We felt this particularly impacted our decision about best investment bank, and by proxy best bank (which incorporates the criteria for both best investment bank and best commercial bank). No bulge bracket investment bank continues to exist in the same shape as it began the year. While we realise that our award is recognition for a year gone by, we believe that winning this award, by definition, suggests the firm we name is well-positioned for the coming year. And weÆre not convinced that even the investment banks themselves know with any degree of certainty what 2009 will bring and hence who is best positioned to weather it.
Impaired balance sheets and clients expressing concern that a bank may go under due to news from the West also weighed into our decision. We felt it would be odd to label a bank ôBest Investment Bankö if it has required bailout capital or indeed has made a firm-wide decision to prioritise other parts of the bank. That view knocked out of the running a sizable number of potential candidates and in the end, we opted not to award any bank the title of ôBest Investment Bankö this year.
For entirely different reasons, namely the sharp decline in deal activity, we have refrained from awarding a top name in four other categories as we feel there were simply too few transactions from which to accurately judge a best house. These categories are "Best High-Yield Bond Houseö, "Best Financial Sponsors Houseö, ôBest Leveraged Finance Houseö and "Best Small-cap House".
We look forward to this not being a problem next year.
BEST BANK
Deutsche Bank
Deutsche Bank stands out this year both for the strength of its balance sheet and its continued commitment to investing in its Asia business. There has been no talk of a pull-back and no withdrawal from products or services. Indeed, Deutsche Bank has been able to win market share from its competitors across businesses. Capital injections committed for Asia-Pacific branches in 2008 totals more than Ç1.1 billion. ($1.4 billion)
But itÆs not just growth that matters; itÆs the quality and sustainability of the growth. The bank was a contender in the public market side of investment banking û itÆs a perennial player in the debt markets but was also active this year in equities, where it topped the league table for IPO issuance, and arranged and took part in some key M&A deals. But what really differentiates Deutsche is its ability to structure solutions for its clients away from the public markets - a business which is on a high growth trajectory in Asia as corporates seek to minimise the risk on their balance sheets. Such activities form the core of DeutscheÆs business model and account for the vast majority of its revenues in the region.
The non-public space revenues are not easy to assess on a relative basis but other essential parts of the bankÆs business, which have also been growing, are visible.
Deutsche BankÆs retail banking arm is smaller than its rivals, but it is investing in strategically important countries such as China and India. India is viewed as a key market and the bank is committing both financial and human capital to ensure it is taking advantage of the opportunities the sub-continent offers. In the fourth quarter this year Deutsche opened its 13th retail branch in India, in Pune, and now has more than 600,000 customers in the country, which it has built up in just three years, and more than 500,000 credit card customers. In China, it launched a locally incorporated entity, Deutsche Bank (China) Co, in January¼ and its Hua Xia/Deutsche Bank credit card joint venture, which was set up in the middle of 2007, has by now issued 520,000 cards. Meanwhile, its strategic 10% investment in Habubank positions it well in Vietnam.
Not surprisingly, Deutsche Bank grew its private banking business this year as high-net-worth individuals found the strength of the franchise reassuring and chose the German bank in the hope that it would manage their money as effectively as it has been managing its own balance sheet. Deutsche BankÆs strategy of targeting onshore business through its private banking operations in nine Asian countries is also yielding dividends as many of the regionÆs newly rich chose to bank onshore.
Similarly, Deutsche BankÆs global transaction banking division (which is made up of trade finance, trust and securities services) grew significantly last year. Just as Deutsche made counter-cyclical investments into the region following the Asian financial crisis - when it played a key role in recapitalising many local economies and opened rates trading desks in a number of countries - the bank is once again standing behind local markets, local governments and corporations in 2008 during extreme market dislocation.
BEST COMMERCIAL BANK
Citi
Citi dominates this category, as we recognise year-in and year-out, and indeed highlight in July every year, when we award Citi the lionÆs share of accolades for best foreign commercial bank on a country-by-country basis in the region. This year, we gave the firm the top prize for this category in Australia, Hong Kong, India, Indonesia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
Despite the trying economic times, the bank is expanding across the region. Notable organic growth initiatives in 2008 included being the first foreign bank to launch debit cards in China. It also started offering banking services for expatriates in India and launched commercial cards in Taiwan. The integration of Bank of Overseas Chinese in Taiwan during the past year has allowed it to add 1 million new clients, open 32 branches and add more than 300,000 new card accounts.
In the region as a whole, Citi has developed more than 1,500 new client relationships in 2008, across its corporate and commercial bank.
