BEST BANK
Citi
The Best Bank award recognises excellence across investment banking, consumer and commercial banking.
This year, volatile emerging markets stress tested Citi’s Asian business. Analysts scrutinised its franchise in the region but found no major ramp up in net credit losses, demonstrating that Citi’s growth in Asia over recent years has been built on a solid foundation.
The business looks steady and well funded: income from continuing operations before taxes rose 10% to $4.57 billion in the first nine months of 2013 from a year earlier. Citi’s deposits in Asia were $250.8 billion and it had more than $157.3 billion in consumer and corporate loans.
Citi also avoided significant breaches of the plethora of new regulations coming in across Asia and it should be lauded for its relative transparency into its Asian business during such a turbulent time.
A big theme across banks this year in Asia has been improvements in efficiency as regulation continued to weigh on profitability and interest rates languished at cyclical lows. Citi’s operating expenses in Asia dropped 5% year-over-year, partly helped by greater use of common technology within the bank. Also Citi generated over $1 billion in annual revenues in eight countries.
Citi was an early mover in cross-selling products between commercial and investment banking, a trend that has been vigorously pursued by nearly all major banks this year. Citi’s commercial bank operates in 12 countries in Asia and serves around 27,800 clients.
In investment banking Citi was again in the running for the Best M&A House after advising on landmark transactions such as Cnooc’s acquisition of Nexen and the leveraged buyout of Focus Media. Citi also raised about $117 billion for Asian clients during the year.
This was not the year to be aggressive on deals — and Citi and a source says it declined close to $3 billion worth of deals across the region that in the end lost money.
BEST COMMERCIAL BANK
HSBC
HSBC’s deep relationship with corporate clients across Asia helped it win our award for commercial banking again this year. Key considerations were its $120 billion-and-expanding Asian loan book as well as its leading trade finance position.
Greater collaboration between commercial banking and its investment banking division has also helped the bank solve problems for its growing Asian clients, particularly among mid-sized companies. Commercial banking-related high-yield bond deals have risen to 39 in the year to date from 23 in 2012. It brought 13 debut issuers to the bond market in 2013.
Cross-selling is also increasing within its huge flow products business. In one example, HSBC recently conducted its first coal-hedging trade for a commercial banking client.
Collaboration between the two divisions has created over $700 million of incremental gross revenues since 2010. It has also pushed HSBC up the investment banking league tables this year, particularly in IPOs and M&A, and helped maintain its leading position in DCM. This made it a contender for our investment banking award this year for the first time.
HSBC is also making strides in fast-growing renminbi markets. It maintained its lead in dim sum offerings and helped mainland Chinese companies raise funds offshore by collateralising deposits that were trapped onshore.
BEST INVESTMENT BANK
UBS
During another year of declining revenues for the industry in Asia UBS ably picked its battles, focusing on high-fee paying products and creating innovative solutions for clients by collaborating across divisions.
The Swiss bank made use of its broad franchise across Asia to advise clients across the region, particularly in Southeast Asia early in the year, and then capturing its fair share of rising deal activity out of China during the second half.
As a result, UBS led the field in terms of core investment banking revenues across Asia in the year to date.
By division, its equity capital markets franchise won our award for best in class. UBS worked on signature deals such as the largest-ever private sector IPO in Thailand for Bangkok SkyTrain, the largest IPO in Indonesia since 1996 for Matahari Department Store and the biggest follow-on placement in the Philippines for LT Group.
In M&A, UBS orchestrated some landmark multi-billion-dollar transactions and was higher when ranked by fees than the volume of its deals suggests.
It was sole financial adviser to CP Group for its complex $9.4 billion acquisition of a 15.57% stake in Ping An Insurance, by far the largest cross-border deal in Asia in the past five years. The deal demonstrated UBS’s ability to mobilise different parts of its franchise to provide advice and financing.
UBS advised on our winner of the Best Private Equity Deal, China Mengniu Dairy’s acquisition of Yashili, which was an important step in the consolidation of China’s dairy sector. The deal featured a bespoke transaction structure by offering private SPV shares as part of the consideration. It also advised on the largest-ever leveraged buyout of a US-listed Chinese company, enabling the $3.8 billion privatisation of Focus Media.
In debt capital markets, UBS was ranked second behind HSBC in terms of revenues. Rivals commented that the Swiss bank continues to surprise — even as it scales back the balance sheet allocated to fixed-income, it continues to be able to support clients.
