FinanceAsia is pleased to reveal the rationale for the winners of its annual International Banking Awards for countries across Asia.
The competition was extremely tight this year, with numerous financial institutions proving their resilience in a difficult regulatory and banking environment.
The write-ups will also appear in the next print edition of FinanceAsia.
For details of the competition rules and judging criteria, please click here.
BEST FOREIGN BANK: STANDARD CHARTERED
This award always comes down to two banks: HSBC and Standard Chartered. Both grew their assets, loan and deposit base in 2015, but Standard Chartered is still bigger and has better ratios across most financial metrics according to S&P Global Market Intelligence data.
In 2015, it grew its asset base from $2.65 billion to $2.75 billion and increased loans from $1.32 billion to $1.37 billion and deposits from $1.92 billion to $1.99 billion according to S&P.
Its low cost of funding means it has a strong CASA ratio of 75% and enviable profitability and efficiency metrics. This includes a cost-to-income ratio of 30.47%, a net interest margin (NIM) of 4.92%, return on assets (ROA) of 4.27% and return on equity (ROE) of 30.14% at the end of the 2015 financial year.
There was some deterioration compared to 2015, with, for example, its ROA declining from 5.5%, its ROE dropping from 46.46% and its cost-to-income ratio worsening from 23.54% in 2014. But its NIM expanded from 4.58% and problem loans dropped from 5.37% on a gross basis in 2014 to 4.16% in 2015.
On the retail banking side, the emphasis is on maintaining its edge as the bank with the largest outstanding credit card balance (23%) and improving digitization. During the year it became the second bank after City Bank to introduce chip and pin technology and it has rolled out Priority Pass, which gives cardholders access to 850 airport lounges worldwide. At the end of the year, online banking accounted for 24% of the total and it hopes to increase this to 28% by year-end.
In a huge and still relatively unbanked market like Bangladesh, mobile phone is very strong and here Standard Chartered has partnered with BRAC Bank, which runs bKash, the biggest mobile financial services platform in the country.
On the corporate side, Standard Chartered says it banks 80% of the 140-odd multinational companies operating in the country and has 40% of their wallet.
It also says that of the $7 billion infrastructure projects, which have been awarded over the past year-or-so, it has routed 62% of the payments. Much of this funding is coming from China and to service those clients it has established a dedicated China desk in Dhaka, which has a two-strong team liaising with Standard Chartered in China.
On the capital markets front, one of the big trends of 2015 was capital raising to meet Basel III standards. Here the bank led five out of the six Tier 2 deals in the market.
BEST FOREIGN BANK: HSBC
London-headquartered HSBC retained its grip on the crown in the last 12 months thanks to its leading franchise in the country, as well as its ambitious expansion into the Pearl River Delta.
HSBC already had the largest footprint in the country among its Western peers, running more than 170 outlets in about 57 cities nationwide. That enabled it to offer premium services, from commercial banking to capital markets, to various clients, in particular those in top-tier cities.
The biggest foreign bank in China by assets made a significant step forward in November when it teamed up with a Shenzhen-government-backed entity to establish a majority-owned joint venture securities company in the Qianhai district of Shenzhen, Guangdong province. HSBC’s JV differs from many other Chinese JV securities firms as the British bank has control and is not in partnership with a potential rival.
In cross-border renminbi transactions and solutions, traditionally a strong area for the bank, HSBC continued to hold the largest market share by volume, with 51.87% of the renminbi qualified foreign institutional investors (RQFII) market.
Helping cement its position as a leading RMB bank in China were its renminbi clearing business and direct onshore trading of the renminbi and seven foreign currencies, including the euro and Singapore dollars on China’s interbank foreign exchange market. The same it true of its work towards RMB internationalisation.
HSBC has also helped Chinese companies’ overseas expansion in line with the Beijing government’s One Belt, One Road (OBOR) initiative, as the bank has a presence in 35 OBOR countries and territories, of which 28 are covered by its RMB services.
All of this helped the bank generate net profit of Rmb5.38 billion ($820 million) from the world’s second largest economy last year, up 34% year-on-year.
HSBC also remained at the forefront of the development of China’s capital markets. In September, it was among the first international banks to issue an onshore renminbi bond, or panda bond, in China.
In terms of mergers and acquisitions, HSBC offered indispensable advice to some of the country’s most high-profile acquirers, such as ChemChina in its planned $48 billion acquisition of Swiss agrochemicals firm Syngenta. It was also the sole financial adviser to Biostime on its purchase of Australian health-supplement maker Swisse Wellness.
BEST FOREIGN INVESTMENT BANK: UBS
This award was hotly contested, as different banks were strong in different asset classes. Goldman Sachs and Morgan Stanley were both noteworthy contenders.
But in the end, UBS stood out with a more diversified and well-balanced business in the last 12 months in China. The Swiss investment bank is also embarking on a general build-out of its China-based operations, with the goal of doubling its mainland headcount from today’s 600 to 1,200 in the next five years.
UBS registered its Chinese securities joint venture in 2006, which was the first fully licensed foreign bank in the domestic market and helped it gain a leading presence on the mainland. It remains one of only two fully licensed foreign banks, alongside Goldman Sachs.
UBS’s clients in the country include not only large state-owned enterprises and financial institutions such as China National Nuclear Power (CNNP) and Industrial & Commercial Bank of China, but also leading firms in the private sector, such as Dalian Wanda Group and Soho China.
During the period under review, UBS worked on some of China’s most prominent outbound and domestic mergers and acquisitions, such as ChemChina’s $48 billion planned acquisition of Swiss agrochemicals firm Syngenta, which once completed is set to be the largest-ever outbound purchase by a Chinese firm, and HNA’s $2.56 billion acquisition of Irish aircraft lessor Avolon.
As a result, it sits third by volume in the China-related M&A table compiled by data provider Dealogic, with 42 deals totaling $120 billion, behind only CICC and Goldman Sachs.