Some of its biggest gains have been on the transaction banking front. It is now processing more than $2.5 trillion worth of transactions every month through its global transaction services (GTS) platform in Asia. It boasts an additional $325 million in new cash management mandates, which is a 37% increase year-on-year. No wonder that GTS revenues in Asia were up 29% this year at the time Citi pitched for this award.
CitiÆs Asia commercial banking franchise is still the gold standard for many firms. This probably explains why Citibankers are poached regularly by firms seeking to build their business in the region.
BEST PRIVATE BANK
Julius Baer
Our ôhypothetical clientö situation this year was one of our most realistic ever. Our Indonesian businesswoman was partly domiciled in Singapore and partly in Indonesia, much like her business which had both a Singapore-listed component and Indonesian unlisted companies, and which exported primarily to the US. The subprime crisis had made her seek out a new private bank to supplement her existing private banking relationship amid some concern about the financial health of that bank.
The client intended to transfer $10 million to the new private bank based on both how well the new bank gauged her investment considerations as well as the confidence the new private bank inspired in her about the safety of her assets. She was seeking some annual income out of the assets, as she was foreseeing a slowdown in her business income, but also wanted assurance that her capital would be protected, yet productive.
Our contenders suggested portfolios which were mostly defensive. And given the bloodbath across asset classes this past year we can understand the rationale. But weÆd still note that the level of defensiveness in some of the portfolios was not, to us, in tandem with the client profile provided.
The Deutsche Bank solution, while heavily weighted towards bonds, was very creative. WeÆd like to commend the German bank for constructing a bond portfolio which offered us the highest annual return.
As usual, UBS was impressive. From the moment we were escorted upstairs from the lobby at Two IFC to the actual presentation, the firmÆs consummate expertise was evident. And the chemistry between the members of the UBS team and our team was outstanding.
But despite the stiff competition, this year the award clearly belongs to Julius Baer. Their suggested portfolio allocation was biased towards bonds, yet provided enough exposure to other asset classes to allow for capital appreciation. The annual cash flow requirement was met through a combination of coupons, distributions and dividends. The selection of asset managers was stringent and rigorous back testing of the portfolio provided us with additional comfort. The justification for each asset class was compelling and convincing. Other noteworthy features included a currency overlay to deal with the clientÆs mismatch of having income in US dollars, while spending primarily in Singapore dollars and Indonesian rupiah.
The Julius Baer team correctly gauged that the client was primarily seeking superior investment advice and that was the overriding focus of the pitch.
UBS loses this award after having won it for seven consecutive years. We congratulate Julius Baer for its first time win and anticipate an even more competitive arena next year.
Please go to the next page for more deal awards...
BEST M&A HOUSE
Morgan Stanley
Choosing the best M&A house was one of our most difficult decisions this year. After the capital markets dried up, most firms enhanced their focus on M&A and there was no dearth of activity. Indeed, every investment bank had its share of announced and completed deals, making for stiff competition.
Unlike in 2007 there was no clear defining trend which dominated Asia-wide M&A. For example, even though China outbound M&A had a record year, some investment banks did well without having a significant role in China outbound.
Complicating the league table rankings û after taking out fairness opinions which we donÆt recognise as pure M&A advisory û were things like the China telecom restructuring and the advisory on bailout investments by sovereign wealth funds into banks. Even those who were involved in some of these deals concede that they did not showcase the true abilities of a firmÆs M&A franchise.
Risks û especially related to the financing û were also large this year and we could not assume that an announced deal would close even if it was at an advanced stage.
After our analysis we found that two names consistently stood out for the depth and breadth of the business they closed this year: Credit Suisse and Morgan Stanley. And by a whisker we feel that Morgan Stanley had the lead.
Morgan Stanley, together with Credit Suisse, advised Temasek on the sale of its three power generating companies, our Singapore Deal of the Year. The US investment bank also advised private equity firm KKR on the $575 million takeover of Unisteel, another transaction we recognised in our deal awards.
In Korea it worked on the sale of a controlling interest in Korean brokerage and asset management firm CJ Investment & Securities to Hyundai Mipo Dockyard for $683 million. In Indonesia it played a role on two bank deals. Geographical spread was one of the noteworthy points about Morgan StanleyÆs M&A franchise this year, although we believe the firm still has some way to go in winning M&A business in India.
We were also impressed with how often other firms mentioned Morgan Stanley as the competitor they saw most often in pitch situations and the one against which they benchmarked their own M&A franchise.
