Best Bank / Best Commercial Bank
In Citigroup, the client comes first. The whole structure of the integrated commercial and investment bank of Citibank and Salomon Smith Barney is designed to give the client whatever they need. And in Asia, clients need a lot. The concept behind the banking cross-sell is not new, but making it work in practice has proved harder than many at first expected.
It is undoubtedly the right strategy because it enables both corporate and institutional clients to get the best deals and the deepest relationships. Citigroup in Asia has made it work better than any other institution and it is winning key mandates on its ability to provide the clients with the whole range of banking services from loans to FX, equity to high yield bonds, trade finance to custody.
It is the sheer breadth of what Citigroup offers that makes it so impressive. It is a top tier competitor in every market in which it is present. This is true both in terms of products equity, debt, custody, cash management and so on as well as geography. Managing this matrix is challenging, but Citigroup is doing it better than any.
The bank's localization in every country in Asia has continued apace this year. It has increased its on the ground presence in every market and has made a few key acquisitions. In Taiwan, its 15% investment in the five financial services businesses of the Fubon Group is one of the most significant deals of the year. It shows Citibank putting real money into the local market and moving away from its traditional approach of organic growth to increase its localization.
In many countries, Citigroup is actually viewed as a local player and competes as much with the local institutions as it does with its international counterparts a real testament to how embedded the bank is in Asia.
In its investment banking products, offered through Salomon Smith Barney, the bank has had admittedly mixed fortunes. But the team remains strong in both equity and debt and has some key mandates that will propel it up the league tables in 2001. Its equity research in particular has enjoyed a year of growth both in terms of coverage and respect, with more analysts covering more stocks than ever before. It has a strong equity capital markets franchise, particularly in Singapore and south east Asia. And its M&A advisory work is being seen all over the region.
On the debt side, Citigroup is one of the most powerful forces in the world. In Asia, the ability to offer local currency execution capabilities through Citibank, alongside Salomon Smith Barney's cross border capital markets execution is married to the option of having a back-stop loan financing provided by Citibank. This is a powerfully compelling offer for clients and it is especially potent in the volatile world of Asian markets.
Leveraging off this smorgasbord of products, Citigroup this year has completed transactions of every product description that are available in the debt markets. Local and cross border loans and bonds, in multiple currencies and in every sector. The banks has done liability management deals, asset backed deals and structured trades and is a clear leader in the world of Asian derivatives.
The bank is increasingly winning investment banking and advisory mandates from the relationships that its corporate and commercial bankers have built up over many years with the leading Asian companies. For instance, it presently has a mandate with Hyundai Electronics which involves an advisory role for future financings whatever product they may be. It has provided a bridging loan to the company and has been doing trade finance deals for the exporter for many years.
Its relationship with Chartered Semiconductor of Singapore also shows that repeat business comes out of a strong relationship across all product areas. Salomon did the IPO of Chartered last year and this year did the ground breaking $1 billion follow-on equity offer in May. In September, Citibank project finance did an $820 million loan for Chartered Silicon, a subsidiary of Chartered Semiconductor. In this instance, the commercial bankers were winning business from the success of the investment banks, although the overall relationship goes back many years.
In the traditional commercial banking areas of cash management, trade finance, foreign exchange, derivatives and custody, Citibank is number one or two in every product in Asia. It is knows for its continuous innovation, its dedication to clients and the quality of service it offers. It has strong and deep relationships with fine Asian companies, both large and small and is always looking to provide its clients with the services that best suit them, not the services that best serve the bank.
In many ways, imitation is the sincerest form of flattery and the Citigroup model is being copied throughout the world. The acquisition by Chase of JP Morgan and Fleming's shows that it too wants to be a universal bank. Similar efforts by Deutsche Bank and HSBC also indicate that they too want to be able to offer the breadth and depth of products that Citigroup can. Local champions such as DBS are also following this strategy albeit in a regional rather than global mould.
While stand-alone investment banks still dominate the equity and debt league tables, their lack of commercial banking skills hampers their ability to offer the overall banking relationships to which they aspire. It is something of an admission these days when the blue-chip investment banks freely boast of their abilities to provide bridging loans, something not heard of a few years ago, even if it did happen behind the scenes.
Citigroup has made the whole landscape more competitive and in the process, upped the service that clients can now expect in Asia. Chillingly for competitors, the bank feels that it is a twelve-cylinder machine only running on four cylinders at the moment. Once all the integration issues have been smoothed out, and the mandates start rolling in Citigroup will become even more formidable. Now that will be something to watch.
Best Investment Bank
When we asked for submissions for this year's Best Investment Bank, one of the things we requested were testimonials from key clients. These were to be kept anonymous, but let us quote what one major Asian client said at the conclusion of its letter to us: "Goldman Sachs has fully demonstrated that the excellent quality of its execution skills and strong commitment to clients has solidified its leadership position in Asia, and it has brought our relationship to another level."
How does Goldman measure its own success? It does so through the repeat business it does for such key clients. After all, clients will not use you again if you do a bad job. So what repeat business has Goldman done? Take China Mobile, whose IPO it did in October 1997. It then did a $2 billion follow on transaction for the firm in October 1999, and in October this year it launched a $6.9 billion equity follow-on in extremely volatile market conditions - especially for the telecom sector. It also advised on the acquisition of seven mobile networks in China and advised on Vodafone's $2.5 billion investment in the company.
Or MTR, whose $1.38 billion IPO it launched this year, and then was mandated to be a joint book-running lead manager in the $600 million global bond issue the next month.