In the equity capital markets, UBS helped arrange five equity and equity-linked offerings, including CNNP’s $2.16 billion IPO in Shanghai, the second largest A-share listing in 2015, and Huadian Power International’s $1.12 billion private placement, China’s largest follow-on offering from the utility and energy sector in five years, according to Dealogic. Such deals also helped UBS to second place in the A-share ECM league table for foreign players in China, after Deutsche Bank.
Meanwhile, UBS continued to maintain a solid performance in the domestic bond market, executing 38 onshore debt capital markets deals worth $9.6 billion for a diverse range of issuers during the awards period. Among the debt transactions it worked on were a few jumbo bond offerings, including a $7 billion corporate bond issued by ICBC, the largest onshore corporate bond of 2015.
This smorgasbord of deals meant UBS ranked third among international banks in China, behind only Morgan Stanley and Deutsche Bank, in terms of core investment banking revenues during the awards period. Those revenues reached $110 million, up from $100 million in the corresponding period the previous year, according to Dealogic.
BEST FOREIGN BANK: CITI
The New York-headquartered bank put in a strong showing in Hong Kong across its major divisions: consumer bank, markets, investment banking as well as treasury & trade.
Importantly there were no major compliance failings or security breaches within the awards period – an important and increasingly difficult track record to maintain in today’s complex financial system and with Citi’s size. The bank has a workforce of 4,000 in Hong Kong, making it the largest foreign banking employer in Hong Kong.
Citi’s powerhouse consumer bank launched Citigold Financial Planning, a tool to combine wealth planning with investment goals and insurance means cross-selling grew substantially. While Citi is going all-out to stay ahead of the fintech trend it still has 26 retail branches in Hong Kong serving customers seeking advice in person.
In markets, Citi said it ranked first in aggregate trading volume on the Hong Kong stock exchange from June 1 2015 to April 29 this year.
Citi’s securities service department saw a strong rise in transaction volume in 2015 as the bank positioned itself to offer a full-suite of services for funds using Stock Connect.
Its investment bank handled deals worth over $20 billion during the awards period. Among the landmark deals, it advised China Resources Beer on its $1.6 billion acquisition of SABMiller’s 49% stake in China Resources Snow Breweries.
In the financial services sector Citi was the joint financial advisor for China’s JD Capital on its $1.4 billion acquisition of the Hong Kong business of insurer Ageas in August 2015.
In ECM it advised on Xinyi Solar Equity’s $70 million top-up placement which has since outperformed the benchmark Hang Seng index.
In fixed income it performed private placements for MTR and Towngas. Citi was also the joint bookrunner on Bank of East Asia’s $650 million of perpetual securities in November, which was Asia’s first dollar liability management exercise involving a Basel III compliance.
Citi was the only bank that acted as the original mandated lead arranger and bookrunner on Alibaba’s $4 billion syndicated loan in March 2016.
Treasury and trade solutions saw strong momentum in supply chain finance helped by new mandates and the introduction of a fintech platform to maximise use of working capital.
BEST FOREIGN INVESTMENT BANK: MORGAN STANLEY
Morgan Stanley captured the most in terms of China offshore investment banking revenues and enjoyed the highest wallet share among banks.
In equity capital markets, Morgan Stanley led the league tables in terms of volumes.
The investment bank also brought investors some companies that were different from the usual fare of state-owned industrials and banks.
The US firm advised on IMAX China's $248 million flotation which climbed sharply in the months following the IPO.
Likewise, intimate wear maker Regina Miracle attracted strong institutional demand for its $213 million IPO
Morgan Stanley maintained its strength in M&A advising on deals such as COFCO’s $750 million acquisition of its remaining stake in Noble Agri.
In financial institutions M&A, always a Morgan Stanley strength, the firm advised on some of the largest and most interesting deals in Hong Kong. It helped China Cinda buy Nanyang Commercial Bank from Bank of China (Hong Kong) for $8.8 billion and worked alongside Ageas on its sale of its Hong Kong life insurance business to JD Capital for $1.4 billion.
BEST FOREIGN BANK AND BEST FOREIGN INVESTMENT BANK: CITI
Citi India continued its strong growth momentum across the business – from helping corporate and individual clients raise capital to providing cash management, trade, securities, mobile payments and loans to local small- and-medium-sized enterprises.
Worth noting during our review period was Citi’s increasing effort to boost lending to the country’s householda. The US bank increased lending to unprivileged groups by 40% year on year, extending $1.65 billion of loans to household for affordable housing, agriculture, and SMEs.
Meanwhile Citi’s India business is leading the way on digital technology. The bank launched the first global digital wallet in India through a partnership with MasterCard, allowing its debit and credit cardholders to shop at more than 250,000 e-commerce merchants worldwide.
Corporate payments are increasingly conducted via mobile phones. The bank is also giving companies big-data analytics to help them assess their working capital positions. Meanwhile, it makes strong use of digital platforms to reach customers, with e-commerce now accounting for 25% of new credit card business.
Citi handled more than 150 million transactions for the year, with a value of $2.5 billion, the largest among foreign banks. Digital spending is growing at more than 44% annually, according to data provided by Citi.
Thanks to some impressive digital marketing efforts and deep engagement with online customers, Citi India reported a profit after tax of $548 million in March last year, representing an 18.8% increase year on year.
Deposits rose to $14.2 billion from $13.1 billion, despite a smaller physical branch footprint. Its profitability was the highest compared with peers, thanks to its lower cost of funds through consistent deposit growth.
With a total balance sheet of $22.2 billion, Citi India’s capital-to-risk-weighted-assets ratio stood at 15.3%, compared with a requirement of at least 9% under global Basel III rules.
In the investment banking business Citi made a lot of efforts to bring in a group of senior industry-focused bankers to service its overseas and domestic clients in India.
The US bank was involved in some of the most prominent M&A transactions and ranked No.1 in the league table, completing more than $9 billion in 15 transactions, according to Dealogic. Citi became the sole advisor to a $500million private placement round by India’s mobile payment company Paytm in September 2015, following the first fundraising round as a joint advisor in February.