If 2008 was an M&A-driven year, we expect 2009 to be more of the same. Even during the leanest periods this year, M&A deals of various sizes and shapes have continued to be announced across a number of advisers. We recognise Morgan StanleyÆs achievement this year, knowing full well that it will be a difficult crown to hold on to.
Special mention: Credit Suisse
BEST EQUITIES HOUSE
UBS
With the unprecedented pickup in volatility and subsequent collapse in share prices leading to a surge in investor risk aversion, this year has been less about spotting the key trends than about finding pockets of demand and ways to access it. Banks have approached these challenges in different ways, which has made comparisons between houses more difficult than usual. Meanwhile, the 70% slump in both overall ECM issuance and IPO volumes means the league table rankings are less telling.
UBS is our top choice because we feel that it has managed to navigate this environment with the right balance of solid execution, innovation and timing to deliver a good outcome for its clients, whether corporates looking to go public for the first time, listed companies seeking additional capital, or shareholders looking to sell. Despite the difficult markets, the bank also managed to do business across the region, executing deals in nine different countries, which shows that it is truly an Asian franchise.
The firm helped arrange five of the 15 largest IPOs this year and seven in total. These include China-based rice cracker producer Want Want, which raised $1.04 billion from a listing in Hong Kong six months after being taken private from the Singapore Exchange and restructured. It was also one of eight bookrunners on Reliance PowerÆs $3 billion IPO, the second largest listing in Asia ex-Japan this year.
True, UBS does not have a perfect record in terms of bringing all its IPOs across the finish line û the standout firm in that respect is Morgan Stanley, which has pulled no deals this year û but in a market as difficult and fast-changing as the one we have seen this year we feel you have to sometimes be willing to put a deal out there if the client needs the money and you feel there is a reasonable chance that it could work. Should the market turn rapidly half-way through and leave no option but to call off the deal, then so be it.
Where UBS has really made a mark this year, though, is with follow-ons and block trades where it has demonstrated an ability to come up with unconventional, yet effective solutions to meet its clientsÆ objectives - using its balance sheet where needed to ensure certainty of execution. Two examples are the $300 million follow-on for Beijing Capital International Airport, and Anglo AmericanÆs $708 million exit from China Shenhua Energy.
UBSÆs focus on this business and the flexibility it has shown in grabbing brief market windows to do deals also puts it in a good position for the first half of 2009 as such transactions are expected to continue to dominate the ECM deal flow.
BEST EQUITY-LINKED HOUSE
Citi
This proved to be one of our toughest categories this year thanks to the modest activity. The top two houses û Citi and J.P. Morgan û are virtually neck to neck on volumes, with five deals each to their name and a similar geographic spread. J.P. Morgan was the sole bookrunner on the yearÆs largest deal, the $920 million convertible for CapitaLand, and remained active late in the year with a couple of CB tenders to help issuers buy bank bonds that have slumped in the secondary market.
Looking at actual issuance, however, we feel CitiÆs execution has been more solid, with all its deals fully distributed and all of them trading up after pricing without leaving too much on the table. Citi is also the bank that best epitomises one of the key trends this year û the issuance of CBs by real estate investment trusts (Reits). Indeed, Citi pioneered this trend back in 2006 when it helped Hong Kong-listed Champion Reit raise $98 million through the first CB issue by an Asian Reit. It followed that up in February this year with a $194 million CB for Suntec Reit (together with Deutsche Bank), which is noteworthy for achieving quite aggressive terms despite being offered without either credit protection or stock borrow
Citi also completed a $600 million CB for Champion which formed part of a $1.9 billion financing package to cover the acquisition of Langham Place. ChampionÆs sponsor, Great Eagle Holdings, bought half the deal, but the potential of this happening had been flagged and was anticipated in the market. The CB was secured on the Langham Place property, allowing investors to assume a tighter credit spread than for its comparables and helped lower ChampionÆs financing costs.
Having dominated the CB issuance out of India in the past couple of years, Citi this year successfully shifted its focus to other markets when the credit spread widening and restrictive regulations killed off any hope of further Indian CBs issuance in the near-term. Citi managed to get one Indian deal out the door in early January, for software provider Geodesic, but since then has complemented its Hong Kong and Singapore issuance with deals out of Malaysia and Korea. PoscoÆs Yen58.8 billion ($483 million) exchangeable into SK Telecom, with Citi as one of four bookrunners, re-opened the Asian CB market in August and attracted good demand thanks to the provision of both a credit bid and stock borrow. This helped it avoid the fate of a US CB also in the telecom sector that had to be pulled on the same day.
