FinanceAsia is pleased to announce the winners of the best domestic banks and financial institutions in our final announcement of our inaugural China Awards.
Three new categories and winners have been added to our previous winners, which can be found here.
This was a tight competition, with many worthy pitches and difficult decisions were discussed by the editorial team.
Congratulations to all our worthy winners of the inaugural China Awards, and we look forward to celebrating your success at our gala awards dinner on November 29 in Beijing.
To review all of the winners in our China Awards series please click here.
BEST DIGITAL BANK: MYBank
Alibaba prides itself on its transformation of the Chinese internet landscape. The Hangzhou-based internet giant is now using technology to serve the country’s unbanked population better; it is a move that it hopes will replicate its success in e-commerce and payment solutions.
The Best Digital Bank award goes to MYBank because of its adoption of advanced technology for small-and-medium enterprise funding, and the idea to provide credit at a cheaper rate to underserved small business owners and farmers.
According to Toward Universal Financial Inclusion in China, a joint report published by the People’s Bank of China and the World Bank in 2018, only 14% of China’s small businesses have access to loans or lines of credit, compared to 27% of smaller firms in G20 countries.
Without any physical branches or indeed an army of banking staff, MYBank has built its business through its online application. Founded in June 2015, it now serves more than 5.71 million customers. The bank is backed by Alibaba’s fintech unit Ant Financial, which is also its largest shareholder; indeed Ant Financial’s chief executive Eric Jing is its chairman. It holds a 30% stake in MYBank, while Fosun Industrial Technologies, the second-largest investor, owns 25%.
According to the bank’s 2017 annual report, its profitability and assets rose steadily in the twelve months to December last year, but MYBank didn’t disclose its net interest margin and non-performing ratio – the industry metrics for profitability and asset quality.
More to the point, a possible limiter of growth in the future is that the bank’s borrowing costs could be higher than other peers. It relies heavily on borrowed funds from other banks through the interbank market, which may eventually hurt profitability.
BEST M&A HOUSE: CICC
Advising on some of the largest and most complex Chinese mergers and acquisitions deals, China International Capital Corp (CICC) bags our Best M&A House award with a clear market share lead in both outbound and domestic deals.
The Beijing-based broker advised on the $20.5 billion acquisition of Singapore-listed Global Logistics Properties, the largest warehouse operator in Asia, and owns a $39 billion portfolio of property and logistics assets spread across China, Japan, Brazil and the US.
CICC advised the consortium – which comprised China Vanke, Hopu Investment Management, Hillhouse Capital, GLP chief executive Ming Mei, and Bank of China Group Investment – and provided strategic advisory to aid the purchase with the support of Singapore sovereign wealth fund GIC, the largest shareholder of GLP with a 37% stake.
In the domestic market, CICC advised on Alibaba financial affiliate Ant Financial’s $14 billion Series C funding. It was the largest private equity financing in the global technology industry and the largest equity financing deal since 2015.
The group was also a financial advisor to China Unicom's Rmb74.7 billion ($11.6 billion) share sale to a group of 14 investors in August 2017, the first company to respond to Beijing's call to diversify its shareholding structure.
THE SAFEST BANK: BANK OF CHINA
Prudence should be a quality that is always associated with banking. Sadly, that has not always been abided by. In the case of Bank of China (BoC), we are pleased to say it is.
The bank’s ability to forecast and provision for its bad loans should act a reminder to other financial institutions that good credit control is possible alongside decent profitability. Recent data shows the group’s outstanding non-performing loans (NPLs) stood at Rmb163.304 billion with its non-performing loan ratio 1.43%, notably lower than its major peer group.
Typically if the level of provisioning covers 100% or more of the actual bad debt expense the bank writes off, then you can say it is relatively accurate and prudent in its bad debt provisioning. As at June 30 this year, BoC’s loan impairment losses to non-performing loans stood at a very healthy 164.79%.
