Investment banks plying their services as bookrunners of international debt deals often have an uneasy relationship with league tables. When a bank is top, the table is an accurate reflection of its hard work and well-earned market share. When it is not, tables turn out to be riddled with statistical anomalies designed to artificially lower that bank’s standing.
Like it or not, league tables are part of the fabric of capital markets. They are touted in press materials, DCM pitches, and celebratory post-pricing syndicate drinks. But there are grains of truth buried beneath banks’ self-serving claims that the tables are not a true reflection of the market. And in the case of the international sukuk tables, the reflection warps like a funfair mirror.
One issue is that supply is simply not that large. International benchmark sukuk supply was $18.9bn in 2014, according to Dealogic. JP Morgan — a regular podium finisher in international emerging market deals — managed to place ninth in the Dealogic sukuk bookrunner league table that year with only one $2.5bn deal.
Another problem is that the sukuk issuers — more so than their conventional cousins — tend to hire a veritable bevy of bookrunners for a benchmark deal. JP Morgan was lucky that on its $2.5bn dual tranche sukuk there were only two other banks. First Gulf Bank worked on three sukuk to JP Morgan’s one but finished 10th in the table, because it was one of between eight and 11 other top line banks.
Debt bankers were worried that a jumbo sukuk from Petronas earlier this month would similarly skew the league tables this year. Some syndicates were prepared for a sukuk of over $2bn as part of the Malaysian corporate’s four tranche transaction — and it had hired only five banks for the roadshow. But Petronas opted to print only $1.25bn of sukuk, and added another three passive bookrunners.
Rather than providing a boon for sukuk stalwarts like CIMB and Citi, those banks were credited with only another $138.9m of sukuk volume after splitting the sale with banks that do almost no international sukuk business.
All this means that as the first quarter of the year draws to a close — with sukuk issuance already 2.5 times what it was in Q1 2014 — the league table looks down right strange.
Because of their place on the Petronas deal, Bank of America Merrill Lynch, Mitsubishi UFJ Financial, Maybank and Morgan Stanley are among the banks tied for 9th place with $138.9m. BAML did not work on a single sukuk in 2014 and none of the others finished higher than 20th.
Their apportioned share might seem small enough that they will be quickly washed away as supply mounts, but it is almost a third of the $422m that earned First Gulf Bank a place in Dealogic’s top 10 for international sukuk in 2014.
The sukuk market is booming with new sovereigns paving the way for new sets of corporate and financial issuers. For prospective issuers wondering who to hire, league tables are often seen as a reasonable indicator of expertise — but the Islamic bond market needs to become a lot larger before the rankings are reliable.