In May, FinanceAsia named the winners of its annual Country Awards for Achievement. Last month, winners were given ther awards at our annual awards dinner in Hong Kong. Today, we continue presenting the rationale for our decisions with a look at Singapore.
Best Bank, Best Investment Bank, Best ECM House, Best DCM House: DBS
DBS continued to grow earnings and improve interest margins amid volatile global market conditions.
Some of the bank’s 2016 financial highlights include a 6% increase in total income to S$11.5 billion ($8.3 billion) and a 10% increase in profit before allowances to a new high of S$6.5 billion. Net interest margin improved three percentage points to reach 1.8%, the highest in six years, while net interest income also gained 3% to a record S$7.3 billion.
DBS continued to strengthen its capital position ahead of the implementation of the new Basel III capital requirements in January 2019. Last year, the lender’s tier 1 common equity ratio strengthened nine percentage points to 13.3%, putting it comfortably above the minimum requirement of 9% and ranking it top among all major Singaporean banks in terms of capital buffer levels.
Among the other bright spots last year was DBS’s consumer banking and wealth management business, which reported a stunning 51% improvement in pre-tax profit compared with a year earlier. There was significant growth in customer deposits, mortgage loans, and credit cards that helped to contribute to the overall 26% increase in net interest income.
Meanwhile, the bank’s 15-year bancassurance partnership with Manulife started contributing positively to its performance, as non-interest income from investment and bancassurance product sales grew 18% on a year-on-year basis.
DBS also remained committed to digitalisation. As part of its digital push, the bank started leveraging off data analytics to personalise its services. Relationship managers can now use analytics-driven tools to get a comprehensive view of customer profiles and investment preferences, among other things.
In investment banking, DBS remains one of the few local banks that can compete with international banks with its strategic advisory business. The bank advised the founding families of Singaporean logistics company CWT on its $981 million sale to China’s HNA Group, proving itself a trusted advisor for local entrepreneurs.
DBS also advised the buying consortium behind the $1.3 billion take-private of ARA Asset Management, one of the largest managers of real estate investment trusts in Asia ex-Japan.
In equity capital markets, DBS was undoubtedly a driving factor behind the revival of Singapore’s IPO market after a tepid 2015. DBS took senior roles in each of the IPOs of Manulife US Reit, Frasers Logistics & Industrial Trust, and EC World Reit. The three IPOs raised nearly $1.4 billion combined and were described as market-defining deals that reignited investor interest in Singapore’s IPO market in mid-2016.
For debt capital markets, DBS maintained its dominant position in local currency bonds with a slightly expanded market share of 32.2%, one percentage point higher than the same period last year, according to Dealogic.
The bank also improved in international bond markets, with a 30% increase in the number of deals printed and a 9% increase in total fundraising volume. DBS ranked first among Southeast Asian banks in the Asia ex-Japan international bond league table with a 3.2% market share.
Best Broker: DBS Vickers
DBS’s strong investment banking franchise and the group’s extensive connection with local high net worth and retail investors continue to play a vital role in supporting DBS Vickers, which has not been immune from the competitive threat posed by fintech start-ups and independent research providers.
In recent years DBS Vickers has captured trading flows originated from brokers such as Standard Chartered, Barclays, and Jefferies, which have either pulled out entirely from cash equities or have downsized considerably. That said, Singapore’s recent take-private trend and subdued trading volumes have made it hard for DBS Vickers to justify its investment in broking and research services.
Similar to other major banks, DBS Vickers has been striving to keep its business sustainable at a time when investors have become more demanding. Tighter regulations and compliance requirements have also indirectly led to the rise of independent brokers and internet-based research houses, challenging the business model of existing brokers.
For DBS Vickers, the solution was to expand outside Singapore. The broker now provides securities brokerage and research support in five other markets besides Singapore. As of last year, Hong Kong overtook Singapore as its top revenue contributor.
DBS Vickers has also made a success of partnering with local brokerages, leveraging off local expertise while minimising the risk of entering a new market alone. Regional partnerships include First Metro Securities in the Philippines, KTB Investment & Securities in South Korea, and Alliance Investment Bank in Malaysia.
The Singaporean broker is committed to providing trading and research support despite the industry headwinds. During the award period, DBS Vickers’s total number of institutional sales, dealers and research analysts remained largely the same with a year earlier. It also added an economist to its five-strong team in response to calls for stronger macroeconomic support.
Best Private Bank: Bank of Singapore
Last year was perhaps one of the most important years in Bank of Singapore’s history as it purchased and consolidated Barclays’ wealth and investment management business in Singapore and Hong Kong.