BEST MID-CAP EQUITY HOUSE
Morgan Stanley
Our mid-cap award has traditionally been given to the bank that has been the most active and successful in bringing new medium-sized companies to market as a way of helping them to raise capital for their next growth phase. But the sharp decline in IPO volumes overall this year means other types of businesses, such as follow-ons and convertible bonds for companies that are already listed, played a greater role in our overall view of what defines the franchise most capable of servicing clients in this market segment (issue sizes between $100 million and $300 million, or a market capitalisation below $1 billion, according to our definition).
In a thin market, Morgan Stanley outdid the competition on both accounts. It successfully completed four IPOs (versus three each for Deutsche Bank and UBS) out of a total of 20, which allowed its clients to raise about $930 million, according to Dealogic data.
It is worth noting that the work needed to ensure a successful outcome of a new listing this year was probably several times that of what was required in the past few years when deals were routinely hundreds of times oversubscribed. The strength of Morgan StanleyÆs franchise is underlined by the fact that its IPOs are spread across three markets (China/Hong Kong, Thailand and India), that it acted as sole bookrunner on two of them and that it took all the deals it launched across the finish line û an accomplishment in a year when numerous IPOs were getting pulled before pricing. It was the only bank to successfully complete a Hong Kong listing for a pure Chinese property developer this year with Central China Real EstateÆs $176 million IPO and acted as the sole international bookrunner for Esso (Thailand)Æs $294 million IPO. It also teamed up with Credit Suisse on the $269 million listing of China Shanshui Cement in Hong Kong, which we recognised as the best mid-cap deal this year.
At the same time, Morgan Stanley has carved out a niche for itself when it comes to arranging convertible bond issues for mid-caps û providing an alternative route for these companies to raise additional capital as share prices were under pressure. It arranged four such deals this year, which all included some form of structuring to facilitate hedging and increase the demand.
Please go to the next page for more deal awards... BEST INTERNATIONAL BOND HOUSE, BEST LOCAL CURRENCY BOND HOUSE
HSBC
In an arid year for Asian bond issuance, both in G3 currencies and regional domestic markets, any bank scouring for opportunities needed an edge û or indeed, several. A strong balance sheet, well-established links to key decision makers at sovereign and corporate borrowers, an experienced debt capital markets team and an extensive distribution capability were essential qualities. HSBC was fortunate to possess all of these. Its reward was first place in the league tables for both international and local currency bonds.
Of course, bare numbers donÆt tell the whole story. But, the move from sixth place in the G3 bookrunner rankings in 2007 to the leader among peers this year is a striking testament of HSBCÆs pre-eminent position in 2008. Not only was HSBC dominant in terms of volume, but it was a lead manager in almost twice as many individual deals as its closest rival, while also participating as a bookrunner in four out of the six transactions worth $1 billion or more.
The bank led a $1 billion five-year issue for Korea Development Bank; a Ç750 million bond with the same tenor for another Korean borrower, Export-Import Bank of Korea; and a $1 billion 10-year debut issue for Hong Kong & China Gas, which was the biggest investment grade corporate bond from Asia since 2003. And although it didnÆt lead the widely-praised multi-tranche deal for Indonesia in June, it did successfully prepare investors by launching a $2 billion 10- and 30-year dual-tranche issue for the sovereign at the beginning of the year. Other significant deals included a $225 million upper-tier 2 issue for Wing Hang Bank and a $400 million 10-year bond for Swire Pacific, which included a $100 million re-opening a week after launch after continued investor interest.
HSBC has a conservative capital structure and had the foresight to raise new capital both in 2007 and early this year; it was also quick to make sub-prime related write-downs. Hence, it has benefited from a stable credit rating and a relatively low credit default swap spread, which has given counterparties the confidence to transact the interest rate or currency swaps that borrowers often require. Its balance sheet has also supported its underwriting capacity.
Such strength helped HSBC win G3 mandates, but it provided even greater support for its local currency franchise. In particular, the bank was able to deliver all-in financing packages for cross-border borrowers with bundled swaps, sometimes at levels inside international funding costs. HSBC led 86 cross-border deals in local currencies worth $3.1 billion, which was more than three times the number and almost twice the value of its closest rivals.
Again, the bankÆs effectiveness is reflected in the numbers. It ranked first in the Asian domestic currency league tables, top in the individual markets of Hong Kong, Indonesia, Malaysia, Philippines and Singapore, and out-ranked its nearest competitor in six of the regionÆs major markets. HSBCÆs diverse spread of business and its wide geographical penetration defies any criticism that it relies too heavily on its natural Hong Kong home-base. In fact, it led local currency deals for issuers from 21 different nations, with a range of structures that included cross-border, bank capital, corporate agency, Islamic, loan repackaging, synthetic, securitisation and offshore renminbi transactions.