The Swiss bank hit the ground running at the start of the year providing products to investors hungry for yield. It was certainly given a leg-up by close collaboration with its private bank, the world’s largest, to distribute high-yield bonds. UBS is also the winner of our private banking award.
It advised clients on innovative deals such as the first Basel III-compliant capital raising for UOB. Its strong performance in scoring mandates on high-yield bonds, where fees are generally higher, also helped it win this award.
With little commercial lending to help it win deals UBS still held its own among its peers.
BEST PRIVATE BANK
UBS
An ethnic Chinese Indonesian entrepreneur owns outright 2% of his coal-mining and infrastructure listco, SuraFortune, whose market cap has reached $2.7 billion. But a cascade of shell vehicles and cross-shareholdings gives him effective control — including over the shares held by his wife and three children.
But troubled offtakes have left him with unwanted inventory while this summer’s tapering feats have damaged the stock. An SPV in Singapore has accumulated debts of $500 million that will roll over as interest rates rise.
The tycoon’s personal fortunes remain considerable, however — perhaps up to $300 million in family assets — and he’s keen to match his buddies in owning a bank. But his eldest son, who is the private bank’s client, is eager to make his own way in TMT.
The children want to professionalise how the family’s wealth is managed and brokered an introduction between his father and several leading private banks in Hong Kong and Singapore. The bank’s mission is to convert the patriarch into a substantial client.
From this imaginary case study emerged many creative ideas, not all of which were easy to compare. UBS set the tone by introducing “the patriarch” to senior bankers from its Jakarta and Singapore offices.
The bank’s strengths included its capital-markets solution to SuraFortune’s debts, involving an exchangeable bond and an eventual re-IPO. Not every competitor had this combination on offer. UBS was also best at exploring alternatives and explaining why they were less helpful. And while most banks suggested partners for offtaking coal, UBS was the most specific in its ideas.
Some banks were better at explaining how to restructure the ownership of SuraFortune and the patriarch’s other assets. But UBS provided the best up-to-date view on how changing regulation in Indonesia would impact any trust structure.
Other banks had flashier ideas around the group’s future but UBS brought a specific deal to the table, steering the patriarch away from buying an Indonesian bank in favour of mobile phone banking start-ups.
This solution met both the patriarch’s sentiments and gave his tech-focused son an entry to the business. In short the bank demonstrated local as well as global expertise, creative proposals but sensible and specific suggestions. It did not have a monopoly on great ideas, but delivered these where they counted the most, within a well-rounded offering.
BEST M&A HOUSE
Morgan Stanley
This was a difficult decision because Asia had another patchy year, with only a couple of noteworthy cross-border China offshore acquisitions and a muted deal flow out of the mining sector. Offshore acquisitions are also taking a longer time to close and, as a result, many of the closed deals in 2013 were announced in 2012.
Citi was also a strong contender, having advised Cnooc on its jumbo Nexen acquisition. However, Citi’s roster of announced deals wasn’t as strong as its rivals, and while Goldman Sachs topped the completed league tables, its volumes were skewed towards its North American client base.
In the end, it was Morgan Stanley that stood out for having a strong roster of deals, across FIG and corporate M&A, and having worked on trades that earned good fees.
Notably, while others were having a lacklustre year in China as state-owned companies shied away from undertaking major acquisitions, Morgan Stanley seized opportunities in the private sector, acting as sole adviser to Shuanghui International on its $7.1 billion acquisition of US-listed Smithfield Foods.
The deal is the largest Chinese acquisition of a US company and Morgan Stanley single-handedly helped its client navigate the regulatory waters, grapple with the complexities of buying a listed company and beat other bidders to the punch.
The bank was also involved in huge deals announced last year and completed this year, notably TCC Assets, in its $11.1 billion public takeover of Singapore conglomerate Fraser & Neave. As one of three banks advising TCC — the other two were UOB and DBS — Morgan Stanley was the only bank that wasn’t a lender, an indication that it was hired for its advisory capabilities, not its balance sheet.
The bank has also been successful in helping parties to exit with good returns. On the FIG side, the bank was sole adviser to General Electric on the sale of its stake in Bank of Ayudhya to BTMU, and it similarly helped Aviva extract value from its Malaysian life insurance joint venture.