In the ECM business, Citi demonstrated its execution and product knowledge, offering more tailor-made financing solutions to India corporate. For example, it helped HDFC raise $770 million through the sale of a stapled non-convertible bond debenture and warrants, the first-ever issuance of such an instrument in the country’s capital market.
In the IPO business, Citi was the left lead bookrunner in the listing of IndiGo, India's biggest airline by passenger numbers. InterGlobe Aviation, which runs India’s IndiGo, and existing investors raised about 30 billion rupees ($464 million) after pricing its initial public offering at the top end of the marketed range.
The offering, the first by an Indian airline since 2006, will allow IndiGo to build its fleet and cut debt in one of the world’s burgeoning aviation markets. IndiGo is the only Indian airline to have made a profit in each of the past seven years.
In the international bond markets, Citi was placed second after JP Morgan, underwriting $682 million in six deals, according to Dealogic. JP Morgan raised $741 million in five deals.
BEST FOREIGN BANK: CITI
In the wake of the financial crisis, the role of Citi as a 'financial supermarket' was frequently said to have come to an end. But in Indonesia, its clients could be forgiven for not having noticed. The bank offers a vast array of services to both commercial and investment banking clients.
Like most big global banks, Citi can certainly stress its ability to close syndicated loans for its clients: its role as a bookrunner on Indonesian garment manufacturer Pan Brothers' $270 million dual-tranche loan last October gives a quick demonstration of that. But from consumer banking to securities services, from trade settlement to cash management, the bank appears to be offering its Indonesian clients, if not a supermarket, then at least a well-stocked mini-mart.
That approach has paid off. Citi generated net income of around Rp1.57 trillion ($118 million) in 2015, an improvement of 12% compared to 2014. This profit growth came on the back of a 14.6% year-on-year growth in assets, and an impressive 2.8% return on assets.
Citi has put a lot of emphasis on technology, as it has elsewhere in Southeast Asia. The bank launched four smart branches in 2015, adding to a digital suite that includes a plethora of corporate banking options under its Citidirect BE platform. That helped the bank win transaction banking business from domestic companies like Indofood and Pertamina, as well as plenty of foreign companies hoping to grow their businesses in Indonesia.
Citi has prospered in Indonesia not just because it offers a variety of services, but because it tries to offer every service better than its rivals. This comes from the ground up. Citi bankers working in the country have a convincing knack of extolling the virtues of their individual businesses, making some of the more dry areas of consumer and corporate banking seem just a little exciting. Their bosses connect the dots, trying to ensure that clients see Citi as a bank to rely on across markets, currencies and even businesses.
This is part of the pitch of several foreign banks operating throughout Asia. Many claim to be a 'full-suite bank'. But although Citi might not have stuck entirely with the financial supermarket model, in Indonesia its suite still looks a little more full than its rivals'.
BEST FOREIGN INVESTMENT BANK: CREDIT SUISSE
There can be few bank CEOs who haven't boasted, at one time or another, that their institution has a 'client-focused' model. For many banks, this is little more than a buzzword. Not so for Credit Suisse in Indonesia.
The bank has, for years, shown the benefits of key relationships in the country. Credit Suisse has operated in Indonesia since the late 1990s, and during that time it has built lasting relationships with some of the biggest business owners in the country. This is partly because it has remembered the potential of the country even through the most trying times.
A clear example comes from the bank's equity business, which was created in 2007. Other banks may have jettisoned the newly-created division as the global financial crisis took hold, opting to allocate capital to more seasoned — and prominent — areas. But Credit Suisse stuck with it. It is now considered one of the top equity houses in the country.
Our awards period was a trying time for Indonesian clients. Questions about the country's economic growth, and a tumbling stock market in the second half of 2015, forced many executives to revise their plans. But Credit Suisse made the most of this challenging environment, helping bring a roughly $1.4bn stake sale-cum-rights issue in tobacco company Sampoerna, a $393 million rights issue for miner Aneka Tambang and an $80 million IPO for consumer goods company Kino Indonesia.
It was in M&A, however, where the firm really stood out from the crowd. Credit Suisse was at the top of the league table during our awards period, according to Dealogic — pipping Deutsche Bank to the post after the German bank had an impressive year in Indonesia. Credit Suisse advised on deals worth an apportioned $1.08 billion during our awards period. This included conglomerate CT Corp's sale of a partial stake in TransRetail to Singapore's sovereign wealth fund GIC, a deal which came alongside a $125 million credit facility underwritten by the Swiss bank.
Credit Suisse is the only major international bank to have an Indonesian running its Asian operations. Helman Sitohang, a former Indonesia country head at the bank, was named Asia Pacific chief executive in October 2014. He hit the ground running — just over a year later he was given FinanceAsia's Outstanding Achievement Award.
If imitation is the highest form of flattery, Credit Suisse bankers should be blushing. Other global banks have tried, with varying degrees of success, to follow Credit Suisse's relationship-centric approach in the country. But the Swiss bank prospered during our awards period as it always has: by proving an invaluable resource to a client base which, over the years, has come to expect nothing less.
BEST FOREIGN BANK: CITI
In a year when Korea’s banking industry was under the shadow of a diminishing outlook for growth and declining interest margins, Citi has been one of the better performers among foreign banks and retained its competitiveness with the help of an internal restructuring that started as early as 2014.
The strategy was to refocus on high-quality clients and businesses with higher profitability. As part of that strategy, Citi closed about one-third of its retail branches in Korea and placed more emphasis on its corporate banking business, where it enjoyed a competitive edge over local banks by leveraging on its global platform.
But unlike HSBC, which fully withdrew from the retail banking business in Korea the same year, Citi kept the retail business in order to remain a full-service bank that offers a comprehensive solution. Instead, it fine-tuned the business to focus on areas in which it has been leading the market, such as wealth management and its credit card business.
