In May, we named the winners of our annual Country Awards. Today, we present the rationale for our decisions covering Malaysia, Myanmar, Mongolia, Pakistan and the Philippines.
The competition was as fierce as ever and took place against an unprecedented global backdrop thanks to COVID-19. As we went through the pitches, what stood out was all the firms' resilience and ability to adapt to fast-changing conditions.
For the second year running, an editorial advisory board also aided the editors by providing a peer review across the region. So in addition to congratulating the winners, the editors would also like to thank the board members for their help and guidance on the banks, brokers, law firms and rating agencies that were shortlisted and selected.
The members of the advisory board comprised:
Terry Mahony - deputy chairman VinaCapital; former CIO emerging markets equities TCW and Indochina Capital, plus launch CIO of HSBC's GEM fund.
David Morton - advisor Helsinki Foundation Asia Pacific and chairman Yojee; former Asia Pacific head of corporate, financials and multinationals banking HSBC.
Susan Yuen - non-executive director Alliance Bank Malaysia; former regional CEO NBAD and CEO ANZ Hong Kong, plus head of corporate and institutional banking HSBC Malaysia and head of multinationals banking Maybank.
Sadly, due to the current global situation there will be no awards dinner this year. However, plaques will still be available and where possible, we would be more than happy to arrange individual ceremonies to present the awards.
You can find out more about our judging criteria for the domestic and international categories.
MALAYSIA
BEST BANK: Public Bank
When faced with a global pandemic, it is the banks with the best asset quality and careful lending policies that shine. Unsurprisingly, the famously prudent Public Bank seems set to weather COVID-19 in far better shape than its peers.
It is one of those banks that up-and-coming peers in Asia’s more developing countries seek to emulate. It never compromises on asset quality and has a flexible strategy that means it can adapt to changing circumstances.
This is reflected in industry leading metrics. During the 2019 Financial Year, it enjoyed a significantly lower NPL ratio than its two main domestic peers, Maybank and CIMB.
According to S&P Global Market Intelligence data, it reported a 0.49% level, better than 0.51% the year before and far better than Maybank’s 2.65% and CIMB’s 3.07%. These NPLS are underpinned by strong capitalization, which stood at 17.32%.
Public Bank also enjoys the highest ROAE, ROAA and cost-to-income ratio. In 2019, these stood at 12.91%, 1.31% and 34.39% according to S&P.
Yet while Public Bank is prudent, it is still aggressive about pursuing market opportunities in the sectors it targets. Its strength is retail and here it has a commanding market share of 19.9% for residential properties, 35% commercial properties and 29.4% for car finance.
All three segments registered strong growth, higher than the industry average. Residential property, for example, now accounts for 38% of its loan book and grew 8 percentage points during 2019.
The bank also bucked the industry’s downward trend in car financing activity. This segment accounts for 16% of its loan book.
The bank continues to focus on optimising its funding position by balancing deposit growth and cost of funds. Its customer deposits registered 4.7% growth during 2019, above the industry’s 2.9% average.
Its loans and advances, meanwhile, grew by 4.5% higher than the industry’s 3.9% average.
All of this is supported by a strong online platform thanks to a three-year digitisation programme, which is just coming to an end. During 2019, the key focus areas were simplifying payments and developing the online platform. This included deploying APIs for the first time.
BEST INVESTMENT BANK, BEST DCM HOUSE: Maybank
It is rare to see a domestic house top the M&A league tables in any Asian country. It is normally the preserve of the international investment banks.
But during FinanceAsia’s awards period, Maybank knocked the foreigners into the dust taking the top spot over Credit Suisse, BofA Securities, Credit Agricole and Citi. According to Dealogic, it claimed 10.51% market share from seven deals with attributed volume of $1.625 billion.
