Investment banking

Q&A: AMTD takes HK investment banking onto international stage

Calvin Choi of AMTD Group spoke to FinanceAsia of his pride in leading the first Hong Kong-based financial service firm to list in New York.

AMTD International, a Hong Kong-based financial services firm, saw its share price pop up over 20% on its debut in New York on Monday after raising $174 million from its initial public offering.

Unfazed by the rising trade tensions between China and the US, AMTD International made a strong debut, closing at $10.09 against its IPO price of $8.38.

"Today is an important milestone in AMTD's growth as we continue to leverage our deep relationships, industry knowledge and experience to connect Asian clients to global capital markets," AMTD Group's chief executive officer, Calvin Choi, said in a statement.

AMTD International is a full-service financial platform with three business lines, namely investment banking, asset management and strategic investment. It is part of AMTD Group, which operates insurance brokerage and virtual banking in Hong Kong.

The firm trades under the ticker HKIB, a common acronym for Hong Kong investment banking.

In an exclusive interview with FinanceAsia, Choi spoke about the uniqueness of being a financial institution majority-owned and managed by local Hong Kong entrepreneurs and professionals. He also talked about his vision to help the firm navigate the highly competitive investment banking market in Hong Kong.

The following extracts of our conversation with Choi have been edited for brevity and clarity. Some of the questions have been reordered to improve the flow.

Q Congratulations on the listing of AMTD International in New York. How was the IPO process?

A We have had a great start right on day 1. I am happy because we are the first Hong Kong-based financial services firm to list in the US.

Q Many people in Hong Kong know AMTD as an insurance broker. What was on top of your mind when you decided to turn this company into an investment banking-focused firm?

A If you look at the investment banking landscape in Hong Kong, we have international firms and we have Chinese firms, but we don’t have a local firm. I always see the need to build a Hong Kong-based investment bank to serve local entrepreneurs here.

Q But investment banking is a highly competitive business and even some of the large banks have been shutting down their businesses here. What is AMTD’s competitive edge?

A I would say our relationship with local entrepreneurs and families put us in a good position to do business with them. As you can see, most of our people here are local “Hongkies” and speak the local language. We understand local culture and how things work within China and Greater China. We know the best way to help our clients fulfil their corporate goals.

Q How does AMTD differ from the bulge-bracket investment banks?

A Nowadays many investment bankers are losing their personal touch and work pretty much machine-like.

When we approach a client, we do not look to serve them on just one particular transaction. Instead, we always take that as an opportunity to discuss further cooperation or partnership.

One example is our relationship with Guangzhou Rural Commercial Bank. After we helped them with their listing in Hong Kong, we pitched them with their internationalistion plan. We became their sole credit rating advisor and with that rating, we helped them issue different fixed income products in the market, including their HK$10 billion preferred share sale in June.

The old days of investment banking are gone. Structural complexity, hierarchy, internal politics and different strategies across different regions are some of the factors holding global bulge-bracket investment banks back.

Stacey Cunningham, the first female president of the New York Stock Exchange, regards us as a disruptor in investment banking. Our entrepreneurial mindset definitely helps us to navigate the ever-changing business environment.

Q What is AMTD’s focus in equity underwriting?

A One area we identified quite early on is Chinese regional banks. Apart from Guangzhou Rural Commercial Bank, we have advised on the IPOs of Zhongyuan Bank, Bank of Qingdao and Jinshang Bank, among others.

Chinese regional banks have been typically underserved by bulge-bracket banks. These banks are stable, have a large asset base, but a lot of them are yet to set up any operation offshore. There are a lot of opportunities for us.

We have also built a strong presence in the TMT sector, helping the so-called new economy companies to list offshore. We were an underwriter of Meitu’s IPO in 2016, and also for Meituan-Dianping and Xiaomi last year.

Q In recent times there were a slew of high-profile defaults among Chinese regional banks. Is there a risk of AMTD’s business being overly skewed towards this sector?

A No, not really. First of all, we are not an investor in most of these banks. We are only a business partner. Even if any of them goes bankrupt, it won’t affect us from a financial standpoint.

The number of our banking partners will continue to grow as we bring more regional banks to the Hong Kong market. Even if one of them fails, we still have plenty to continue working with us.

Most importantly, most of our banking partners are regional leaders. We are not picking the small bank in a country. I don’t think any of these banks will go into trouble.

Q Tell us about the asset management business.

A Our asset management business is highly correlated to our investment banking operations.

A lot of our investment banking clients are sitting on hundreds of millions of US dollars after going public in Hong Kong. Naturally, we help them with their asset allocation and advise on their overall investment so as to generate more value for them.

We are now the largest asset manager in Asia with the largest assets under management for Chinese regional financial institutions. Even for non-investment banking clients we also pitched for their extra cash on hand and basically help them with their offshore treasury management.

This could not have been done without our holistic approach to every client. As I pointed out earlier, we do not look to serve our client on just one particular transaction.

Q And what about strategic investment?

A We are the third-largest shareholder in Bank of Qingdao, the largest lender in China’s Shandong province. We are among a list of high-profile investors including Haier Group, Intesa Sanpaolo (Italy’s largest bank) and Rothschild.

It all started just like any other investment banking client. We were a joint global coordinator in Bank of Qingdao’s Hong Kong IPO. We helped them with bond issues, asset management, and eventually we became an investor.

We see it as a very good investment and a good way to put our cash into work. After all, it pays good dividends. In fact, the annual dividend we get from Bank of Qingdao already covers the full operational cost for AMTD International.

Q In partnership with Xiaomi, AMTD is one of the eight entities granted a virtual banking licence by the Hong Kong Monetary Authority. What is the thinking behind the new business?  

A When people think about virtual banking they will see it as a retail-focused business. In fact that is not true. It is a comprehensive banking license and so, literally, you can go retail or institutional, or both.

It all comes down to who has the capability and creativity to bring a complete solution to your clients.

As for AMTD, we definitely have the capacity to do both. We have a strong retail network with our insurance brokerage business, as well as a large institutional network with our investment banking operations.

The new virtual bank will be operated with a separate management team. Our vice chairman Frederick Lau has been appointed CEO of the new entity.

We are in the process of setting up the platform and making the relevant hiring of staff, with an aim to start operations by the end of the year.

¬ Haymarket Media Limited. All rights reserved.

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