This strategy seemed to bear fruit last year. Citibank Korea recored a 95.3% year-on-year increase in net profit to W226 billion ($195 million) in the 2015 financial year, while it also saw improvement in a number of financial indicators, including return on equity, return on assets and expense/revenue ratio.
In the period covered by the awards, Citi has improved its asset quality and reduced its non-performing loan ratio by 0.23 percentage points from a year earlier to 0.75%, while it also strengthened its core tier-one capital to 16.35%, from 15.86%.
Citi was in May 2015 selected by Korea Securities Depository as its global custodian for the Shanghai-Hong Kong Stock Connect.
“This partnership will provide a good platform for facilitating cross-border investment flow from Korea to China's A-share market and enable local brokers in Korea to transact using different China Connect brokers," says Jaehoon Yoo, chairman and CEO of Korea Securities Depository. "Korea Securities Depository will also be able to better safeguard Korean investors’ investment in A-shares.”
BEST FOREIGN INVESTMENT BANK: MORGAN STANLEY
Morgan Stanley was the unanimous pick among the judges thanks to its strong dealmaking capabilities in various industries.
In terms of its strategic advisory business, Morgan Stanley was actively involved in conglomerate restructuring and corporate mergers, arguably the two biggest themes of Korea’s M&A business during the award period.
During the period, one of the biggest achievements for Morgan Stanley was to assist Samsung Group in establishing a holding company through the merger of Samsung C&T and Cheil Industries. As sole advisor to Cheil, Morgan Stanley played a big role in fending off the challenge of US activist fund Elliott to help the $8 billion mega-merger to fruition.
Besides the Samsung restructuring, Morgan Stanley was also a joint advisor on the $23 billion all-stock merger between SK C&C and SK Holdings, another high-profile corporate restructuring in Korea during the award period that allowed major shareholder Chey Tae-won to strengthen his control over his business empire.
Credit also goes to Morgan Stanley for participating in leading corporate merger cases that reshaped the industry landscape. For instance, it was the sole financial advisor to Hanwha Techwin in the company’s $600 million acquisition of Doosan DST, which effectively established the country’s largest defence company. It was also an advisor to KB Financial in the $1.1 billion partial acquisition of Hyundai Securities, effectively created the nation’s largest financial group.
Morgan Stanley participated in almost every significant M&A transactionsin Korea during the period. The only one that it wasn't directly involved in was the $6 billion sale of Tesco’s Korean discount retain chain Homeplus.
In fact, the US investment bank was involved in the bidding process, representing the KKR/Affinity consortium, which eventually lost out to private equity firm MBK Partners.
The bank was also firing on the ECM front, delivering some landmark transactions in Korea during the period. It was the sole bookrunner for Nexon’s $535 million secondary block in NCSoft, one of the biggest equity transactions out of Korea during the period.
It also successfully completed the $190 million sale of Korea Air shares on behalf of Hanjin Transportation at the second attempt. The deal was first brought to the market in an unsuccessful attempt by a separate syndicate a week earlier.
According to Dealogic, Morgan Stanley ranked first among foreign investment banks in both M&A advisory and ECM during the award period.
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BEST FOREIGN BANK: HSBC
Last year was a very challenging one for the Malaysian economy. The country suffered a double whammy of political scandal that enveloped state fund 1Malaysia Development Berhad (1MDB) and Prime Minister Najib Razak. In addition, the economy has been hamstrung by failing oil prices and slower export growth to key markets such as China. Having a strong balance sheet seems to be the best way to survive in a challenging environment.
Despite difficult market conditions, HSBC Malaysia saw a modest expansion in revenue, due in part to modest growth in deposits and assets. The former expanded 3.5% year on year, while the latter grew 7.1% for the same period.
In terms of profitability, both its return on assets and return on equity were moderate but stable, thanks to its strong client base. Its tier-1 and total capital adequacy ratios improved slightly, reflecting its stringent approach to credit and liquidity risk.
Thanks to increasing deposits, its tier-1 capital ratio rose 0.1% to 12.7% in December of last year, while its total capital adequacy ratio edged up 0.2% to 14.5% for the same period. Total deposits increased 3.5% year on year to MYR 60.67 billion in December.
On the dealmaking side, HSBC Malaysia was involved in a number of large cross-border M&A transactions, including sovereign wealth fund 1MDB’s $2.3 billion sale of a collection of energy assets to China General Nuclear Power Corp. Those assets, known as Edra, consist of 13 power plants across five countries from Malaysia to Egypt and Bangladesh.
The deal came after a fierce bidding process that also saw interest from Malaysia and the Middle East. The Chinese state-owned nuclear company outbid key contenders such as Tenaga Nasional, which is 30% owned by Malaysian sovereign wealth fund Khazanah Nasional.
The asset sale was the largest Malaysia M&A in 2015. It was also a landmark deal as the Malaysian government waived the foreign ownership restriction to allow a foreign company to acquire a 100% stake of a domestic power asset.
BEST FOREIGN INVESTMENT BANK: JP MORGAN
JP Morgan won this award in the face of strong competition, walking away with the trophy thanks to solid positions in M&A and equity capital markets.
JP Morgan was the only foreign bank to advise Malaysia’s largest mobile operator, Axiata Group, on its $1.4 billion acquisition of Ncell, the largest private-held mobile operator in Nepal. In an all-cash transaction, Axia purchased a 80% stake in Ncell from Swedish phone company TeliaSonera AB.
The US bank appears to have pitched the lucrative deal to the Malaysian company. Axiata an EV/EBITDA of five times Ncell's forecast earnings for 2016. That compares to EV/EBITDA of 5.7 times for other South Asian operators and 8.4 times for Axiata's Association of Southeast Asian Nations peers.
According to official data, mobile phone usage in Nepal is relatively low, with a 51% penetration rate. Mobile broadband penetration is even lower at 21%, suggesting to carriers that the country still has a lot of room to grow.