Or Taiwan Semiconductor (TSMC) for which it has done nine transaction since June 1997. This year it did a $170 million block trade in February, a further $207 million block in April, and then in June a further $1.16 billion follow on trade - in what was the then largest ever (non-privatization) equity issuance from Asia. In June it also closed the $6.4 billion acquisition of Worldwide Semiconductor by TSMC.
Then there's Hutchison Whampoa. This year Goldman helped Hutch sell a $5 billion chunk of its Vodafone stock. It also advised Hutchison on telecom M&A in India and raised $476 million for Hutch's JV with Global Crossing.
Or Li & Fung, for whom Goldman first did a block trade in January 1999 and then did two block trades this year the first in March for $250 million and the second in September for $290 million. Or Legend, for which it a 1999 block trade of $121 million with a $369 million deal in February. Or Far Eastern, or Acer or ASE&
The message: top clients in Asia use Goldman not once, but again, and normally, again. It does not matter what the client wants to do. If its is equity financing, debt raising or strategic acquisition advice, Goldman has truly become the one stop shop for Asia's blue-chip companies when they are looking for financial services. But it is not just big, easy deals that investors will lap up anyway.
When key decision makers have to decide who they will entrust with a difficult but crucial deal, it is Goldman to which many turn. It is significant that in one of the hottest mandate chases of the year, for Chunghwa Telecom one of Asia's last great privatizations the Taiwanese government decided that Goldman was to have the global coordinator role.
It is a fact that Asian governments trust Goldman with their key privatizations. China is an instructive case. In both the telecom and oil industries, Goldman was selected to take the first major companies to the equity markets. In terms of telecom, that was China Mobile and in the oil industry, PetroChina.
The $2.9 billion IPO for PetroChina was a landmark deal. In atrocious markets and amid some of the greatest political opposition ever to hit a capital markets transaction, the Chinese government saw this as a make-or-break deal for its whole SOE restructuring programme. That Goldman got the deal done, and that it was one of the best performing for investors in the subsequent six months, is a testament to the institutional power of Goldman, regardless of the execution hurdles that had to be crossed.
This year Goldman did 37 deals in equity, debt and M&A, and in volume terms that equates to $57.6 billion. It has been a year of equity, M&A and telecom, and Goldman's abilities in all three areas are excellent.
Goldman, with its towering presence in the eight floors beneath Li-ka Shing's office in Hong Kong, has 1,379 people in Asia, which includes 155 investment banking professionals in Singapore, Taipei, Seoul, as well as Hong Kong. It has successfully re-built its franchise and this year the firm came of age in Asia. It is now fully focused on and committed to the region. It has read the market perfectly this year with its emphasis on telecom deals and China businesses. It has excelled in nearly every deal that it has touched. It has been unrelenting in its devotion to clients and in its pursuit of excellence, and in the process has raised the standard of investment banking in Asia.
Best Equity House
Morgan Stanley Dean Witter
In a challenging but still record-breaking year for the region's equity markets, Morgan Stanley Dean Witter has excelled, both for the breadth of its range and narrowness of its focus. Strong franchises across the whole region have meant that when some markets are closed for business, the bank has been able look elsewhere to collect its fees. Likewise, the sheer length of time, dedication and single-mindedness it has brought to bear in some markets, notably China, have paid off spectacularly.
The bank has led two of the big three big China privatizations of the year and managed to do so successfully against a volatile global backdrop. Indeed, the colossal weight of the huge deals went some way to deadening the impact of volatile equity markets, with many fund managers required to pick the transactions up to meet their index weightings.
China Unicom, which came in June with $5.65 billion in stock, nevertheless had one of the smoothest passages through the primary markets of any transaction of 2000. Representing the Mainland's largest ever IPO, the offering benefited immensely from a strong and focused management team that managed to overturn many of investors' preconceptions. A short run of clear conditions also allowed indicative pricing to be pushed upwards.
Unicom was followed by a far tougher proposition, Sinopec. The company's $3.468 billion IPO was one that the Chinese government held particularly dear, since the petrochemicals sector has been the main spearhead of the country's economic restructuring programme. The effort that was necessary to get the company ready for market and capable of attaining an investment grade rating also underlines the huge manpower commitments investment banks are now having to make with the region's benchmark deals. With a staff of 1.2 million and 10,000 separate companies that needed to be integrated and consolidated, the task was immense.
Morgan Stanley also understood that success could be better guaranteed by anchoring the transaction with as many strategic investors as possible. It consequently secured a 50/50 split for the international placement between institutional investors and a group of four Hong Kong corporates and four strategic investors including three of the world's oil super majors.
While China dominated, Taiwan and the tech sector were not far behind, with TSMC and UMC both making their mark. The latter's $1.3 billion listing on the New York Stock Exchange via MSDW in September marked the largest ever initial US listing by an Asia corporate (ex-Japan) and the largest ever offering from Taiwan. It faced extremely testing market conditions that led the lead to adopt a cautious approach to syndicating a book that had still closed two times oversubscribed.
Two other MSDW deals of note this year Wipro and Globe Telecom - further highlighted the challenges of launching deals for good companies out of countries that are far from the top of investors' wish lists. This was especially true of Globe, whose $100 million PDR deal represents 23% of all new issue volume from the Philippines since January 1998. Virtually the only company from the Philippines capable of executing an international transaction, its deal was a hard struggle, but ultimately completed.
According to its own calculations, MSDW raised $11.7 billion for 12 issuers in seven countries over the course of 2000 This marks a significant pick-up over 1999 and for the bank's Asian ECM head, Colin Stewart, a strong platform to secure business in 2001. A former CEO of China International Capital Corp (CICC), Stewart is one of the region's most experienced bankers in the China market and has recently begun to build up a stronger and bigger ECM team in anticipation that the Mainland will dominate the primary markets next year in much the same way that it has this.