Best Domestic Commercial Bank HDFC Bank
There were three outstanding submissions from domestic commercial banks: Public Bank in Malaysia, H&CB in Korea, and HDFC Bank. Staffed by ex-Citibankers and headed by the visionary Aditya Puri, HDFC Bank is one of the great growth stories of modern times. Last year, it made net profit of Rs1.2 billion (about $27 million), up 40% on 1998. Its return on equity is 29%, putting it in the same bracket as super-banks like Lloyds-TSB of the UK. With a capital adequacy ratio of 12.19%, and the lowest non-performing assets in the Indian banking industry, not surprisingly this is the bank that analysts love to love.
A new phase of development occurred when HDFC Bank merged with Times Bank - cleverly using a share swap to execute the deal rather than cash. When someone else wants your equity, it's a sure sign they believe in your management.
What never ceases to impress about HDFC Bank is how savvy it is about the new economy. It is the acquiring bank in the first online real-time payment gateway for B2C payments in India and has a joint venture with Sesami.com to take e-procurement to Indian corporates.
With a strategic partner in Chase, the bank also covers more conventional bases. It has a rapidly growing corporate customer base of over 200 relationships, and guarantees around Rs65 billion of letters of credit per year, throughputs over Rs850 billion per year in cash management services and did $5.5 billion of corporate forex turnover last year, up 50% on the previous period.
Another revenue stream is the infrastructure of the capital markets - custody and bank clearing - where again it is at the cutting edge. Like all sensible banks, it recognizes that a healthy consumer banking franchise provides cheap funding and healthy assets.
Last year it helped its retail drive by almost doubling its branches to 111 and saw retail accounts soar between March 1999 and 2000 from 345,000 to 825,000. Add to this the fact that market sensitive revenues (from forex and profits on sales of investments) actually declined from 19% of revenues to 13%, and it is obvious that HDFC Bank is a truly exceptional story.
Best Foreign Commercial Bank: HSBC
With an asset portfolio of Rs40 billion and strong relationships with over 300 multinational corporations and 150 domestic ones, HSBC has a historically dominant position in the Indian market. The bank has the largest dealing room in India, with 50 dealer positions, and provides forex services in 25 currencies. It has a $2.6 billion balance sheet, and placed Rs50 billion worth of primary and secondary debt in 1999. It also handles about 3% of India's annual trade volume of $85 billion, servicing 800 importers and exporters.
HSBC is a member of the national clearing system run by the Reserve Bank of India, and has the ability to make collections at 3000 locations and make payments at 400. Moreover, it is the dominant custodian in India, holding investments of over $10 billion made by foreign investors.
As if that were not enough, the bank's commitment to India is further illustrated by its new global processing centre in Hyderabad, which will migrate processing work from HSBC Group's non-Indian operations.
With 26 branches, HSBC's push into the consumer market can also be deemed a success, with new accounts surging 30% in 1999, with there also being a 400% growth in the credit card business - although admittedly, from a modest base.
Best Domestic Investment Bank: DSP Merrill Lynch
You would have to get up pretty early in the morning to get the better of Hemendra Kothari - as the boss of DSP Merrill Lynch he leads one of the most experienced teams in India. Year after year rumours have circulated that DSP and Merrill might go their separate ways, but Kothari has kept the two together and done some great deals for India in the process.
It should come as no surprise to anyone that between April 1999 and March 2000 the bulk of the cross-border capital-raisings were lead managed by DSP Merrill Lynch. It did the first Indian bank American depositary receipt (for ICICI) and the first Indian internet ADR (for Satyam). In terms of domestic equity, it did the largest domestic IPO in 1999 for HCL Technologies - and did so using bookbuilding techniques.
DSP Merrill Lynch has also been active in the debt capital markets, raising $4.2 billion for clients for the financial year between April 1999 and March 2000.
With a 135-year presence in the Indian capital market, the bank is strongly placed. It has 11 dedicated equity sales personnel, and is the broker of choice for US institutional investors. A research team of 14 ensures that its coverage of 85 companies is to international standards, while its 5,000 sub-brokers for retail investors ensures it sees both retail and institutional flows.
DSP Merrill Lynch is also extremely active in the M&A market with deals completed for the likes of Indiaworld Communications and Indian Rayon, and also advised on purely domestic deals for top companies such as Larsen & Toubro. Over the last five years, the bank has consistently been the top or second firm in almost every sphere. It is a track record that no one else can match.
Best Foreign Investment Bank: Jardine Fleming
Aside from certain viceroys during the Raj, there cannot be many Britons who have spent so much time in India as Roddy Sale. He has been in India leading the JF corporate finance team since 1991 and has created a sense of continuity that no other foreign firm can really match. Since June 1999 it has completed advisory transactions for the likes of Nomura (buying equity in BPL Cellular), Hindustan Lever (on the sale of its dairy business to Nutricia India) and Tisco (on the sale of its cement business to Lafarge). Apart from the eight transactions it completed in that period, it has 14 others which are ongoing.
Since 1992 Jardine Fleming has raised $1.85 billion for Indian companies in Euro-equity issuance, and since last year has been involved in high-profile deals such as the $218 million global depositary receipt for Gas Authority of India, the largest disinvestment to date.
Aside from this, the bank completed five domestic equity issues last year and manages $800 million of funds invested in India by international investors.
JF has 11 analysts working on 120 Indian companies, which cover around 70% of the market cap of the Bombay Stock Exchange. In its New York conference it presented nine Indian companies to 450 investors, and in a special Emerging Markets Technology conference it organized (again in New York) in May, it showed 18 Indian companies to 600 investors. It has around 12% of foreign institutional turnover.
Both Sale and country head Robert Gibson can only look forward to seeing what new owner Chase can bring to an already outstanding franchise.