BORROWER OF THE YEAR
Reliance Industries
In one of the most difficult years in recent times for raising debt financing, Indian petrochemicals firm Reliance Industries (RIL) tied up $2.55 billion at the height of the crisis between July and October. RIL needed the funds to finance its oil and gas projects and sought a diversified funding base while achieving long tenor and the lowest rates.
RIL raised the money through a combination of export credit agency-backed financing, syndicated loans and a private placement, realising the importance in a difficult year of tapping all available pools of liquidity.
In August, RIL launched a syndicated loan facility of $1 billion with 17 mandated lead arrangers. The demand from participating banks was high so RIL upsized this facility to $1.2 billion. To increase liquidity RIL gave participants the choice to lend in US dollars, euros, Japanese yen or Singapore dollars. The amount was finally shared between 32 banks. RIL achieved an average tenor of over five years and a margin of Libor plus 130bp, translating to an all-in-cost of Libor plus 155bp.
The ECA-backed financing tranche accessed by RIL raised $1.25 billion. The company tapped the Norwegian Guarantee Institute for Export Credits (GIEK), the Italian state-owned export credit insurance company (SACE), and Export-Import Bank of the United States. GIEK backed funding from Nordea Bank Norge, one of the major banks in Norway, to the tune of $350 million and from German government-owned development bank, Kfw, to the tune of $200 million. SACE backed funding of $100 million each from Spanish bank BBVA, and GermanyÆs DZ Bank and BTMU. We have already recognised the $400 million US Exim facility structured by J.P. Morgan as our leading trade finance solution this year.
A private placement of Ñ11 billion ($118 million) with Japan's American Family Life Assurance Company (Aflac) rounded off RILÆs debt-raising this year. The Aflac deal features a bullet repayment at the end of 12 years and a fixed coupon of 3.63%. It also has one of the longest-dated tenors ever achieved by an Indian company in yen.
Reliance Industries wins this award for the second time in three years. We awarded the company in 2006 on the back of a $1.5 billion syndicated loan project financing, a euroyen trade and a $300 million private placement. The fact that RIL has pulled off another borrowing feat in a challenging credit environment suggests that the company truly is one of AsiaÆs leading borrowers.
BEST FINANCIAL LAW FIRM
Linklaters
The difficult conditions of the past year actually meant that the field of contenders for our law firm award was broader than usual as the slim pickings left less room for the bigger firms to gain their usual advantage. Nevertheless, Linklaters once again impressed with the scope and quality of its deals.
The debt capital markets practices at Cleary Gottlieb Steen & Hamilton and Davis Polk & Wardwell, which between them advised on almost all of AsiaÆs cross-border bonds in 2008, certainly deserve mention as stand-out teams. And LinklatersÆ UK-headquartered rivals also provided strong competition in certain areas, but our award places the most emphasis on the firms that advise on the biggest and best transactions in our core coverage areas, which are primarily equity and bond offerings, mergers, acquisitions and private equity.
On the securities front, Linklaters had a strong year thanks to its formidable track record in the equity-linked market, where the firm has an unassailable share and is the adviser of choice for every bank on the street. In 2008, the firm advised the underwriters on the $550 million Islamic exchangeable from Khazanah; Merrill Lynch on the $500 million Country Garden convertible, which was paired with a synthetic share buy-back; and J.P. Morgan on CapitaLandÆs record $920 million deal, the largest convertible ever from a Southeast Asian corporate and the biggest Asian equity-linked deal of the year.
Linklaters currently tops the Asia M&A league tables thanks to its advice on the yearÆs stand-out deals. It advised China Netcom on its $23.8 billion merger with China Unicom and represented Lehman Brothers and KPMG, the provisional liquidators, on the sale of the failed US investment bankÆs Asian franchise to Nomura, a deal that underscores the value of LinklatersÆ one-stop shop approach û on the other side, Nomura had to appoint three separate law firms to get the same product and geographic coverage as Linklaters provided.
In private equity, Linklaters advised Arcapita Bank on a joint venture with TH Venture and their subsequent $750 million acquisition of Honiton Energy. It also advised Morgan StanleyÆs private equity arm on its $835 million acquisition, as part of a consortium, in Norske Skog Korea.
Ominously for its competitors, LinklatersÆ mandate on the Lehman liquidation suggests that the firm is well-placed to capitalise on the shift from a bull market to the distressed environment that is likely to dominate in 2009.
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