In addition, the due diligence process for the telecom deal was put on hold for couple of months, as it was interrupted by the April 2015 earthquake. JP Morgan was able to quickly revive the M&A talks thanks to its group of its dedicated telecom bankers in the region. “The transaction was one of the toughest transactions in my career because of the natural disaster,” a JPMorgan banker commented after completing the deal.
With the purchase, Axiata will add to its telecommunications operations across Asia, from Malaysia and Indonesia to India and Singapore. Axiata has more than 260 million customers, according to its website.
According to Dealogic, JPMorgan placed fourth in the Malaysia M&A league table during our review period, advising on four transactions worth $2.3 billion in total.
On the other hand, the US bank was also making a name for itself in the country’s equity capital markets. It was one of the joint global coordinators of Malakoff’s April 2015 IPO, one of the hottest deals of the year. Including the greenshoe option, Malakoff, Malaysia's biggest independent power producer, raised $867 million in a share sale priced at the top end of the indicative range after receiving strong support from domestic institutional investor. The Malakoff IPO was the largest listing in Malaysia since October 2012.
It also a lead bookrunner in a Malakoff block trade in November, when two of the cornerstone investors divested their entire residual stake via a MYR444m ($105m) block, with the deal buoyed by local demand and strong interest from one domestic pension fund.
BEST FOREIGN BANK AND BEST FOREIGN INVESTMENT BANK: STANDARD CHARTERED
Standard Chartered is in a league of its own for this award since it has almost no foreign competition and has been a deeply entrenched presence in the country since it opened its first branch in 1863.
Its competitors are the local banks and among their ranks it is the eleventh largest by assets according to S&P Global Market Intelligence figures. Testament to its efficiency, it scores much higher on profitability, ranking sixth.
Globally, Standard Chartered has been pulling back but not in Pakistan where it plans to invest more resources. The country is one of its designated GROW markets and features four of the 56 key strategic cities where the bank perceives significant economic growth potential from an increasingly affluent middle class.
Assets and deposits both grew strongly in 2015. Assets grew 4.2% over the course of the year to $4.35 billion and were up again during the first quarter to $4.45 billion according to S&P Global Market Intelligence figures.
Likewise, deposits rose 1.7% to $3.06 billion and stood at $3.29 billion at the end of the first quarter.
One of the bank’s great strengths is its ability to mobilise these low cost deposits. For while it maintains 1% of the industry’s branch network, those 101 branches hold 5% of industry-wide deposits.
This helps to give Standard Chartered a 97% CASA ratio: the best in the domestic banking industry.
On the flip side, loans and net profit were both down in 2015. The bank had a loan book of $1.017 billion at the end of the year according to S&P Global Market Intelligence data compared to $1.28 billion in 2014.
However, that trend has reversed itself in the first quarter, with the loan book standing at $1.14 billion at the end of March, up 10%.
Net profit dropped from $97.23 million in 2014 to $91.82 million in 2015.
As with all banks, digitisation is an important trend and here Standard Chartered achieved a 68% transactions ratio in 2015 compared to 35% back in 2011. Of its half a million retail customers, roughly 192,000 are now signed up for online banking and 81,000 to BREEZE, its mobile banking app.
In terms of servicing its corporate clients, Standard Chartered launched electronic payments to easypaisa mobile accounts through its electronic banking platform Straight2Bank in 2015. This was designed to facilitate payments flexibility in remote parts of the country.
The bank’s strong presence across the Indian subcontinent means that it has become an expert coming up with solutions to enhance financial services among the unbanked. As such, the bank is about to roll out electronic fund transfers using national identity cards as an identifier for beneficiaries that do not hold a bank account or a mobile account.
For its corporate clients, the bank has also recently gone live with RTGS (Real Time Gross Settlement), the first bank in Pakistan to integrate with the central bank’s system.
Each year, we mentioned Islamic banking as one of Standard Chartered’s chief differentiating factors. It remains the only foreign bank offering Islamic products and services and says it has the second largest Islamic window in the country.
During the time period for FinanceAsia’s country awards, there was very little investment banking activity, particularly cross border. The one deal of note was the country’s $500 million bond issue of September 2015 led by Standard Chartered, Citi and Deutsche Bank.
The 10-year deal came at a difficult time when markets were still in risk-off mode. As a result, the sovereign halved the planned issuance proceeds and offered investors a generous new issue premium.
And it worked. Unlike many tightly priced bond deals, Pakistan traded up rather than down in the secondary markets. As of late June it was trading around the 105.75% level to yield 7.3%.
BEST FOREIGN BANK AND BEST FOREIGN INVESTMENT BANK: CITI
Citi has an unrivalled lock on this award and over the past year it has proved to be as solid as ever. It remains the only foreign bank in the domestic top 10 by assets and ended the first quarter of 2016 with an asset base of $6.36 billion, and $4.03 billion in deposits.
Its financial metrics also remain strong, with a low gross non-performing loan ratio of 0.54%, return on equity of 16.65% and overall capital adequacy ratio of 18.44% at the end of the first quarter.
As the incumbent, its strategy is partly focused on maintaining market share and partly on providing value-added services to expand in line with an economy, which beat nearly all-comers during the first quarter to expand 6.9%.
The bank believes this strong momentum will likely continue throughout 2016 notwithstanding the recent presidential election, which saw hard-hitting candidate Rodrigo Duterte come to power. It believes the upswing in the both stock market and currency, which greeted the result, means the financial markets believe Duterte’s promises to maintain the economic policies of his predecessor, Benigno Aquino III.
The bank also says that while it did not grow its market share in credit cards issued beyond 22% during 2015, the overall pie got bigger. Given its affluent client base, its wallet share is a higher 27%.
In 2015, it opened two more ATM’s but as with all banks the big focus is on digitization and in this space 47% of retail clients are registered users of digital banking.
The Philippines is not a dollarized economy but it has very strong links to the greenback because of its geo-political relationship with the US and this has long played to Citi’s advantage. The bank is, for example, the sole settlement bank for the Bankers Association of the Philippines PDDTS (Philippines Domestic Dollar Transfer System), which makes it the clearing agent for all US dollars real-time gross settlement (RTGS) transactions.
