In recognition of this year's Achievement Awards, FinanceAsia will be holding its annual awards dinner on Friday February 22 at the Conrad Hotel in Hong Kong. For further details, please contact Susannah Body on 21225223 or by email - [email protected].

Best Bank, Best Commercial Bank

Citigroup/Citibank

Citigroup has had a dominant 2001. Over the past year, its full service banking operation has embedded itself even deeper in the Asian financial scene. It competes at the top tier in every single area in which it operates. And it operates in nearly every financial arena.

On the commercial banking side, it is a clear leader in terms of loans, foreign exchange, derivatives and cash management, while its trade finance operation is highly regarded. On the investment banking side, Salomon Smith Barney has had another impressive year. The debt team continues to impress as do the M&A and equity capital markets teams. The one blot on its copybook has been its involvement with Hynix. However, when the book is finally written on the Korean semiconductor company, Citibank and Salomon will emerge with much more credit than they are being given at the moment.

On the securities services side, its custody and depositary receipt services are fast becoming keen competitors with the old established players and in the process Citibank has really shaken up the industry. It is certainly the bank to watch out for when it comes to securities services.

What makes the bank so impressive is the sheer breadth of its operations. But in many ways it is disingenuous to look at the various parts of the Citi machine on their own. The whole point of the bank is the integrated way in which it can service its clients. This means that it can offer the best solutions to their financial needs on whatever side of the business the solution may lie. It is not a new dream, but Citibank is the only bank in Asia that is making it a reality.

Integration between the various parts of the bank has continued in 2001. Reporting lines are clearer and the cross sell really is happening. The service that Citi offers its clients is much deeper now than it has been, with strategic advice for the CEO being married to the more transactional functions of corporate banking such as cash management and overdrafts. It is this model which Citi's rivals are following, most notably JPMorgan as well as HSBC and Deutsche Bank.

But what makes this product overview so compelling is that it is allied to a hugely localized presence on the ground in nearly every country in Asia. In whichever country you look at in the region, Citi is a local competitor. It services the local companies and the multinationals that operate in those countries. This on the ground ability is key to getting the deals flowing through the integrated bank.

Citi is further cementing its localized presence with selective acquisitions. Its 15% stake in Taiwan's Fubon group is looking like one of the smartest deals of last year as Fubon starts leading the way for a revamped financial sector in the Island Republic. And if Citi's CEO Sandy Weill's presence in Shanghai in early December is any guide, the bank could soon be a proud investor in Bank of Communications in China.

This approach of growth and depth through acquisition is married to a constant focus on organic expansion. And one of the key avenues for this is the application of new technology. Despite the harsh operating conditions in Asia this year and the general aversion to risk, the bank has still rolled out some impressive new products such as CitiDirect Online Banking and CitiTreasury.com.

This focus on innovation and growth helps the bank to ride out the rough seas of global market volatility and still put in impressive results in its Asian operations. At a time when other international banks are rethinking their commitment to the region, Citi's dominance continues. 2002 could be a very special year for the bank if 2001 is anything to go by.

Best investment bank

UBS Warburg

Choosing a best investment bank this year was tough.

We decided to go through all our product awards and all of our deals of the year and allocate points on the basis of first, second or third in each category. UBS Warburg came out top, which is a reflection of its broad-based success this year in equities (primary and secondary), debt (including convertibles for Sunplus and Quanta Computer) and M&A.

UBS Warburg is one of the few firms that could be said to have positive momentum this year. Unlike other firms which have been downsizing - whether quietly or very publicly - UBS Warburg has largely left its franchise intact. It has even selectively hired.

Most of it bulge-bracket rivals now concede that this year has conclusively proven that UBSW has now joined the Asian premier league. One major US rival mentioned to us that they now saw UBSW as one of their key threats.

In that sense it has been a year of stunning achievement and growth for the firm. Indeed, having gone through several years of mergers (and a schizophrenic array of brands), there were many who wondered whether UBSW would ever get its act together.

This year (finally) the firm's bankers - aided by some key new hires such as Mark 'the Admiral' Dowie - started to rev the machine.