The acquisition added some $13 billion in AUM for the subsidiary of OCBC Bank, contributing to a stunning 44% AUM improvement in 2016. But even without the acquisition, Bank of Singapore’s AUM under private banking still increased by 20%, an eye-catching rate when compared with some of the leading European private banks.
However, Bank of Singapore was picked as FinanceAsia’s Best Private Bank in Singapore not only because of its strong AUM growth but also because of its dedication to providing unbiased investment advice to its clients.
Most commercial banks run private banking and wealth management on integrated lines. This one-stop shop model allows greater connectivity between the two businesses and hence, more client referrals and cross-selling opportunities.
But Bank of Singapore, which is literally the private banking division of OCBC, has kept itself independent from the bank’s commercial business, which enables it to operate an open architecture that can offer clients objective and unbiased advice on investment. For instance, the bank operates as a separate legal entity and runs an in-house research team that is independent of OCBC.
Bank of Singapore also partners with asset managers in order to offer unbiased advice to its clients. The bank signed an agreement last year with BlackRock to offer a factor investing strategy-based discretionary portfolio mandate. It formed partnerships with Lion Global Investors too to raise capital for a fixed-income fund last year and with Invesco earlier this year for a $1.1 billion senior loan fund.
Best International Bank: Citi
Citi won FinanceAsia’s award for Best International Bank in Singapore because of its prudent approach in a market facing multiple headwinds, from economic weaknesses to rising non-performing loan (NPL) risks.
2016 was arguably one of the toughest years for commercial banks in Singapore. The Lion City experienced a slowing economy marked by declining private consumption and rising unemployment.
Some of the city’s major banks struggled with soaring non-performing loan risks arising from their large exposure to the oil and gas sector, which struggled with low oil prices and lacklustre global trade.
Some of them were also penalised for breaching compliance, due diligence and money laundering rules in the wake of the 1Malaysia Development Berhad (1MDB) sovereign wealth fund scandal.
But Citi steered clear of these troubles thanks to the careful and thorough way it took on new business and reviewed existing loans. So while the Singapore banking system’s overall NPL ratio rose by 60 percentage points, Citi’s eased by more than 10 percentage points.
Last year, Citi also beefed up its NPL coverage ratio by over 20 percentage points compared with a year earlier, signalling that it is well-prepared for any potential asset quality deterioration.
Despite all the headwinds, Citi managed to maintain top-line growth while total assets continue to grow by 4.5% to S$38.4 million ($27.9 million), according to S&P Global. Its tier 1 capital ratio of 22.48% – up 92 percentage points from a year earlier and strengthening for four consecutive years – remained one of the highest among Singaporean banks.
Best International Investment Bank: Citi
In investment banking, Citi’s franchise in Singapore demonstrated strong deal-making capabilities across equity and debt capital markets, as well as M&A advisory. In the latter category it stood out particularly strongly.
In 2016 Citi executed six M&A deals with a total value of more than $8 billion. All of them were cross-border transactions, showcasing Citi’s ability to match local corporations and investors with foreign companies.
The biggest and most important was undoubtedly the $5 billion sale of Singapore’s Neptune Orient Lines to French shipping giant CMA CGM, in which Citi was the sole sell-side advisor.
Citi was mandated to find a buyer for Singapore’s home grown shipping giant at a time of slowing global trade, falling commodity prices, and overcapacity. The bank was also tasked with selling a business that booked a 29% year-on-year decline in total revenues and had just returned to profit after four years of losses.
Through a robust auction process, Citi helped Neptune Orient shareholders exit their investment at a 49% premium to the undisturbed share price. The deal was struck at 16.1 times EV/EBITDA, representing a 165% premium to the average market value of publicly-traded long haul carriers, and was the largest ever consolidation in the global container sector.
Citi also led a $1.2 billion investment by GIC into US electricity transmission company ITC Holdings. The transaction, which saw GIC expand its exposure in the US by taking a 19.9% stake in the unlisted US firm, demonstrated Citi’s close relationship with the city’s sovereign wealth fund.
Other deals for which Citi provided advice include Suzhou Dongshan Precision’s $610 million acquisition of Multi-Fineline Electronix, a subsidiary of the Singaporean engineering firm United Engineers, and Singaporean asset manager Shanda Group’s $337 million investment in Legg Mason in April last year.
In ECM, Citi advised various real estate investment trusts on deals totalling over $1 billion during the period, including Fraser Logistics & Industrial Trust’s $684 million IPO and Suntec REIT’s $223 million convertible bond offering.