On the corporate side, the bank estimates that it banks 70% of the roughly 700 multinational corporations operating in the company and says their number is growing all the time. Key initiatives during 2015 included growing supplier financing, which enables clients to discount receivables and rolling out a product, which facilitates multi-currency payments and allows clients to fix their FX values and margins up front.
Our second award for the Philippines covers investment banking and this was a difficult award to judge. In a year when there was almost no equity capital markets activity, it came down to debt.
This is an area where both Citi and Deutsche Bank have been historically very strong in the Philippines. Both had a very good 2015 and were on the two key transactions executed by the Republic of the Philippines.
Over the past decade the government’s treasury team has transformed its reputation. The past year has been punctuated by two very different but equally impressive transactions.
The first comprised a Ps264 billion bond exchange. This extended the government’s maturity profile out to 25 years and reduced its cost of funding in the process. The government followed this up in February 2016 with a $2 billion bond and switch tender that also resulted in significant savings on a net present value basis.
Both Citi and Deutsche led dollar-denominated senior perpetual deals in 2015. Deutsche was one of the leads on a $300 million issue for SMC Global Power and Citi on a $450 million deal for International Container Terminal Services Inc (ICTSI). The former proved to be a tricky transaction thanks to disclosure issues surrounding one of the group’s power projects and also came one day after ICTSI, which sucked up a lot of demand.
Deutsche was stronger than Citi in a second key trend in the domestic market during 2015: lead managing deals for other banks. The German bank was also one of the bookrunners on the only mid-sized flotation of the year: the $77 million listing of Metro Retail Stores.
Where Citi’s ECM business is concerned, 2016 is likely to prove a banner year if it can execute the $525 million initial public offering for Cemex Philippines, which was recently mandated and is shaping up to be the country’s largest industrial flotation on record.
But in the end what helped swing the award in Citi’s favour was its M&A work on the £550 million ($806 million) takeover of the UK’s Marlow Foods, which makes quorn products. The bank acted as the buy side financial advisor to Monde Nissin, which purchased the group from its private equity bankers.
This was the largest outbound M&A transaction from the Philippines in 2015 and not only underscores the strong niche the country has in the food and beverages sector, but also its companies’ abilities to leverage that into global platforms.
BEST FOREIGN BANK: CITI
Singapore continues to be one of the important business locations for Citi globally. It is the largest banking employer in the Lion City, with about 9,200 staff as of the end of May this year.
Citi is the leading provider of cash management and trade services in Singapore, one of the busiest trading hubs in Asia. In 2015, the bank processed more than 24 million fund transactions and 180,000 trade transactions to multinational corporations, financial institutions and local companies.
It was also a market leader in foreign exchange transactions, having traded $2.76trn with 1,522 active FX clients in Singapore.
It was also the largest foreign bank in terms of retail banking with 18 branches, while its major competitors Standard Chartered and HSBC manage 17 and 11 branches respectively.
While its assets were on a similar scale to those of Standard Chartered, Citi had a higher capital buffer of 22.15% compared to 17.58% for Standard Chartered, according to data provider S&P Global Market Intelligence. Citi’s tier 1 capital ratio of 21.56% is also much higher than Standard Chartered’s 12.51%.
Corporate and investment banking remained the largest components of Citibank Singapore’s operations. Citi was particularly strong in the debt capital markets business as it was able to leverage on a balance sheet that is much stronger than those of other foreign investment banks, while also possessing an advantage over local banks with its ability to conduct foreign-currency transactions.
According to Dealogic, Citi was the top dealmaker in the G3 bond market in Singapore during the award period.
BEST FOREIGN INVESTMENT BANK: CREDIT SUISSE
Credit Suisse won because it displayed strong deal origination capabilities in all three investment banking products, namely M&A, ECM and DCM, while most of its competitors are highly focused on one particular area.
The Swiss bank’s M&A business was what stood out among foreign banks during the period. Credit Suisse displayed its diversified deal making abilities through the execution of 15 transactions that involved both domestic and cross-border mergers, as well as corporate delisting cases.
Some high-profile transactions include Alibaba’s $1 billion acquisition of Lazada and $139 million investment in Singapore Post, as well as OCBC’s $320 million acquisition of Barclays’ wealth and investment management business.
One of Credit Suisse’s achievements last year was to originate investment banking deals from its strong private banking and wealth management network. That was underlined by the bank’s advisory roles in the management buyouts of local companies Osim International and Eu Yan Seng, which has a combined deal value of close to $1 billion.
In addition, Credit Suisse managed to complete five equity transactions in a year of little significant ECM activity. The $470 million initial public offering of Manulife US Reit was arguably the most important transaction because it effectively reopened Singapore’s IPO market, which had been extremely slow for the entirety of 2015.
Credit Suisse was one of the new bookrunners that successfully brought the reit to market in May following a failed attempt in July last year.
BEST FOREIGN BANK: HSBC
HSBC has a strong track record winning this award and its long history in the country makes it well placed to grow with the local businesses it has banked for many years.
Sri Lanka has one of the most promising growth trajectories in Asia, but in 2015 politics overshadowed economics thanks to parliamentary elections in the summer, which allowed the coalition government to finally consolidate power.
However, it was not longer after that the debt hangover created by the previous regime of strongman Mahindra Rajapaksa pushed the country into the arms of the IMF, which agreed to extend a $1.5 billion three-year loan in April this year.
HSBC believes the IMF aid has allowed the economy to re-find its equilibrium. Growth picked up to 5.5% in the first quarter.
HSBC says there has been a noticeable uptick in FDI discussions since the beginning of the year and has grown its own balance sheet by roughly 6% over the first third. This positive momentum is helping mitigate the slight drop in revenues and profitability in 2015, which also hit the bank’s efficiency ratios.
Its cost to income ratio, for example, rose from 40.75% in 2014 to 44.24% in 2015, while revenues fell from $170.7 million to $150.65 million.