A quality that Warburgs clearly has is an intelligent ability to sit down and spot the key trend of the year. Last year it was the firm that spotted the opportunity for PCCW to take over HKT. And this year it was UBSW that planned and executed the long overdue consolidation in the Singapore banking sector. For that reason we gave OCBC/ Keppel our Deal of the Year (see separate write up).

Indeed, Singapore has been one of the region's most active investment banking markets and UBSW has garnered a strong position there under Robin Tomlin and Andrea Muller. Indeed when it was given the mandate to lead the Singapore Power mandate, it set a new precedent by getting three privatization mandates in a row from Temasek.

In Korea it also gained a privatization hat-trick with Korea Telecom 2 and then receiving its recent mandate for the $1 billion Korea Deposit & Insurance Corporation exchangeable bond. Notably, KT 2 was another of our deals of the year. And the Korea Tobacco & Ginseng's concurrent equity and equity linked deal - totalling $553 million - was another of the year's great deals. Indeed, it was also the first deal to be completed since September 11.

ECM head, Colin West, syndicate supremo Marcus Brown and convertibles head Simon 'Anglo Saxon' Ollerenshaw, deserve credit for making this happen.

Indeed, UBSW has proven to be a formidable competitor in the privatization field. This year it has gained the mandates to lead manage five out of the seven biggest deals to be allocated: KT, Singapore Power, MTRC II, Chunghwa Telecom and Bank of China.

The latter was a significant mandate, as the gaping hole in the firm's ECM franchise has always been China. This was the year in which that was rectified. Using its vice-chairman, Sir Leon Brittan - the former European Commissioner - it persuasively gained itself a place at the China mandate table.

By October 1 it had completed, with its co-advisors, the restructuring of Bank of China's 13 Hong Kong affiliates and prepared it for IPO. It has also been retained as the sole rating adviser to Bank of China HK.

Indeed this year it has done ratings advisory for OCBC, Citic Ka Wah and Korea Tobacco & Ginseng. Which brings us to debt. In a year in FIG has been hot, the firm's execution of sub-debt deals for OCBC (in three currencies simultaneously) and Citic Ka Wah obviously stands out. Then there was its Euroyen for Kepco, its $150 million FRN for Korea's Woori Finance and its neatly executed deal for Jardine Strategic (with Goldman, JPMorgan and HSBC).

The speed with which the OCBC deal was executed in Singapore dollars, US dollars and Euro makes it one of the standout debt transactions of the year - a fact made more impressive by OCBC's status as a debut issuer. Indeed, debt heads, Paddy O'Brien and Joon-Kee Hong delivered the cash for the client in a fashion that proved how far the franchise has come.

Further reinforcing this observation is the $500 million deal for LG Card - for future credit card receivables - that has come in right at the end of the year.

On the M&A front, Dowie has built a strong team, and under Steven Sun the FIG area has blossomed. Its year was dominated by the OCBC transaction, an assignment which lasted from March till August, but the Bank of China reorganization and the $5 billion PCCW/ Telstra Reach and Regional Wireless alliance were also important corporate finance mandates.

Moreover on the secondary broking side, UBSW has emerged as the number one player under the leadership of John Holland (head of sales) and Michael Oertli (research head). This is a powerful franchise, and a persuasive tool when you are pitching to clients for the biggest ECM placements.

Most tellingly of all, UBSW's pitch this year was crammed with testimonials from satisfied clients. The things the clients said in their letters mean the firm must be doing something right.

Deal of the Year

OCBC's $2.9 billion acquisition of Keppel Capital and $2.14 billion debt financing

UBS Warburg, JPMorgan, Salomon Smith Barney (M&A), UBS Warburg (bond issue)

Where do the plaudits end for this $2.9 billion deal? Not only was it Singapore's first major unsolicited offer, it involved a triple-currency bond issue to finance it. And it proved the catalytic start of the long-awaited consolidation in the Singapore banking sector.

Indeed, this was a transaction that was planned with all the thoroughness of a military invasion. In the small, clubby world of Singapore, all concerned knew that an unsolicited bid would ruffle many feathers, and that the strategy had to be exactly right. Immediately following the announcement, DSB then launched a hostile bid for OUB, and the rest as they say, is history.
While the merger of UOB and OUB has created the largest banking entity in Singapore, it is our belief that the overall execution and catalytic quality of OCBC's bid for Keppel deserves to be remembered as the defining M&A trend of the year, just as PCCW's takeover of HKT indelibly was for 2000.

