As 2008 drew to a close two banks benefited from a late flurry of issuance in equity, M&A and debt to seize the top spots in the region’s league tables.
Most of these transactions were linked to China, underlining how important the country continues to be for the region’s investment banking industry, and how vital it will be for banks to strengthen their onshore presence in the coming year.
UBS was a particular beneficiary. The Swiss bank is one of only a handful of institutions to boast an onshore brokerage joint venture, and it seems to be helping it gain business. The bank leapfrogged its rivals to take the number one position for both equity and M&A league tables.
Meanwhile Industrial and Commercial Bank of China (ICBC) made for an unlikely market leader in Asia’s debt capital markets (DCM) league table.
UBS’s involvement in several equity deals in the final weeks of December helped it take a decisive lead over rivals Goldman Sachs and J.P.Morgan. The Swiss bank was responsible for a total of US$12.6 billion in deal value, compared to Goldman’s US$9.1 billion and J.P.Morgan’s US$8.2 billion. It also earned US$215 million in revenue, the most of all its peers.
UBS had trailed Goldman in equity issuance as late as December 8, boasting only US$8.7 billion of deal value versus the US-financier’s US$8.9 billion. But a number of equity transactions in the last few weeks helped to improve its final position, including Commonwealth Bank of Australia’s A$1.65 billion (US$1.14 billion) follow-on equity offering on December 17.
UBS further extended its lead in the equity capital markets – but perhaps not its standing in Beijing – on December 31, when it sold its Bank of China stake for US$841 million. In total, 3.4 billion H-shares were offloaded in a discounted placement to institutional investors.
But the bank’s success could not disguise the fact that 2008 had been a miserable year for Asian equity. Deal volumes plunged 57% in 2008 compared to a year before, accounting for a mere US$97.7 billion.
M&A movements
Equity wasn’t the only place in which UBS thrived amid difficult markets. During the last weeks of 2008, the bank closed several M&A transactions, which took it past front runner J.P.Morgan to top the league tables. UBS was responsible for US$80.7 billion-worth of deals, versus its rival’s US$79.7 billion.
Its bankers were hard at work in China during the holiday season. UBS advised Citic Pacific as its parent bailed out the troubled subsidiary. Citic Group paid US$5.4 billion – made up of US$1.5 billion in convertible bonds plus debt – to up its stake to 57.6%. UBS was also the sole advisor to online media company Sina Corp. in its US$1.4 billion acquisition of Focus Media on December 22.
Grabbing these deals and taking the top spot for Asian M&A was a real coup for UBS. As late as December 8 the bank had trailed J.P.Morgan at US$74.3 billion to US$78.3 billion of deal volume, respectively. UBS also took home US$177 million in revenue from M&A deals, the most among its rivals.
It was a good time to be strong in the M&A space. Volumes in the field fell just 10% to US$502 billion in 2008, a much smaller drop than in equity issuance. One particular bright spot was China, where targeted M&A reached US$190.8 billion, the highest total on record and an increase of 38% from 2007.
ICBC’s bond run
UBS was not the only bank to leap to the top of the region’s league tables at the last minute. ICBC ended up topping the debt league table as a result of a trend that has dominated the latter half of the year – the expansion of China’s local currency bond market.
While the dearth in G3 currency deals extended into the last month of the year, overall debt volume in Asia ex-Japan increased 14%, to hit US$342.3 billion in 2008. Renminbi-denominated local bond issues in China were responsible for much of this growth – China’s borrowers raised a record US$94.8 billion in 2008, more than double the US$44 billion they had been responsible for in 2007.
The change in momentum was especially noticeable in the league tables, and it particularly benefited Chinese banks. ICBC was the biggest recipient, acting as a bookrunner on enough multi-billion US dollar-sized bonds to end up topping the Asia ex-Japan DCM league table.
Overall ICBC accounted for US$13.7 billion in deal value, just a hair over HSBC’s US$13.6 billion and Citic Group’s US$13.1 billion. But coming top does not always ensure profitability; second-placed HSBC earned the most in revenue, taking home US$45 million.
ICBC had trailed its rivals for most of 2008, and as of December 8 it was a solid third in the league tables. It managed to improve its position by acting as the sole book runner on China National Petroleum Corp.’s Rmb20 billion (US$2.9 billion) three year deal on December 17. The bond pays 2.8% and was priced at par.