In rupees terms, loans and deposits were still able to grow, with the former up 9% to 1.28 billion and the latter up 4% to 1.27 billion.
HSBC continues to maintain its hold over credit card issuance and spending, with respective market shares of 31% and 29%. In 2014, it had 32% of the wallet, but says it is happy with the ratio since the overall pie is getting larger.
In 2015, the bank arranged loans for three business leaders in their respective sectors. It led a $70 million loan for MAS, Sri Lanka’s largest garment manufacturer, a $75 million loan for Sri Lanka Telecom and was sole banker for Aitken Spence’s acquisition of Al-Falaj Hotel in Muscat.
The bank was also one of the joint global co-ordinators for the sovereign’s $1.5 billion 6.85% 10-year bond deal in the autumn. This represented the bank’s ninth consecutive mandate from the government and was particularly well timed from Sri Lanka’s point of view.
At the time investor demand was relatively strong and the deal attracted a fairly healthy final order book of $3.3 billion. Since then, however, it has traded down in line with the country’s IMF-related woes and in late June was yielding about 7.2%.
BEST FOREIGN BANK: CITI
Citi has been on a winning streak in this category for many years and once again claims the title this year.
Entering its 52nd year in Taiwan, the most significant achievement was perhaps restoring asset growth after seeing total assets declining for four straight years between 2011 and 2014.
Taiwan has not been an easy place to do business in recent years and it has been the same for Citi, which recorded declining operational data including net profit, net interest margin, return on equity and return on assets over the past few years.
Yet Citi remained stronger than other foreign banks in these aspects. It was the most profitable foreign bank with earnings before interest and tax of $268 million last year. Citi’s 1.09% ROA was higher than market average of 0.75%, while its 7.94% ROE was also much higher than Standard Chartered at 3.24%, according to S&P Global Market Intelligence.
Digitalization was a big theme among Taiwanese financial institutions in recent years. Citi was at the forefront of banking digitaization by introducing voice biometrics authentication in May this year. Such technology helps reduce the average time of automatically verifying customers’ identity on the phone by 66%, from 45 seconds to 15 seconds.
Citi also remained as one of Taiwan’s leading credit card issuer with the highest activation rate of 85%. The average spending per Citi credit card was 39% higher than market average last year.
BEST FOREIGN INVESTMENT BANK: MORGAN STANLEY
Morgan Stanley and JP Morgan went head-to-head in the best foreign investment bank category but it was eventually Morgan Stanley which stood out, based on the comprehensive nature of the overall business.
The judgment was based mostly on M&A advisory and debt capital markets rather than the relatively insignificant equity business, which was mostly dominated by local banks and brokerage firms.
In perhaps the most important transaction of the year, Morgan Stanley was the financial advisor to Sharp in its $3.5 billion sale to Taiwan’s Hon Hai Precision Industry. The deal scored a number of titles including Taiwan’s largest outbound M&A, the largest M&A in the technology sector, and also the second largest cross-border M&A in Taiwan history.
JP Morgan was an advisor to Hon Hai but one could argue that Morgan Stanley has a more important role in the process given that it was tasked with advising Sharp, which had been actively seeking a bailout for years on the back of mounting liabilities.
Morgan Stanley played an important role in advising Sharp on its choice between Japanese state-backed firm INCJ, which would keep the century-old electronics brand under a local owner, or Hon Hai, which offered a higher bid.
Besides Hon Hai/Sharp, Morgan Stanley was the sole advisor on Yuanta’s $1.8 billion acquisition of Ta Chong Bank, which had been the largest M&A transaction in Taiwan in more than three years at the time of the announcement.
Morgan Stanley was also an active bookrunner in the Formosa bond market and assisted foreign clients such as AIG, Vodafone, Intel and National Bank of Canada in raising debt capital in Taiwan during the award period.
BEST FOREIGN BANK: CITI
Thailand has proved a difficult operating environment for the banking industry since martial law was imposed in May 2014. Political deadlock has acted as a break on the economy as has the global slowdown, which has hit an export sector that is also facing fierce competition from low-cost Asean neighbours.
It is an environment governed by low credit demand and although Citi is still recording revenue levels more than double the level of its nearest competitor, HSBC, it would be the first to admit that the tough environment for its corporate clients has hit its margins too.
In 2015, it recorded revenues of $394 million off an asset base, which stood at $6.065 billion at the end of the year. Its loan book stood at $2.5 billion, while deposits amounted to $3.9 billion at the same point.
On nearly every financial metric Citi beats HSBC, but has recorded a worse performance in 2015 compared to 2014. Return on assets, for example, stood at 1.84% at the end of the year compared to 2.3% in 2014 according to S&P Global Market Intelligence figures.
Return on equity came in at 13.43% compared to 15.89% in 2014 and the cost-to-income ratio also spiked up to 48.78% compared to 46.93% in 2014 according to S&P. One area where it did see improvement was non-performing loans, which fell to 2.59% compared to 2.67% in 2014 according to S&P.
One clear difference with HSBC is Citi’s balanced mix between retail and corporate banking. HSBC sold its retail business in 2012, while Citi has a roughly 50/50 split between the two where profits are concerned.
In terms of retail banking, Citi still earns the highest revenue per card in the domestic banking industry. On the corporate side, it flagged a number of new treasury and trade mandates in 2015.
These included: Rohm Integrated Systems Thailand, which moved sizeable US dollar funds to Citi; Nestle Thailand, which mandated Citi to provide supplier financing to new clients; AIA, which mandated liquidity solution to Citi; Volvo Thailand, which mandated Citi to support working capital solutions and: Mitsubishi Heavy Industries-Mahajak Air Conditioner Thailand, which has expanded Citi’s supplier finance programme to all new suppliers including those based overseas.
BEST FOREIGN INVESTMENT BANK: HSBC
This award came down to HSBC and Morgan Stanley, last year’s winner. But while HSBC has pulled back from its retail operations in Thailand, its corporate franchise continues to go from strength to strength as it focuses on being, in its own words “advisory led and financing focused.”
