China Merchants Bank
The Chinese banking sector does not lend itself to the same transparent overview that its bretheren do around the region. However, China Merchants Bank (CMB) is one of the new generation of banks -- outside the big four -- and as a result does not suffer from the same legacies. In 2000, it made profit of Rmb16.7 billion up from Rmb12.7 billion in 1999, a 37% increase. CMB specializes in trade finance and is in a good position to benefit from increased trade following China's accession to the World Trade Organization. It has a healthy parent in Hong Kong-listed China Merchants Group. Perhaps one of the most impressive things about this bank is its modernity. Its IT is so sophisticated that a CEO of a leading Western commercial bank commented that CMB's technical resources were on a par with his own bank's. This is perhaps an overstatement, but its IT platforms are cutting edge by Chinese standards. Similarly, its commitment to serving its corporate customers is a long way ahead of its state-owned rivals.
Best Domestic Commercial Bank - Hong Kong
Not a tough choice, this one. With 75% of the adult population holding a bank account with HSBC, few would question its dominance in Hong Kong -- the city where it was founded in 1865. Moreover, it saw a massive increase in profits in 2000 (up 45% over 1999). On the treasury side, its massive Hong Kong dealing floor is the hub for the 19 dealing rooms in the region, while it has the biggest market share in the syndicated loan market; indeed it has held this position for the last five years, according to Capital Data Loanware, and was mandated for the biggest deals of the year such as Doncaster Group's $12 billion acquisition financing for Hongkong Telecom and its subsequent $4.7 billion refinancing. Nor was there any evidence of complacency in HSBC's submission, as it enclosed 11 client testimonials attesting to the confidence clients have in the bank.
Best Domestic Commercial Bank - India
Run by the dynamic Aditya Puri, HDFC Bank has long been the most favoured private sector bank in India. And while it is now facing more and more competition from New York-listed ICICI Bank, Puri and his team continue to deliver outstanding results. What has been impressive has been the manner in which he has integrated Times Bank, and managed to bring the two cultures together to make sure the enlarged entity is as profitable and technology-focused as ever. It says a lot about the confidence many have in HDFC Bank, that when the Times deal was done, it was done as a stock swap, a rare thing in India, where family owners normally prefer cash. In this case, they were satisfied that to take the equity in the belief that management could continue to grow the franchise. This was also the first merger in the Indian banking sector. And the results speak for themselves. In the year ended March 2001, HDFC Bank saw its revenues rise 60.4% and even more incredibly its net profit rose 75%. Its earnings per share were up 46%, while its return on equity was 24.53%. Thanks to its belief in technology, it has become a market leader in cash management products. And only 7.4% of its revenue stream comes from market sensitive revenues such as forex profits and profits from the sale of investments and debt securities.
Best Domestic Commercial Bank - Indonesia
Bank Mandiri was created at the end of 1999 through the merger of four state-owned banks, creating the largest bank in Indonesia. It now commands a market share of 25% in terms of assets, nearly twice the size of its nearest competitor. The bank has invested heavily in new risk management processes and corporate governance techniques so that its management is now the most trusted in the country. Its financials are the envy of the rest of the country's banks. With over $200 million of profit booked in 2000, the bank now boasts a capital adequacy ratio of over 32% and a return on equity approaching 40%. It has successfully restructured over 87% of its problem loans and is now focused on profitability, customer service and product innovation. Its forthcoming IPO should be well received and a good testament to the bank's stellar performance over the past year.
Best Domestic Commercial Bank - Japan
Mitsubishi Tokyo Financial Group
Choosing the best bank in Japan might well be described as a labour of Hercules. The choices, to put it mildly, are tough. With a market capitalization of $58.8 billion, there's no questioning Mitsubishi Tokyo's size and clout. And when we contacted well-connected, intelligent local analysts, they commented that Mitsubishi Tokyo was the only bank to openly disclose its NPLs and that (at least) it had paid back the public money it had received. Having said that, the bank did lose Y124.5 billion in the latest financial year, and while that was Y10 billion smaller than expectation, it is not something to get readily excited about. The only thing to say is that the whole banking industry in Japan has been in chaos, and continues to be. Mitsubishi Tokyo is, however forecasting net profits of Y240 billion for the coming year.
Best Domestic Commercial Bank - Korea
Kookmin Bank is the largest financial institution in Korea and has the distinction of being the most profitable. In 2000, the bank earned W720 billion in profits -- a seven-fold increase on its 1999 profits and the largest profits of any Korean bank ever. A new stringent approach to risk management and bad loan provisioning saw the bank's NPL rate drop to 6.98%. While all other Korean banks are busy moving away from corporate lending, Kookmin is developing its corporate relationships with 49% of its profits coming from corporate-related work. In the future, the bank will continue to cherry-pick the best corporate work and serve its corporate clients through a well-organized risk management system. It is focusing on corporate finance through project and structured finance work. It is also committed to bringing new cash management products to its corporate customers as well as having a market-leading derivatives operation. Unquestionably strong in the retail sector, Kookmin nevertheless remains committed to its corporate clients. Its forthcoming merger with H&CB will make the bank even stronger in the future.
Best Domestic Commercial Bank - Malaysia
For the third year in a row, Public Bank is the best commercial bank in Malaysia. And what a year it has been for the bank. Profits were a record M$1.26 billion, up 50% from the previous year, provisions for bad loans were down sharply and overall loan volume was up. Corporate banking contributed over 50% of the bank's profits. With the merger with Hock Hua Bank completed, the bank now has deep and enduring relationships with many of Malaysia's best run companies. In particular its expertise in cash management is allowing many Malaysian corporates to make their back offices much more efficient than they have been before. The bank is also rated a buy -- or equivalent -- by every analyst that covers the stock. The bank is one of those rare entities that manages to please its shareholders and its customers alike through its commitment to prudent management and customer satisfaction. Its submission to FinanceAsia for this award was again one of the best received from any domestic bank.
