits of W296.8 billion, up 177.1% year-on-year.
A large chunk of this derived from its international operations, which reported net profits of W69.2 billion, which represented a 157% year-on-year increase.
If Mirae can continue at the same pace for the rest of the year, it is well on track to hit the one trillion mark in net profits in both Won and US dollars by the end of the 2021 Financial Year.
BEST PRIVATE BANK: KEB Hana Bank
It is now a hat trick for KEB Hana Bank in winning the award, despite the close competition it faces from Shinhan and KB Kookmin.
South Korea is now a country with a million millionaires to fight for business. The private banking industry is growing strongly and there is a big push to sign up the Millennial cohort. Some private banks like KEB Hana even offer matchmaking services.
The most recent research shows that there were 354,000 citizens with assets above W1 billion ($887,000) in 2019, double the level of one decade ago.
KEB Hana has made a big digital push, but it also still places a lot of emphasis on its Club1 premium private banking centres for its Gold Club members. These have been designed to keep clients coming into the centres.
BEST BANK: HSBC
One of the defining trends of this year’s Country Awards is that while banks were able to grow assets during 2020, they struggled to grow profitability. And it was particularly noticeable among international banks across the various local markets they operate in.
But that was not the case for HSBC in South Korea. It had an incredibly strong year.
It reported 27% asset growth to $21.09 billion and an even stronger rise in profitability. Net profits rose 38% across the 2020 Financial Year to $138 million.
Likewise, ROE was up from 8.9% in 2019 to 11.9% in 2020 and ROA from 0.5% in 2019 to 0.6% in 2020.
Strength across the board was also a notable feature of its investment banking franchise. HSBC is always a DCM powerhouse, but this year it also notched up a number of benchmark deals across M&A and ECM as well.
Where M&A is concerned, it advised LG Chem on the sale of its polarizer business to Ningbo Shanshan.
In ECM, it secured a joint bookrunner role on the $4.5 billion NYSE IPO of e-commerce group Coupang. This represented the largest flotation of a South Korean company in over a decade and the largest from Asia since Alibaba’s 2014 IPO.
In DCM, it was ESG that stood out. The bank was a bookrunner on 16 of the 24 green and sustainable bonds issued out of South Korea during the period. That was a remarkable result, notwithstanding HSBC’s strong ESG credentials.
The deals were varied and often innovative. They included Kookmin Bank’s $500 million Covid-19 Response Sustainability Bond, for instance.
HSBC also executed Asia’s first two-year structured ESG-linked cross currency swap transaction. This $100 million deal for Hana Financial Investment is linked to ESG targets.
Last May, HSBC also participated in a syndicated green loan for Hyundai Heavy Industries, the first time in the global shipbuilding industry.
HSBC’s desire to lead from the front was also evident in its trade business, the lynchpin of the bank’s operations all over the world. In December, it executed its first live blockchain Letter of Credit on the Contour platform for a South Korean chemical exporter trading raw materials with an entity in Hong Kong.
Another one of the bank’s calling cards is its custody business. HSBC’s market share for foreign investors’ assets stood at 38% for equities and 23% for bonds. Assets under trustee for overseas funds came in at 23.7%.
BEST INVESTMENT BANK: Morgan Stanley
This award was an extremely tight three-horse race between Citi, Credit Suisse and Morgan Stanley, with the latter taking the crown for the second year running.
The two largest M&A deals that Morgan Stanley had an advisory role on did not feature in Dealogic’s domestic league tables as both concerned South Korean consortium members of cross-border deals booked in other jurisdictions.
The first was Morgan Stanley’s advisory role to NH Investment & Securities (NHI&S), which was one of a consortium that paid $10.1 billion for a 49% stake in 38 gas pipelines owned by Abu Dhabi National Oil Co (ADNOC). The accompanying financing represented the largest cross-border infrastructure club deal ever underwritten by a Korean investment bank.
The second concerns South Korea’s National Pension Fund’s investment in another consortium, which paid $2.63 billion for Portuguese toll road operator, Brisa Auto.
The US investment bank also had an advisory role on a further five cross-border M&A deals: the $1.73 billion sale of Hyperconnect (the third largest Korean software M&A deal since 2010); the $1.6 billion acquisition of a minority stake in Plug Power; the $1.1 billion sale of CJ Rokin (largest ever cold chain logistics transaction in Korea); the $1.08 billion sale of Samsung Display China’s LCD panel business; and the $799 million sale of JobKorea (largest online platform control exit by a financial sponsor in Korea).