The bank has made decent strides to strengthen credit asset quality management further and promoted ongoing improvement in its credit structure. From a compliance standpoint, BoC is also planning to enhance its well-regarded risk control system, which already monitors millions of transactions to prevent money laundering and other fraudulent activity.
“[BoC] advanced the construction of its risk management information system, consolidated its risk database, improved its risk data governance and proactively promoted the construction of an intelligent risk management system," the bank said in its 2018 interim report.
BEST BANK: ICBC
Industrial and Commercial Bank of China (ICBC), the world’s largest lender by market cap, managed to maintain its profit margins and a healthy balance sheet, despite Beijing’s ongoing crackdown on shadow banking and a steady pickup in corporate defaults.
The Beijing-based lender posted a net profit of Rmb286.05 billion ($44.7 billion) last fiscal year, up 2.9% on 2016. The full-year results beat analysts’ estimates due to its ability to control costs while eking out additional yield.
Thanks to higher inter-bank funding costs and a declining M2 growth rate, the bank’s net interest margin – the difference between the cost of funds and yields on loans – rose by 18 basis points quarter-to-quarter to 2.37% in the fourth quarter, according to its 2017 annual results published in late March this year.
With a strong retail franchise across China, the bank has leveraged its strong deposit base and allocated more of its capital into higher-yield assets. Net interest income, which accounted for 77.3% of its operating income, rose 10.6% year on year to Rmb522 billion.
Also important is an apparent improvement in asset quality. Its non-performing loan (NPL) ratio dropped by 7bp year-on-year to 1.55% at the end of December last year, which bank president Gu Shu attributed in April to the country’s improving economic conditions. ICBC’s NPL ratio was lower than the industry average of 1.74%, according to data compiled by the China Regulatory Banking Commission.
That said, there are signs of a rebound in soured assets. The amount of “special mention loans” — those in the pipeline that could potentially become NPLs – steadily increased over the course of last year, adding 5bp to 3.95% of total loans in the second half. With the government still looking to squeeze debt out of the Chinese economy and a liquidity crunch evolving, asset quality will remain in focus.
BEST INVESTMENT BANK: CICC
China International Capital Corporation, the country’s first joint-venture investment bank, sealed its position as FinanceAsia’s top Chinese investment bank with another strong all-round performance during our review period.
The Beijing-based lender’s ability to help Chinese companies acquire overseas assets and raise capital in both equity and debt markets are important elements that set it apart from its major rivals in the hotly contested mainland market.
The past year saw CICC pass another milestone in China-related mergers and acquisitions, advising on $27 billion worth of outbound deals and $28 worth of domestic deals, according to data compiled by Dealogic. It ranked second in the country’s outbound M&A league table with a market share of 4.04%, just a tad below Goldman Sachs’s 4.84%.
In domestic M&A, CICC maintained its pole position and advised 8 out of the 20 largest Chinese domestic transactions in 2017, with a market share of 15.9%.
Landmark deals include the $20.5 billion acquisition of Singapore-listed Global Logistic Properties, the largest operator of warehouses in Asia, by a group of Chinese investors. CICC advised this consortium, which comprised Hopu Investment Management, Hillhouse Capital Group, Vanke Group and Bank of China Group Investment, providing strategic advisory services to aid the purchase.
In domestic M&A, CICC was a financial advisor to China Unicom’s Rmb74.7 billion ($11.6 billion) share sale to a group of 14 investors in August last year, the first company to respond to Beijing’s call to diversify its shareholding structure.
Beijing-based CICC was traditionally known for winning lucrative IPO mandates from state-owned enterprises. But in recent years the bank has also expanded into other areas such as fixed income and wealth management.
According to data compiled by Wind, CICC ranked fifth in the domestic debt capital markets league table, with Rmb2.5 billion-worth of bonds in 325 deals. The number of its wealth management clients rose by 28.9% year on year to 38,644 at the end of 2017, with its assets under management rose by 19.1% to Rmb736.886 billion.
