Citigroup
The Citigroup machine rumbles on. The US bank continues to be strong across the board, and continues to recognise the importance of a strong local presence. Its acquisition of Koram Bank in Korea has thrown off cash, and proved a model for its future expansion plans.
Indeed, its recent success in leading a consortium to buy a controlling stake in Guangdong Development Bank for $3.1 billion is another potentially transformational move. The fact that GDB has 500 branches underlines the serious local presence this bank will provide. And the fact Citi will be the first foreign bank to gain control of a domestic bank speaks volumes, and says a lot about how the Chinese authorities view the æstamp of approvalÆ of having Citi in charge.
What also impresses is that CitiÆs strength is equally balanced across North Asia, Southeast Asia and the Indian subcontinent. The firm is also well balanced across the full array of commercial banking and investment banking products û whether they be derivatives, loans, G3 bonds, convertibles or cash management. Year-to-date it has raised $42.1 billion of capital for Asian clients.
Citi has a presence in over 17 countries and employs over 10,000 in its corporate and investment banking businesses. Within this its sales and trading team of 1,200 provide liquidity and solutions to one of the region's broadest array of clients.
Citi has continued to innovate throughout 2006. To take just one example: its advisory work on the M&A and loan side for KKR when it was acquiring FlextronicsÆ Software Development Systems. Indeed, the innovative structure ought to lay the groundwork for future LBOs from India. Critical to the structure was the repatriation of cashflows from India via share repurchases, with the result that dividend taxes were minimised. Little wonder this deal was named our loan of the year.
The ability to push the envelope and develop innovative solutions has always been a hallmark of the Citi culture. And with AsiaÆs strong growth the firm is positioned perfectly to see its profitability continue to surge in the region.
Best Investment Bank/ Best Principal Finance House
Goldman Sachs
On Wednesday GoldmanÆs bankers in Asia were told their bonuses. We can only imagine the staff at Italian Motors showroom were deluged. Indeed, the importance of the profit contribution from Asia continues to surge. This much was reflected in the recent round of partner promotions, which disproportionately favoured the region: Asia got 22% of the new partners, even though its share of global headcount is only 14%.
Put simply, this has been GoldmanÆs most profitable year in Asia, and there will be some who will be wondering whether it can be bettered. The Goldman æmodelÆ û now being widely emulated û has seen the firm harvest huge dollar gains from investments, while also retaining market leading positions in key client areas such as M&A and equity capital markets. Indeed, in the brave new world of Asian finance, the ability of Goldman to co-invest with its clients has become a distinct advantage.
Surprisingly, there was much less sniping about Goldman this year than in previous years. Perhaps thatÆs because one of the criticsÆ central arguments was recently neutered. In the past, there have been those who have said Goldman finds it hard to work with private equity firms due to its own investment appetite (via its PIA and SSG divisions). However, with Goldman advising Carlyle on its recent bid for TaiwanÆs ASE that argument lost some of its potency û especially since that deal represents one of the most innovative, landmark events of the year (albeit not one we can recognise with an award, since it is not closed).
During this yearÆs round of pitch meetings, one rival banker described Goldman as a ôFerrariö. The mystique of the Goldman franchise remains one of its chief intangible assets. One internal indicator we have of this is our own website. When we recently checked the 10 most read stories of the year, GoldmanÆs name appeared in four of the headlines.
All of the above must make it sound like this yearÆs decision was easy. It was not. We received exceptionally strong pitches in this category from Deutsche Bank, Merrill Lynch and UBS. Indeed, when we did peer reviews with senior bankers, it was clear that the award this year came down to Goldman versus UBS. The Swiss bank has made great strides in the past 18 months û improving its M&A presence dramatically and growing its China business intelligently. UBS has clearly confirmed its positions as a top tier, bulge bracket Asian firm. Credit for this success is probably due in large part to Rob Rankin, its Asian investment banking boss, who has imported much best practice from the Australian operation.
However, after doing our peer review, and doing our own analysis, we came out in favour of Goldman, which sits above UBS in the league tables for both equity and in our blended M&A table (where we gave half the credit to completed deals, and half to announced). If you add together GoldmanÆs volume in ECM, DCM and M&A it comes to $43.21 billion versus $35.44 billion for UBS.
Also aiding GoldmanÆs cause was its principal investing, which we have taken into account in judging this category for the first time. We took this decision because the landscape of Asian investment banking has shifted; and principal investing has become a vital part of the scene. In order to be profitable in Asia today, firms need to marry principal investment with advisory û much as 19th century merchant banks did.
GoldmanÆs Asian operations successfully do this. The US firm has made 18 principal investments this year, eight of which are publicly disclosed. Some are æveryÆ public, such as the $4.5 billion of profit it has (currently) made on its investment in ICBC. Then there is the pioneering investment in China food company, Shineway, where Goldman is looking to buy 100% via a consortium in which it holds 51%; or the acquisition of a stake in IndiaÆs National Commodity and Derivatives Exchange.
Married to GoldmanÆs æsmartÆ investing are a host of major investment banking transactions. It led the landmark IPO of Bank of China, and the biggest equity deal out of Korea for Lotte Shopping. It continued launching IPOs right into December for Kingboard Laminates (which in a rare situation for the Asian ECM markets was done with sole books), and for China Communications Services. In M&A it has worked on three defences, including advising KT&G on Carl IcahnÆs raid. It has also demonstrated repeat client business, such as advising Hutch on the stake sold by Hutchison Ports to PSA. It has worked on domestic Chinese M&A (Gome/ China Paradise); and worked with financial sponsors, such as in the afore-mentioned deal in which Carlyle is seeking to acquire ASE. On the debt side it was a lead manager on our high yield bond of the year for C&M in Korea.
And thanks to its JV in China, GS Gaohua, Goldman is extremely well positioned there, holding key domestic equity mandates in China û such as for Ping An.
Year after year, Goldman has been the firm to beat, and going into 2007 that fact has not changed.
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