Best Cash Management Bank
2003 saw HSBC wage an intensive war to topple Citibank from its position as top cash management bank in the region. It was a war fought in part by spending heavily on technology and creating 30 new senior job positions across the region - a strategy that produced 1,200 new account wins during the year.
HSBC now boasts a total regional customer base of just over 310,000 with a growing number of these clients residing outside Hong Kong. (A cash customer is classified as holding an active operating account and processing payables and receivables through the bank). HSBC has long been categorized as a bank for small to medium enterprises, but more recently Lawrence Webb and his team have made significant inroads into the top-tier sector.
SMEs still represent the bulk of its customer base, but 57% of revenues come from top-tier and middle-market customers. The bank currently provides pan-regional cash services to P&O Nedlloyd, Tesco, and WPP.
Top-tier companies, like these, are awake to the benefits of banking with an institution that banks their suppliers and buyers. But while HSBC has performed well in beauty parades run by multinationals, the current economic climate has rewarded banks that can win incremental business from existing clients and corner niche segments like the Indian domestic corporate market.
This is where growth is evident, and this is where HSBC excels. The bank has done some pioneering work on the establishment of shared services centres and has moved quickly into new markets like China where it already serves cash customers through nine of its own branches and a strong correspondent bank network.
The coming year will prove challenging for Webb who must deliver on his growth strategy and catch up to his peers who are well on the way to integrating their cash and trade businesses.
Best Trade Finance Bank
In the meticulous business of trade finance, volume speaks volumes, and nothing matches HSBC's impressive scoreboard. In the year to September 2003, the bank turned over $87.4 billion in trade transactions, an increase of 14.7% on the first three quarters of 2002. In the same period, HSBC picked up just under 8,000 new accounts from Asian-based importers and exporters.
The majority of these customers fall into the SME category, but HSBC has made considerable headway into the top-tier market too. HSBC is one of the largest issuers of letters of credit in the region, while also negotiating just over 427,000 LCs totalling $36.7 billion in the first nine months of 2003.
And more than 70% of the HSBC LCs issued are initiated online via Hexagon or the bank's business internet banking platform.
Today's buzzword in trade finance is supply chain management which essentially means providing banking services across the trade chain - from the multinational buyer to the hometown supplier. HSBC's footprint in the SME market and its willingness to extend credit to this sector gives the bank a distinct advantage in capturing supply chain business.
HSBC is also ready to finance open account trading in Asia, offering factoring services in Hong Kong, Taiwan, India, Japan, Singapore and China. Up to September, the bank's factoring business totalled $1.79 billion and was set to beat full year 2002 activity. Customers like HSBC for its ability to deal with complex trades, its competitive pricing, its electronic delivery and, most of all, its dependability.
"During the war on Iraq, our export LCs from the Middle East were shunned by other banks but HSBC was there to offer financing support that enabled us to continue our operations as usual," says Low Seng Chong, general manager of finance for In-Comix Food Industries in Malaysia.
Unseating an incumbent for Best Custodian is difficult when the crown-wearer not only continues to oversee the biggest book of assets in the region, but has recorded a growth in third party assets of 60% during the year. State Street picked up a significant amount of custody assets over the 12 months period, made up of incremental business and 35 new client relationships.
Its best performing markets were Korea and Taiwan. Much of State Street's growth in 2003 can be attributed to its purchase of Deutsche Bank's global custody book in November 2002.
While the sceptics questioned whether State Street would be successful in transitioning this business, these doubters have been proved wrong in many instances. One of these inherited clients was the Hong Kong Baptist University and its endowment fund.
"The transition from Deutsche Bank's platform to State Street's platform was carried out smoothly," says Alex Shuen, the University's director of finance. "After the transition we continued to be serviced by the same relationship manager and client support team that has been servicing us since January 1997."
State Street is praised by old and new clients alike for its web-based reporting tools. These tools help clients to achieve higher straight through processing rates on trades.
In the first quarter of next year the custodian plans to introduce a new online information delivery system for its Japanese clients. The system is designed for non-SWIFT users who want real-time transmission of trade instructions in a secure and authenticated environment.
The bank is making the same technology moves in China where in August 2003 it signed an agreement with Zhejiang University Innovation Technology Company to develop IT solutions for China's financial services industry. State Street's vanilla custody business is supported by a string of other award-winning products including securities lending, fund administration and transition management.
HSBC's portfolio of sub-custody assets just keeps getting bigger and, as a key factor in FinanceAsia's decision to name the bank Best Sub-Custodian again, service hasn't been compromised by size. In 2003, the bank grew its asset book by 20% to over $300 billion in Asian-sourced securities.
About 80% of this is third party business and since January HSBC has won about 200 new institutional mandates across its regional network. Many of these mandates were multi-market deals covering more than a few countries.
They also included HSBC being appointed the QFII custodian bank for three large broker/dealer and global custodian clients in China. In fact, like other divisions of this Hong Kong-based bank, HSBC's sub-custody group is using its influence in China to lobby the government and shape the guidelines for the country's institutional funds management market.
It successfully lobbied for securities settlement to be moved from T+0 to T+1 and has been working with the CSRC and CSDCC to promote an agreed error-rectification procedure for QFIIs. China, and Japan, have been the bank's largest sources of asset growth in the past 12 months.
Clients praise HSBC for its market insight and its strong regulatory relationships around the region. They also like the service they get from the bank's staff. "HSBC has a deserved reputation for reliability and consistency which has been demonstrated over many years of servicing," testifies one client.
"The proactiveness of HSBC's staff and their understanding of our business ensure all exceptions are handled promptly and diligently."
HSBC has more than 900 staff across its Asian network, with 690 of these people based in the bank's top 10 local markets.
Best Securities Lending House
Northern Trust consolidated its position as the number one securities lender in Asia this year with a 9% increase in daily outstanding loans and a continued commitment to developing the market. In this competitive industry, JPMorgan is often touted as offering the best supply of securities, but, says one happy borrower: "For supply and customer service, Northern Trust wins hands down. They have one of the best and longest-standing teams in the industry."
Customers also like the tight risk practices of the firm - practices that reduce losses incurred from borrower or investment risk. Globally, Northern Trust has $584.1 billion in lendable assets, while in Asia it manages a pool of $22.4 billion with more than 20% of these securities on loan at any one point.
Customers can check global availability of securities first thing in the morning Asia-time using a new server-based securities lending system that Northern Trust introduced this year. But Northern Trust's real knack for innovation is evident in its market expertise and its ability to influence regulators around the region.
Last year we praised the company for its groundbreaking work in Korea. This year it has moved on to Taiwan where the company, through its membership to PASLA, has been working with regulators to address some of the obstacles hindering the development of securities lending in that market.
2004 should see Northern Trust introduce the efficiency and client service standards it has achieved through EquiLend in Asia. EquiLend is a consortium of 13 market participants that has developed an open, global, standards-based platform that allows borrowers and lenders to transact with each other through a secure hub, eliminating the need for participants to maintain costly point-to-point connections between counterparties.