BEST ECM HOUSE, BEST DCM HOUSE, BEST BROKER: CITIC SECURITIES
As a top underwriter of both equity and debt deals in China, Citic Securities was the clear choice for both these awards. And a widely-recognized research team that covers more than 1,000 mainland companies made it the go-to bank for both institutional and retail investors.
According to data compiled by Wind, the Beijing-based broker defended its pole position in China’s equity capital markets league table, helping to raise Rmb220 billion ($34.4 billion) across 87 deals. It participated in three out of the 5 largest IPO, including being the sole bookrunner in Huaxi Securities’ $775 million listing in January, the largest during our review period.
At the same time, Citic has stepped up its game in convertible bonds and asset-backed transactions. This demonstrates that it is keen to expand into other structural products, including a Rmb30 billion convertible bond for China Everbright Bank, the second-largest of its kind in China, plus asset-backed securities issued separately by the Chinese units of German carmaker BMW and Japanese carmaker Toyota.
When it came to helping Chinese corporate borrowers tap the domestic bond market, Citic also kept ahead of the chasing pack by helping to raise $55 billion across 367 transactions during the award period. With an overall market share of 8.34%, it acted as a joint bookrunner, for example, on Bank of Beijing’s debut green bond, which raised Rmb15 billion in five tranches, and on Hua Xia Bank’s Rmb30 billion deal, the largest high-yield bond issue sold during our review period.
In 2017, its brokerage business ranked second in Chinese equity trading, with a market share of 5.69%. Its total trading volume of stock and funds during the year was Rmb13.05 trillion as it grew its client base by 15% to 7.7 million.
BEST PRIVATE BANK: CHINA MERCHANTS BANK
CMB Private Banking is China’s largest private bank by client assets, with more than 60 private banking centres all over the country and around 1,000 service providers. Founded in 2007, it served 67,000 onshore private banking clients with total assets under management of around $302 trillion by the end of last year, up from 58,300 clients and $226 trillion as of the end of 2016. To better serve its clients, the number of its relationship managers expanded by 38 over the same period.
Its diversified product offering and ability to secure returns from volatile markets for the high net worth individuals it services – which it defines as clients with assets of more than Rmb10 million – is another reason for winning the award.
The bank’s pre-tax profit reached $733 million last year in part thanks to strong inflows, which rose 33.6% year on year to $76 billion.
Beyond China it has a global footprint that includes Hong Kong, Singapore, New York and Sydney, as the wealthy Chinese clients invest heavily in residential property in developed markets, and some set-aside money for the boarding fees of their offspring.
BEST BELT AND ROAD BANK: CITIC SECURITIES
Getting your proverbial ear very close to China’s top regulators is a decent strategy for making corporate friends. This is no more so the case than when getting to grips with what government perks are on offer for corporates looking to tap Belt and Road capital market opportunities.
Citic Securities pitches itself as “the bridge” between the regulators and the market for the latest updates on Chinese markets policy. As the government accelerates the opening up of the domestic bond market to support its Belt and Road Initiative, Citic Securities has been at the heart of efforts to coordinate banner debt issuances.
One perfect example is its role as lead underwriter in helping get one of the first Belt and Road bonds off the ground – a $500 million deal issued by Hengyi Petrochemical. The money raised will be used to fund construction projects in Brunei.
Because of its official Belt and Road status, Citic Securities was able to claim that the China AA+ rated petrochemicals company got a lower issuing rate than its peer group, based on historical transactions. It also became the first publicly issued Belt and Road corporate bond on the Shenzhen Stock Exchange.
Citic Securities was also the lead underwriter for at least two other similar Belt and Road capital market transactions – a Rmb3 billion ($467 million) bond deal from TBEA, a Chinese power transformer manufacturer, and a Rmb2 billion bond issued by the China National Building Material Company.