The firm also has strong China credentials, which is reflected in its pipeline of deals that have yet to close. It advised China Resources Enterprise on its joint venture with Tesco, China Southern Power Grid on its acquisition of a stake in Castle Peak Power, and China Construction Bank on its acquisition of BicBanco.
Its deal roster wasn’t without some mishaps: Morgan Stanley advised Apollo Tyres on its acquisition of Cooper Tire; a deal that by December was showing signs of falling apart. However, on the whole the bank stands out for its strong deal roster and having earned a decent chunk of fees as a sole adviser on a number of them.
BEST EQUITY HOUSE
UBS
If it was about deal volumes only, then Goldman Sachs would win this award hands down. It has been at the top of the overall ECM league table for Asia ex-Japan pretty much all year and it is finishing with a huge gap to UBS in the second spot. But much of that gap is due to Goldman’s sole mandates on three key deals, which together resulted in $5.2 billion of league table credit.
Once you look beyond the headline numbers the comparison between the two banks is significantly closer with both of them having worked on the same number of the top-10 ECM deals and IPOs. They are also both citing strong revenue growth.
But we feel that UBS has demonstrated more versatility when it comes to the type of deals it has been involved in and the ability to make the most of the shift in investor appetite during the year.
In the first half when investors were largely focused on Southeast Asia, it brought high-profile deals in Indonesia, Thailand and the Philippines, including the re-IPO of Matahari Department Store, which we view to be the Best Equity Deal this year, and BTS GIF’s infrastructure fund IPO, which won our Best IPO award. And in the final four months when China returned to the forefront, it was all over that trend as well with leading roles on several of the biggest new listings, including China Cinda Asset Management and China Huishan Dairy, while also finding time for smaller IPOs and block trades.
The Swiss bank has also continued to perfect the business model that it pioneered last year and which essentially focuses on being proactive and entrepreneurial when it comes to meeting the needs of its clients. That may result in a traditional IPO or block trade, or a private market transaction that can involve a structured derivatives element. And UBS is not afraid to think beyond previously tested game plans to come up with the best solution.
The on-going development of its off-market share-based financing business is helping to make up for the decline in the public market fee pool, and this year the quite significant fees from the private market transactions have pushed UBS’s overall ECM revenues in Asia to a new record.
This doesn’t mean that it is any less active in the public markets, however. In fact, once again UBS worked on more ECM deals and more block trades than any other bank, which helped it to stay on top of the shifts in investor demand. And that in turn helped it win and originate more overnight trades.
Notable blocks and follow-ons include Zurich Insurance Group’s $943 million exit from New China Life Insurance, a $325 million ADR for AU Optronics, a $526 million H-share private placement for Sinopharm Group and China Merchants Bank’s $5.5 billion A- and H-share rights issue.
BEST BOND HOUSE
HSBC
HSBC’s dominance in lending and debt in Asia made it the go-to bank for most companies across the region, which helped it win this award. The bank’s competitors highlighted its regular use of balance sheet to secure deals and suggest that it has an easier job than most in winning bond mandates.
While it is true that HSBC leverages its lending relationships more often than orders, every financial institution has its own competitive advantage — be it a commercial, private banking or investment banking franchise.
The breadth, versatility and execution capabilities of HSBC’s bond platform in Asia ex-Japan were at levels that no other house came close to matching in 2013. It was the number one in terms of Dealogic league tables for Asian G3 bonds, leading a record 118 new issues over 2013 and a market share of 11.3% until end-November. This is a sweeping margin over its two closest competitors Deutsche Bank and Citi, which had a 9.1% and 8.8% market share respectively.
There is no doubt 2013 has been a very successful year for HSBC in debt capital markets, with the bank reaching new heights in terms of capital financing volumes, geographical and sector diversity, as well as innovations in its capital financing products.
In the week of January 21, HSBC successfully brought a record-breaking eight Asian US dollar bond issues to market. Later this year, it delivered sole-led dollar taps for Korean Development Bank and Kexim in August, and market-reopening dollar issues for Sri Lanka’s National Savings Bank and China-based multinational aluminium company Chalco around September and October.
Other prominent examples with unprecedented offering structures include United Overseas Bank’s S$850 million ($680 million) Basel III-compliant tier-1 perpetual in July, which was the first ever out of Asia, as well as Hutchison Whampoa’s €1.75 billion ($2.3 billion) perpetual in May, which was the first ever euro corporate hybrid from Asia.