Domestically, it is also an advisor to KDB Investment in its $756 million acquisition (alongside Hyundai Heavy) of Doosan Infracore. The deal, which was announced in February, follows the successful completion of Doosan’s $2.5 billion restructuring programme.
One of Morgan Stanley’s core clients is Naver Corp and right at the end of the awards period it closed the $18.4 billion equivalent merger of its Japanese messaging app LINE with Softbank’s Z Holdings.
It also led DCM Naver Corp’s debut sustainability bond. The $500 million deal was a true benchmark on a number of fronts.
It helped to widen the number of ESG related offerings from South Korea. The group’s debut dollar offering, also offered investors diversification into the Korean tech sector. Further, the 1.5% coupon represented the tightest ever coupon for a non SOE Korean bond at the five-year point of the curve.
Morgan Stanley’s largest equity deal was the W959 billion ($796 million) IPO for SK Biopharmaceuticals. This proved to be the right deal at the right time and despite being priced at the top end of the price range, went on make an extremely strong debut in the summer of 2020.
The US investment bank has a longstanding relationship with the SK Group and this was reflected in a second deal during the course of the awards period: a $406 million equivalent sell down of a stake, which the group held in Hong Kong-listed ESR Cayman.
BEST BANK: Commercial Bank
It was a centenary year for Commercial Bank (ComBank) in 2020. And despite the fact that it had a raging global pandemic to contend with, the bank managed to notch up a number of significant achievements to mark it.
Growth is always good and ComBank saw assets rise 25.15% year-on-year, passing the LKR1.5 trillion ($7.55 billion) threshold for the first time. They ended the 2020 Financial Year at LKR1.736 trillion.
ComBank is Sri Lanka’s most profitable bank and also its most well managed. It bolstered its capital, cut its costs and was able to lift operating income by 13.36% to LKR76.73 billion.
It also benefitted from a flight to quality and was able to increase its CASA ratio from 37.1% to 42.72%. This has set it up well for the coming Financial Year.
ComBank was the unanimous choice for FinanceAsia’s judges once again this year. What stood out was the way that it supported its customers through Covid-19 and made great strides in digitalisation.
Notably it integrated all its online and mobile banking channels on a single channel, ComBank Digital. Online bill payments rose from 1.7 million to 2.2 million and online transaction volumes rose from five to eight million.
But it was also aware that many rural Sri Lankans do not own Smartphones and cannot do online banking, so it also deployed 11 banks on wheels that processed 10,000 ATM transactions over the course of year.
ComBank also received a ringing vote of confidence from the International Finance Corporation (IFC), which was celebrating 50 years of operation in the country. IFC now owns a 7.11% stake in ComBank after increasing it last summer and providing a $50 million loan, enabling the bank to support SME’s during the Covid-19 crisis.
Sri Lanka is a country with huge ESG potential not least because large sections of its population have always appreciated the country’s biodiversity and the forces of unregulated development haven’t been fully let loose. ComBank is playing a part in making sure it stays that way, leading the way among domestic banks.
Last year, it became carbon neutral after initiatives such as installing inverter air-conditioners and LED bulbs. It also finalised the renovation of its branch in the Galle Fort World Heritage Site. This was assigned the country’s highest eco-ranking.
The next step is boosting ESG lending to 3% of its loan book by 2025.
BEST INVESTMENT BANK, BEST BROKER: Asia Securities
If there is a sizeable M&A deal in Sri Lanka, there really is only one go-to investment bank: Asia Securities. That’s because it marries very deep local roots and understanding with an international outlook under the leadership of Dumith Fernando, who took it over in 2015 following a career at Credit Suisse and JP Morgan.
He has built up a talented team who have now been with him for a number of years including: research head Kavinda Perera; chief economist Lakshini Fernando; and Sujendra Mather, CEO of investment banking.
Strength in depth is paying off in terms of winning M&A deals and leading the stock exchange’s brokerage rankings. S&P Global Markets data shows that Asia Securities was the financial advisor on two of the top three deals by companies listed on the Colombo Stock Exchange (COSE).
