With the departures of M&A boss Anthony Steains yesterday and senior rainmaker Chester Kwok last week, ING Barings’ formidable Asian presence has taken a dent. Recent comments from Amsterdam haven’t helped. Is Barings still serious about investment banking in the region? We spoke to head of Asian corporate finance, Malcolm Brown in the wake of Steains' shock departure.
Q: Historically ING Barings have had a strong presence in Asian M&A and corporate finance. Given recent announcements, how do you convey to your clients that you’re still serious about this business?
A: By doing everything the same. Nothing has changed. We continue to build. Over the last year we have doubled the size of our M&A team in Hong Kong. We have set high standards for quality execution, and that’s what we intend to carry on doing to the benefit of our clients.
Q: Some of the announcements from Holland have created a great deal of uncertainty in Asia, where confidence is a key thing. With Steains and Kwok leaving, that obviously has an impact.
A: Chester worked for us for four and a half years and Anthony for five years. If you go round our competitors they probably don’t have many people who’ve been in Hong Kong doing Asian business for five years. We’ve got 10. The stability and staff turnover has been very low. Chester decided to leave a few weeks ago and it was unrelated to these announcements. Tony had also been talking about leaving for a while. However, we have a very strong layer of people at the director and vice-president level. We have a much stronger team than we had three years ago. They will be missed. But things won’t fall apart because they’re gone.
Q: We’re living in a very perception-driven world. How do you correct the perception that’s been created by these two high profile individuals going so soon after one another?
A: Obviously by continuing to do good business. We announced the First Pacific Bank deal last week, and on Friday we announced Chinatrust’s purchase of a 34% stake in its Philippine subsidiary. This morning we signed three mandates for new deals across the different products. We have a good pipeline which is ahead of our forecasts, and people are going to get paid pretty well. At the end of the day, what more can you do? Yes, there’s a lot of noise out there and that will have to work its way through the system because it always does. I don’t believe people are going to leave en masse. We will keep the people together and if the clients are talking to the same relationship banker about deals and prospects, they’re going to keep on using us.
Q: Will you replace Steains with an external hire?
A: We have a very strong layer coming through so we probably won’t replace him externally. We might take someone out of the network. In the meantime I will take up that role again. I was head of M&A for three years, and relinquished the role only in the first quarter of this year, so it’s not a great hardship for me to oversee the M&A product again. I will do more of the telecoms and financial institutions M&A deals.
Q: Do you pay your bonuses in March?
A: We used to pay in March, but last year we moved forward to beginning of February.
Q: So that would be the time when you’ll be concerned about staff leaving?
A: That’s always the time when people who are waiting to leave choose to go. I’m not sure I would be more concerned this year than any other year, provided people believe we are still competitive. In Asia there is no particular reason for them to go. I suspect the American banks will downsize in the first quarter. They generally react quickly when the market turns down. Obviously the market in New York has flattened and the IPO business is gone. I’m sure there will be some cutting back. That won’t affect us.
Q: Most people are bullish about M&A in Asia. You think a weak US market will mean even the Asian M&A teams get downsized?
A: Asia has tended to be subsidized in a lot of US banks by the performance of Wall Street. If Wall Street slows down, it will have an impact in Asia too. For ING Barings, Asia is a much more significant contributor to overall revenues, so we would not be affected in the same way.
Q: Will you miss the Barings name when it is dropped?
A: It’s not certain it will be dropped. We are marketing to clients, to see what they say. The Barings name counts for something in Asia, and as an old Barings person I would be sad to see it go.
Q: How long have you been in Asia?
A: Seven years, going on eight.
Q: Has Asia become a more professional place in that period?
A: In certain respects. M&A is now a viable business product. I would guess our annual M&A revenues are now fives times what they would have been in the best year pre-1997.
Q: You have brought over Adrian Yang from London to replace Chester Kwok. Can you tell us about Yang?
A: He is a very experienced banker. He spent a long time with Salomons, and three years with us. He was brought over to ING Barings by Jeremy Palmer and David Hudson to be head of ECM for us. He’s been in London for two years but is quite keen to get back to Asia, and he’s going to be our senior coverage banker for Hong Kong. He’s been around here for quite a while and he knows a lot of people. He has a lot of credibility in this market.
Q: Is ING Barings going to focus on doing more of the smaller-sized transactions rather than the billion dollar deals?
A: We’ve never particularly targeted working on smaller deals. What we tend to focus on is clients. Look after the clients and the business will come to you. If an important client we are dealing with wants us to do a small deal, we’ll do it for them. We’ve done a lot of work with Procter & Gamble, and if they’re doing a couple of small brand sales we would help them, though it’s not a business we would target in its own right. We’ll do big deals when they come along. National Australia Bank was $2.7 billion, PLDT/Smart was $1.4 billion, Kepco was $700 million, First Pacific Bank is a $500 million deal. We’ve done our share of big deals this year.
Q: But your approach has been different to say a Goldman or a Morgan Stanley which have gone for the big deals. ING Barings and Jardine Fleming did a lot more deals, but they tended to be smaller. Now that Chase is in charge of JF, it is going for the big deals too. Does that leave a niche for you as the only house to do the smaller to medium-sized deals?
A: We have one of the strongest country networks, so we pick up more opportunities than those who just fly in for the day and talk to the five biggest companies. For example, in the Philippines we have a very good M&A practice doing both large and small deals. We have executed several smaller deals this year. Then again we’ve done three of the four biggest deals ever done in the Philippines. So we do both – but even the smaller deals involve big names.
Q: Which markets are you focusing most of your resources on next year?
A: Korea and Hong Kong are the big two. There is also Taiwan. I believe that we will start to see Thailand and Indonesia picking up. And you will see Singaporeans buying around the region.
Q: Do you have the sense that Asia is evolving towards an investment banking bulge bracket?
A: At the top end, yes. There is no doubt that since the crisis in 1997 the US firms have improved their position and many of the Europeans firms have generally not. That is particularly on the top-end equity capital market transactions such as the privatizations. For M&A I don’t think it has been nearly so pronounced. The US banks have been focused on the top end of the market, and that has survived the best throughout the crisis. It’s also where most of the competition is.
Q: Asia is a very brand-conscious place. No CEO will put their reputation at stake if they hire a Goldman or a Morgan Stanley. How do you compete against that?
A: At the working level we provide as good a service as anyone or better. And our track record shows a lot of repeat business. We do a transaction, we do it well, and clients tend to use us again. That’s what counts at the end of the day. Just because the number one analyst flies in for the pitch, it doesn’t mean that that firm will deliver on everything it promises. We try to deliver on what we promise.