This was amply demonstrated by its work on the $3.4 billion sale of a 58.6% stake in Thai-listed Big C Supercenter to the TCC Group. HSBC was the sell-side advisor to France’s Casino Guichard-Perrachon, which decided to dispose of the asset as a part of a de-leveraging plan. Morgan Stanley was advisor to TCC.
The deal was not only a large transaction by Thai standards – the third largest ever – but also the largest from South East Asia since 2011. HSBC’s balance sheet also came into play as one of the lead arrangers on the enormous $6.4 billion bridge facility that was put together to pay for the majority stake and the Mandatory Tender Offering to take up the remaining shares in the group.
For the submission period May 1 2015 to April 30 2016, HSBC led the M&A league tables for Thailand according to Dealogic figures with a total of five transactions amounting to $8.478 billion. Other deals included: advising General Calbe on the divestment of its Thai business to MM Logistics; Emery Oleochemicals on the sale of its German assets and a Philippines-based EGCO joint venture on the project financing of a 455WM coal-fired power plant.
The bank’s DCM expertise was also on display last year. It ranks eighth overall in the Dealogic league tables for corporate issuance, but its bankers say it is not trying to compete with the local banks. Its Thai strategy revolves around taking local clients to the offshore G3 markets, or leading Baht-denominated bonds, which are then swapped back out.
Last August, for example, it was one of the lead managers for Kexim’s Bt10 billion bond issue. Later in the year, it also raised $100 million equivalent for Thai Union, which was swapped into US dollars under the latter’s Global Treasury Centre license for large corporates.
Bankers say the government has been trying hard to woo companies to establish their treasury centres in Thailand through a range of tax and FX incentives and this deal was an example of Thai Union taking advantage of that.
Offshore bond deals have been few and far between from Thailand, but HSBC was also one of the three lead managers for TMB Bank’s $300 million issue.
BEST FOREIGN BANK: HSBC
HSBC has won this award for four out of the five past years and continues to be the dominant foreign bank across corporate and consumer banking.
It views Vietnam as one of Asia’s most promising markets thanks to strong FDI inflows, low labour costs and young educated population.
In a signal of its commitment to the country it increased its capital in 2015 and reported an overall capital adequacy ratio of 20% at the end of the year, up from 16% in 2014. This had been a difficult year for the bank, when provisions had been increased to counter deteriorating loan quality.
As a result, 2015 saw an overall improvement in gross NPLs from 2.89% to 1.84% according to S&P Global Market Intelligence data.
However, 2015 overall saw an overall decline across many metrics in a reflection of the ongoing costs of meeting HSBC’s global compliance standards and the domestic political undertow that resulted from a power struggle between the pro-business prime minister Nguyen Tan Dong and Communist Party General Secretary Nguyeun Phu Trong. Bankers hope the reform momentum will speed up following recent national assembly elections.
These twin headwinds meant that HSBC’s assets dropped from $3.9 billion in 2014 to $2.3 billion in 2015, while loans were down from $1.5 billion to $1.2 billion and deposits from $3.07 billion to $2.5 billion.
On the plus side the bank was able to increase its profitability from $38 million to $42.6 million at the end of 2015, while return on assets improved from 1.08% to 1.19%.
The bank estimates that it services about 70% of the MNC’s based in the country and has a much larger pool of corporate clients than its nearest rival Citi. But most of its business comes from FDI and it also notes that local companies are accounting for an increasing proportion of its loan book – 30% in 2015 up from about 22% a year earlier.
The bank has tapped into this corporate client base to increase its consumer banking business and has signed up about 3,600 customers who are employees of its corporate client base over the past year. Digitization also continues apace and the bank says about 46% of its active clients now have personal internet banking accounts.
Where credit cards are concerned, the bank remains the largest in the country with an estimated 20% of the total spend.
BEST FOREIGN INVESTMENT BANK: CITI
This was one of the most difficult awards to judge since both Citi and HSBC had a very strong year. Both banks were responsible for a number of equally landmark transactions.
HSBC, which has never historically been strong in M&A, demonstrated that its cross-border financing and advisory business has truly come into its own. It completed two stand-out transactions for European clients active in Vietnam: the sale of Germany’s Metro Cash & Carry Vietnam business on an enterprise value of €665 million and France’s Groupe Casino’s Big C Vietnam business to Thailand’s Central Group for $1.1 billion.
Citi, meanwhile, continued to consolidate its relationship with Vietnam Airlines, acting as the strategic sale advisor for the sale of an 8.8% stake to Japan’s All Nippon Airways (ANA). The deal raised $108 million and while it was small by global M&A standards, it was large for a Vietnamese state-owned enterprise (SOE).
The transaction is all the more impressive in the context of a privatization and SOE reform programme, which has been slow and stuttering at the best of times. The airlines 2014 IPO, for example failed to attract a single foreign investor.
Citi also worked with Vietnam Airlines on a second transaction to aid its fleet renewal and transformation programme. Here it was the mandated lead arranger for a $114 million ECA backed term loan facility that enabled the national carrier to purchase two A321-200 planes.
Its biggest deal of the year, however, was a $1.2 billion financing package for PetroVietnam where it acted as sole global co-ordinator and mandated lead arranger. The deal comprised a 17-year Korea-backed ECA facility and 10-year syndicated loan for the Song Hua 1 thermal power project.
What helped to tip the award in Citi’s favour was the launch of its Global Depository Note (GDN) programme. Bankers say they spent three years working on the programme with the government.
They hope it will help to improve liquidity in the domestic bond market by diversifying the investor base by bringing in offshore accounts. The structure enables local and foreign investors to trade with each other via a local depository bank.
The bonds are processed through Euroclear enabling foreign investors to settle and receive payments on domestic currency transactions in US dollars. Citi has already launched the programme in other frontier markets, but the Vietnamese programme represents only its second in Asia alongside Pakistan.