Its biggest deal was YTL Cement’s $757.8 million acquisition of Lafarge Malaysia. Maybank acted for YTL in a deal, which cements the latter’s dominance of the domestic market. The bank was also the mandated lead arranger and bookrunner for an M$1.84 billion ($420 million) bridge loan to finance the deal.
Then there was Berjaya Corp’s $451 million acquisition of the Four Seasons Hotel Residence in Kyoto, Japan from Tigre. Maybank acted for Berjaya. The third deal, which made Dealogic’s Top-20 was the $244 million purchase of Prince Court Medical Centre from Khazanah by Pantai Holdings. Maybank acted for Pantai.
Maybank’s ability to pull in the large deals is both a reflection of its status as the country’s largest bank by assets and its structuring skills. This was also evident on the DCM side where it really stood out during 2019.
This is always a very hotly contested category with CIMB. The latter topped the domestic league tables with $4.9 billion and 54 deals under its belt according to Dealogic data.
Maybank was not that far behind on $3.9 billion from 44 deals. But what swung the award in Maybank’s favour was its activity across the rest of Asia.
It executed 14 deals during the awards period compared to CIMB’s four and raised a total of $396.02 million. Quite a large number of these transactions were for its parent and they also included a $52 million high yield offering for its Indonesian consumer finance offshoot, PT Wahana Ottomitra Multiartha.
But it was also on the country’s largest G3 bond offering of the year, a $1 billion deal for Genting’s Resort World.
In the domestic bond market, there is always plenty of innovation particularly when it comes to sukuk structures. This is an area that Maybank has always been very strong and 2019 was no different.
Typical examples of market leading deals include Cypark Ref’s M$550 million ($126 million) SRI Sukuk Murabahah programme. This is a first-of-its-kind solar turnkey financing structure based on deferred payments from three project companies associated with Malaysia’s largest grid-connected floating solar plant.
Maybank also established a Murabahah programme for DEHB, a company that provides hardware materials and manpower for the offshore oil and gas industry. This M$682.5 million ($156 million) programme also had a unique structure that involved equity issuance in conjunction with Sukuk issuance as part of a debt restructuring scheme.
BEST ECM HOUSE, BEST PRIVATE BANK: CIMB
CIMB was the clear winner of both of these awards this year as it was last year too.
In terms of ECM, CIMB had a 54.32% market share for ECM deals according to Dealogic data. It executed 13 offerings that raised $2.17 billion between April 1 2019 and March 31 2020.
The data shows that it was yet another quiet year for the country’s equity markets. In fact, only eight deals raising more than $100 million.
CIMB was on six of them, including all of the top five deals by issue size, three of them sole-led. It was also on eight of the 10 largest.
It says much about the state of the underlying markets that there were only two IPOs in the top 20: for poultry farmer Leong Hup International and property group AME Elite Consortium raising M$1.1 billion ($266 million) and M$166 million ($40 million) respectively. CIMB was a bookrunner on both.
The Petronas group dominated the market’s issuance activity taking the top three straight equity slots through three block trades that raised funds for overseas expansion, while retaining the parent’s overall controlling stake. The three comprised an M$2.87 billion ($691 million) divestment in Petronas Gas, M$1.8 billion ($436 million) in MISC and M$1.32 billion ($318 million) in Petronas Dagangan. CIMB was sole placement agent for the trio.
It was also a bookrunner alongside two international banks for the market’s second largest ECM trade of the year: a $500 million convertible for Cerah Capital.
What also stands out about CIMB’s ECM franchise is its growing clout across Asean. Historically, the bank has been better known for its Asian DCM deals, but this year it made clear inroads on the ECM side.
The bank was not only the lead manager for Malaysia’s top IPOs but also involved in Thailand’s. It was a domestic co-manager on Asset World Corp’s Bt41.7 billion ($1.36 billion) flotation and an international co-manager on Central Retail’s Bt38.1 billion ($1.23 billion) listing.
It was joint bookrunner for two Reit offerings in Singapore for Elite Commercial Reit and Soilbuild Business Space Reit, plus sole bookrunner for Alliance Healthcare Group’s IPO.