Best Domestic Commercial Bank - Philippines
Bank of the Philippine Islands
Bank of the Philippines Islands, or BPI, has dominated this award for many years now. In part, this is because it is admired for its conservative approach. For example, its loan loss reserve cover stands at 58% versus an industry standard of 42.7%. Its capital adequacy actually rose in 2000 to 13.3%, while a flight to quality saw its deposits rise by 9%. Its results from the first quarter of 2001 -- during the Estrada impeachment turmoil -- signify that it has managed its portfolio well even in times of crisis. Its first quarter results were 100% higher than in the previous period and its return on equity stood at 17%. The biggest bank in the Philippines, it has been focusing on the integration of Far East Bank & Trust Company. However, when Equitable PCI looked like it was up for sale at the beginning of the year, it was BPI (and its shareholder, Singapore's DBS), which looked to be the front-runners to buy it and create a megabank. In the end, Equitable PCI remained independent. None of this fazed analysts. BPI continues to be the favoured choice among the bank analysts that cover the Philippines.
Best Domestic Commercial Bank - Singapore
OCBC Bank has set the pace for a newly energized commercial banking sector in Singapore. It has embraced the new competitive environment and launched a series of services and initiatives that benefit its customers and its shareholders alike. The Business Banking Division of OCBC Bank offers a wide and varied range of products and services to its corporate clients. In many instances, it has taken first mover advantage with new products. For instance, the bank has embraced the whole concept of electronic banking through its eSolutions product. It is a market leader in trade finance and payments, and has a very strong capital markets team. The bank also focuses not just on generating new products but also focuses on deepening relationships with its existing customers. In this respect it earns wide plaudits for its repeat business levels and customer satisfaction. With its commitment to balance sheet efficiency and focus on Singapore, Malaysia and Greater China, it can serve its clients while boosting shareholder value.
Best Domestic Commercial Bank - Taiwan
Chinatrust Commercial Bank
Chinatrust is a jewel in a banking sector that many see as ripe for an overhaul. A 'buy' with brokers such as Morgan Stanley, Salomon Smith Barney and Merrill Lynch, qualified foreign institutional investors now own more than 20% of the bank. The bank has, in its own terms, succeeded in beating "recessional pressures" in the past year and has kept non-performing loans below 2% compared to 6.25% for the bank industry as a whole. Chinatrust's goal is to be the major bank for corporate customers, and given the export-driven nature of Taiwanese industry that means it has sought to boost its overseas presence too. It expects to acquire Chinatrust Bank USA this year, and if successful, that will mean the bank will have 53 overseas business offices to further aid corporate Taiwan in foreign markets. It has been spending more on technology than its peers (and has an alliance with President to put its ATMs into 7-Eleven stores), and with a flight to quality in place, it saw its deposits rise by 15.65% last year. It also led syndicated loans worth NT$58.4 billion, a figure that was up 101% over 1999. On the retail level it has issued three million credit cards, and is ranked as the 90th largest credit card issuer in the world. It will be interesting to see how Chinatrust leverages its domestic dominance when the new Bank Holding Company Law is passed and drives consolidation within the industry.
Best Domestic Commercial Bank - Thailand
Siam Commercial Bank
If you take the view that the Thai banking sector is by no means 'out of the woods', it is natural to look to the bank with the strongest statutory capital. This is Siam Commercial Bank, which at the end of March had a capital adequacy ratio of 15.5% of which 9.8% was tier one. This tier one capital consists entirely of pure equity, and no hybrid capital. The bank has managed to increase its net interest margin from 0.66% in the fourth quarter of 1998 to 2.37% in the first quarter of this year. The bank has also been able to reduce its personnel expense from Bt4.1 billion in 1998 to Bt3.8 billion in 2000. It has also increased its market share in areas of the economy with the highest asset quality. For example, it has a 24.7% market share in the mortgage market. This represents 18% of its total loan book. With this in mind, it has successfully reduced its non-performing loans from 35% at the peak to 20.5%, and set up an asset management group in 1999. It is a 'buy' with nine of the top 17 brokers and a 'hold' with a further four. Part of the reason for this is that the bank has worked hard to improve transparency and disclosure since its recapitalization in 1999, and also thanks to the fact that it has reported net profits for seven straight quarters.
We asked those banks that were short listed to submit the following information:
- Financials (most recent profits, non-performing loans, provisioning, return on equity, branch numbers; do the financials show particularly interesting leaps percentage wise in the past year, quarter).
- A breakdown of where the profits come from (by business areas)
- Is your bank a 'buy' with a large number of analysts?
- Has the bank made any acquisitions?
- What is the broad strategy of the bank (including Internet)?
- How did the bank fare through the crisis? Did it require government support?
- Has the bank been involved in any key transactions/loans that show its skill and commitment in its home country? Detail expertise in areas such as cash management, trade finance and loan syndication.
- Testimonials from highly regarded local CFOs in the relevant countries.
The decision taken by FinanceAsia was based on looking at all of the above information. Evidence of the bank being a 'buy' with a large number of analysts, a high ROE, persuasive testimonials and explanations of significant transactions for clients were given particular weight in making our decisions. In countries where the issue of bank capital is still an issue, the quality of the bank's financial position and BIS ratios were fore grounded.