The Singaporean bank also scored a hat trick in the subordinated debt markets launching Asia's largest bank capital deal to date and the third largest bond deal on record from Asia. Proceeds were used to fund the acquisition and the bank and its advisor UBS Warburg won numerous plaudits for executing a triple currency deal under an extremely aggressive timeframe, with ratings, roadshows and pricing of the dollar tranche all completed within 17 days of the announcement of the acquisition.

Booking proceeds ahead of possible new deals for either DBS or UOB left OCBC in the enviable position of having financed itself ahead of a glut of Singaporean bank transactions and cushioned its capital ratios against the impact of the S$4.8 billion ($2.9 billion) acquisition. "We had until August 3 to get the funds in place and we also knew that PCCW-HKT was coming with its jumbo bond deal," Paddy O'Brien co-head of Asian debt capital markets commented at the time. "We wanted to get in first and OCBC pushed us hard with a very tight timeframe."

If the acquisition had fallen through, OCBC also included a novel make-whole provision giving OCBC an option to call the bonds during a window between September 30 and December 10.

The structure of the deal was very much the work of OCBC's CFO Chris Matten, widely considered one of the world's foremost bank capital experts. The speed with which he had got OCBC rated and ready to execute a capital markets transaction may well be an Asian record.

The deal also gained the approval of the markets. In most cases Singaporean entities that announce M&A transactions see their share price fall. When OCBC announced its intentions for Keppel Capital (advised by JPMorgan, with Salomon advising the parent Keppel Corp), the share price actually went up (by around 15% in one week). The analyst community were heartened to hear OCBC executives say they were "determined to do a deal, but not desperate".

Secrecy was the order of the day, and the fact that the deal was announced on June 12 without a single leak is a testimony to the professionalism and integrity of all those involved - an especial achievement given there were scores of lawyers, bankers and accountants preparing the 10b5 opinion for the bond offering in the preceding weeks.

If any news of the deal had leaked, Keppel's counter would have been suspended. The sheer surprise floored everyone. As a Merrill Lynch analyst wrote the Monday after, "We believe that this unsolicited offer will create a permanent change in the Singapore banking scene. It sets the stage for acceleration of the long-awaited domestic consolidation, which should in the longer term create a healthier banking sector."

Immediately on announcing the deal, OCBC management set off on a punishing routine of roadshows, first with equity shareholders and then with bond fund managers. Things became easier when DBS went hostile for OUB and drew UOB into a bidding war. This eliminated the potential for a second bidder for Keppel and left OCBC happy to have planned so thoroughly, taken so much sub-debt out of the market, and generally speaking set the pace.

Indeed, by taking so much sub-debt out of the market, the bank appeared to have made it impossible for any other Singapore bank to match its all-cash bid.

The unsolicited nature of the offer was soon turned 180 degrees when the key shareholders of Keppel Capital (Keppel Corp, AIB and Temasek) all agreed to an irrevocable undertaking after OCBC raised its price by 8%.

Some have questioned why OCBC raised its price. Yet from a valuation perspective, it had gone in with a low bid (1.7 times book) with the expectation that it would have to bid again, to top another bank s offer. It had thus left itself quite a lot of slack, and the 8% increase was cheap considering the certainty it brought to the deal. Moreover it equated to a price to book of 1.86, which when put in perspective was better value than DBS's acquisition of Dao Heng in Hong Kong (3.3 times book).

In the event, thanks to the irrevocable, OCBC received 98% acceptances.

Moreover this deal was done without diluting existing shareholders (thanks to the sub debt) and saw the bank come out of the transaction with a more efficient capital structure than when it went in.

And thanks to this deal, the Singapore banking sector has taken its first step towards the consolidation that will make its banks able to resist foreign competition and expand abroad. For that reason alone, this was a truly transformational deal.

The lawyers were Allen & Gledhill (domestic M&A council), Shearman & Sterling Stamford (adviser to Keppel Holdings's financial advisor, Salomon), and Simpson Thatcher & Bartlett (issuer's council) and Clifford Chance (underwriter's council).