In China, it is a pioneer in the state-owned enterprise and quasi-sovereign space, which was the key driver of growth in the Asia ex-Japan G3 bond markets this year, accounting for 21% of total issuance.
HSBC also had a standout year in local currency bonds. According to Dealogic, it held a 7.9% market share for local currency bonds for Asia ex-Japan. It was at the forefront of the most high-profile inflation-linked sovereign transactions, including Hong Kong’s and Thailand’s. Also, it was the sole bookrunner for the offshore renminbi-denominated issuance from the World Bank, Total and the Province of British Columbia.
BORROWER OF THE YEAR
Reliance Industries
Reliance Industries surprised us with its diversified funding approach — both in DCM, syndicated loans and export credit agency (ECA) backed financing. Its efforts were certainly not half-hearted and it obtained $7 billion worth of financing this year for capital expenditure purposes.
Considered India’s largest private sector enterprise, Reliance Industries has strong balance sheet liquidity and low leverage. It is rated BBB+ by Standard & Poor’s and Baa2 by Moody’s, which is two notches and one notch respectively above the Indian sovereign rating. This puts the company in a good position to seek financing at low costs.
Reliance hit the market in January with Asia’s first and largest fixed-for-life perpetual bond, which meant that it offered no step-up in coupon or rate reset. The $800 million deal, which attracted an order book of $3 billion, was achieved at a time when the market backdrop towards perpetuals had been soured for a few weeks. The fact that investors were willing to buy it was a vote of confidence for Reliance Industries.
In the ECA space, it concluded $3 billion worth of financings from four ECAs this year. In fact, US Exim, Korea Trade Insurance Corp, France-based Coface and UK-based Export Credit Guarantee Department provided Reliance with a better-than-sovereign rating, the first time they had done so for any company.
As a result, the Indian company was able to obtain capital commitments for tenors as long as 14 years and at extremely low cost of funding — on average 3.5% for a fixed-rate ECA from the US government compared to 5%-5.5% for a 10-year dollar-denominated bond.
And it didn’t stop there. This year, Reliance obtained $3.16 billion worth of syndicated and bilateral loans from financial institutions, despite India’s challenging climate. The company was able to secure loans of maturities between five and 8.75 years, which is unusual based on the fact that loan tenors tend to average around three years. In October, Reliance secured the largest syndicated loan by an Indian company in 36 months — a $1.75 billion dual-tranche facility. The deal saw very strong demand during syndication with 30 international banks participating.
With all this in mind, this is why we believe that Reliance Industries deserves its position as Asia’s Best Borrower this year.
BEST FINANCIAL LAW FIRM
Davis Polk & Wardwell
Wall Street law firms haven’t always got it right in Asia but Davis Polk has long been the best of the bunch — and the leading challenger to the dominance of the incumbent magic-circle firms. It still has far fewer lawyers in Asia than rivals such as Linklaters but the quality of the transactions it works on is consistently high.
The foundation of its success has been a pre-eminent US securities practice that dominates on benchmark-sized debt capital market deals for the biggest borrowers in the region, including transactions this year for Bangkok Bank, China Vanke, Cnooc, Kexim and Sinopec, among others. It is even more dominant on heavily negotiated high-yield deals for borrowers such as Fosun, Indika Energy and Shimao Property.
During the past few years, it has also established capability in Hong Kong and English law, which has allowed it to win market share on Hong Kong IPOs, such as Galaxy Securities and Nexteer.
Davis Polk has further broadened its practice this year with the integration of a market-leading litigation and enforcement team that it poached from Clifford Chance in late 2012.
This new capability has won the attention of clients, including a group of leading investment banks in Hong Kong that hired the firm to advise them collectively on the city’s IPO sponsor regime consultation.
Although it lacks the scale to compete with bigger firms on volume M&A work, it is a significant competitor on the biggest deals, such as Cnooc’s $18 billion acquisition of Nexen, and complex leveraged deals such as the $3.7 billion Focus Media take-private deal.
This award has been a long time coming but it is fully deserved. Davis Polk has built a successful transactional practice in Asia that consistently competes at the top end of the market. It is not a volume shop, to be sure, but it is the go-to firm for complex work throughout the region.