BEST INTERNATIONAL BANK: HSBC
HSBC once again gets all the accolades for maintaining its leading position in Chinese commercial and investment banking.
While it continues to dominate the offshore bond market, the bank is also now getting into the onshore panda bond market, which comprises onshore renminbi-denominated debt sold by foreign issuers. In 2017, HSBC acted as a joint underwriter on British Columbia’s Rmb1 billion three-year panda bond and as a joint bookrunner on Hungary’s debut panda bond.
While small, the panda bond market is part of Beijing’s long-term commitment to open up its domestic capital market and internationalise its currency. As David Liao, president and chief executive officer of HSBC China, told FinanceAsia: “There is a huge interest in raising money in the onshore panda market and the potential is plentiful.”
In mergers and acquisitions, HSBC continued to leverage its local knowledge and global network to provide strategic advisory to its Chinese clients looking to expand beyond their home country. It acted as sole financial advisor to Zhejiang Geely on its acquisition of stakes in Proton and Lotus from DRB-Hicom of Malaysia.
The transactions were of strategic value to Geely, China’s second-largest privately-owned carmaker, after its high-profile purchase of Swedish carmaker Volvo in 2010. HSBC also acted as sole financial advisor to China Eastern Airlines on its acquisition of a 10% stake in Air France – the first investment by one of China’s three biggest state-owned airlines in a Western carrier.
The bank’s business in China is also continuing to grow in 2017. HSBC China’s operating income rose by 3.3% to Rmb10.74 billion, while its total assets expanded by 11% to Rmb467.9 billion, the bank said in its annual report.
Established in March 2007, HSBC China operates 34 branches and 144 sub-branches in the country, providing full-fledged services to its institutional and retail customers on the Chinese mainland.
BEST INTERNATIONAL INVESTMENT BANK: GOLDMAN SACHS
Goldman Sachs is our winner in this category this year because of its consistently solid performance across a range of business lines. At the time of growing trade tension between US and China, the bank’s diversified portfolio of deals and products added to its strength.
With other bulge-bracket firms also bringing their marquee transactions to the table, competition for the award was intense. But it was Goldman Sachs’s performance in the domestic and international equity capital markets that helped set it apart from the rest.
Goldman was the sole placement agent on KKR’s $299 million sale of Shanghai-listed shares in Qingdao Haier in November 2017, showcasing its ability to bring international practices to China’s capital market. To be sure, the selldown of Qingdao Haier shares — a block trade that enabled a private equity firm to exit its investment despite China’s more stringent regulations around selldowns — was not the first of its kind in China.
But then it was Goldman Sachs that first launched the practice in 2015, when it was the sole bookrunner on Hang Seng Bank’s $2 billion selldown in Shanghai of Industrial Bank shares, which was followed three months later by the sale of another $2.7 billion worth of shares in the bank. Since the Haier block trade last year, Goldman Sachs has executed four additional similar blocks for KKR to slowly trim its position in the appliance maker.
Goldman Sachs also leveraged its strong knowledge of the US market to bring a slew of Chinese technology companies to New York. During our review period, the bank worked on seven of these US listings, including Baidu-backed video streaming firm iQiYi’s $2.4 billion float in March, the largest initial public offering during our award period, and Alibaba-backed logistic firm BEST’s $517 million share sale in September.
On the M&A front, Goldman Sachs acted as a lead financial advisor to Blackstone on its €12.3 billion ($14.5 billion) sale of Logicor, the largest logistic real estate platform in Europe, to China Investment Corporation, the country’s sovereign wealth fund. Goldman Sachs was also a lead joint financial adviser for the $20.5 billion takeover of Global Logistic Properties last year, the only bank advising Blackstone across all strategic options for the business, including a potential IPO.
In debt capital markets it worked on Alibaba’s $7 billion multi-tranche debt offering in November as a joint bookrunner. It was also a joint bookrunner on US dollar debt sales undertaken by State Grid and China Petrochemical, also known as Sinopec.