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.
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