The largest was an LKR6.2 billion ($50.81 million) purchase of a 56.4% controlling stake in Piramal Glass Ceylon by Blackstone. The world’s private equity investment firm had never operated in Sri Lanka before so needed a trustworthy and knowledgeable advisor.
The deal represents one of Sri Lanka’s largest in recent years. It was also complicated by the fact that it was part of a larger $1 billion global acquisition of the specialist glass packaging company that is also listed in India. In late March, the group then launched a mandatory offer to take out minorities.
Asia’s Securities second deal was acting as sell-side advisor for the conglomerate Hemas Holdings. It decided to sell its 56% stake in COSE-listed Serendib Hotels as part of an exercise to re-focus on its core holdings across the consumer and healthcare sectors.
The challenge was getting a good price given how badly Covid-19 has hit the tourism sector. Asia Securities achieved a valuation of 20.2 times lagging EV/EBITDA according to S&P Global data, selling the stake to COSE-listed Eden Hotels for LKR791.7 million.
These deals helped Asia Securities to cement its status as Sri Lanka’s leading broker, with a number one ranking by volume for the 12 months under consideration and an 11.9% average market share.
It has very broad research coverage compared to the nearest competition covering 54 stocks and 13 sectors, which together account for 70% of the market capitalisation. This depth means it is able to produce very good insights.
One particularly striking call it made was in March 2020 when it predicted that Covid-19 would deliver a GDP shock. It forecast negative growth of roughly 4% at a time when the government was still predicting 2% positive growth and the IMF -0.6%.
Its forecast was very close given that the economy went on to contract 3.6% during the course of the year.
Like many Asian equity markets, Sri Lanka witnessed a huge swing towards retail investors during 2020 and this benefitted Asia Securities. Foreign investors were net sellers and Asia Securities recorded a swing from 36% of its commission income in 2019 to 9.2% in 2020.
Domestic retail investors accounted for 65% of commission income and domestic institutions 27.8%. The brokerage also underpinned its retail franchise through its financial literacy initiative, DhanaMaga. This comprises 100 short animated videos in Sinhala, Tamil and English that provides Sri Lankans with an introduction to all forms of finance from retirement planning to how to manage a small business.
Chairman Fernando also topped off a very good year for his firm, with a personal achievement of his own. Last summer, he was elected as COSE chairman and so far this year, has overseen one of the most active periods of its history in both listings and secondary market turnover.
BEST BANK: HSBC
Sri Lanka is a small country in which HSBC has always had an outsized presence. It, therefore, remains a key Asian market for the bank and it is still selectively investing for the future at a time when others are stepping back.
One very good example is the way that it expanded its physical presence even in the midst of a global pandemic. Prior to Covid-19 the bank already had 13 branches including one in the Southern city of Galle and Northern city of Jaffna.
Last year, it also added an express banking centre in the fast-growing Hambantota Maritime Centre, adjacent to the multi-purpose port being developed by the China Merchants group. It also opened its second Premier centre for mass-affluent customers in Pelawatte, an up-market suburb on the outskirts of Colombo. This centre offers a phy-gital banking experience.
Many of the bank’s achievements during 2020 were the result of ongoing digitalisation. Examples include the HSBCnet Trade Transaction Tracker, a unique mobile app that allows customers to manage and view the status of their trade transactions globally, end-to-end and in real time.
Touch ID Log On was also rolled out to corporate customers so they could gain quicker and easier access to their accounts through their mobile app.
Last year was a tough environment for all banks thanks to Covid-19. HSBC was the first bank to provide moratoriums to over 300 client accounts affected by the pandemic under a central bank’s scheme.
It kept tight control over its lending book, bolstered its balance sheet by boosting its common Tier 1 ratio from 16.85% to 20.56% and continued drawing in new deposits to support future growth. The latter were up 9% year-on-year to $1.2 billion.
Globally, HSBC is one of the world’s advanced corporations in the way that it tackles and promotes ESG. It is now starting to embed this philosophy more deeply into its Sri Lankan operations.
In 2020, it applied it to the country’s all-important garment industry. It launched a first-of-its kind sustainability evaluation tool – Responsible Meter – in partnership with Colombo Fashion Week to measure each garment’s sustainability credentials and footprint. It also launched the Next Gen Emerging Designer Fund to encourage emerge designers to adopt sustainability practices into fashion.
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