When it comes to the private bank, its winning streak is underpinned by an incredibly sold Malaysian franchise, which has given it a strong platform to expand across the region. As a result, CIMB continues to move up the pan-Asian rankings as it forges a deeper presence in key markets such as Indonesia, Singapore and Thailand.
Overall, the group manages just over $16 billion across Asia, of which $11.5 billion derived from Malaysia as of January 2020. This represented a 21% increase in AUM year-on-year.
As ever, the lynchpin is the affluent category and this became even more apparent in 2019 accounting for 76% of AUM compared to 67% when FinanceAsia conducted the awards one year ago.
BEST BROKER: CGS-CIMB
CIMB’s dominance of the ECM league tables undoubtedly helps to underpin its brokerage’s market share as Bursa Malaysia’s top or second ranked broker on pretty much each month of the awards period.
There is also no doubt that the Malaysian bank’s overall pulling power has been bolstered by its broking operations, which have a much more solid and geographically diverse platform following the 2018 50/50 joint venture with China Galaxy Securities to create CGS-CIMB.
This is the first time that the combined entity has won this award and it seems set to continue along the same path given the strength that comes from merging two complementary brokerages: one with in-depth coverage of North Asia and one with the same across South East Asia.
Together, the combined operation of CGS-CIMB covers roughly 1,100 stocks spanning both ends of the Asian continent and all the countries in between.
However, the bedrock is still Malaysia and during 2019, the brokerage unit enjoyed a 12.92% market share on Bursa Malaysia. This averaged a 65%/35% split between retail and institutional and a 92%/8% split between foreign and local investors.
In total, the group has 30 branches across Malaysia supported by 355 equity trading representatives, six prop traders, 23 institutional sales and sales traders and 13 research analysts.
One of the next planks of business plan is to deepen its Islamic broking presence. Phase one of the plan is to increase both the number of retail and institutional trading accounts. Phase two will involve introducing Islamic stock borrowing and lending (SBL) and Islamic share margin financing (SMF).
It also wants to introduce a global trading platform based on shariah principles.
BEST INTERNATIONAL BANK: HSBC
Although the headline numbers were not stellar, 2019 saw very healthy growth in key markets for HSBC.
In commercial banking, for example, outbound revenue grew 29% year-on-year, driven largely by transactions across ASEAN.
Inbound revenue grew 10% year-on-year, pulled upwards by healthy trade with China.
Standout trades include the successful execution of a M$1.2 billion five-year Murabahah term facility for Serba Dinamilk on which it was mandated lead arranger. Off the back of this, the cash management team won a liquidity mandate with the company.
In terms of innovation, HSBC was involved in the first ever live blockchain letter of credit transaction in Malaysia and the first bank in the country to offer track payments services (via SWIFT).
In its global banking and markets business, HSBC continued its close relationship with the government by leading an M$3.8 billion government-backed Sukuk and also working on the ¥200 billion Samurai bond issuance a month earlier.
In the wealth and personal banking space, the bank was busy upgrading its products and services. A highlight was the launch of the first environmental, social and governance Islamic structured product primed for the Malaysian market.
BEST INTERNATIONAL INVESTMENT BANK: Credit Suisse
This award makes it a hat trick for Credit Suisse in Malaysia. And it was the clear choice.
In all its key Asian markets, Credit Suisse tends to be well balanced and hold top 10 rankings across equity, debt and M&A. There is, however, generally a bias towards M&A, which always stands the bank in good stead when it comes to awards since the complexities of the structuring work earn additional points.
This was certainly the case in Malaysia. During the awards period, there was clear water between Credit Suisse and its nearest rival BofA, which notched up one deal to the Swiss bank’s five according to Dealogic data.
These figures include announced as well as completed deals and the big one for both Credit Suisse and the country is the $1.558 billion framework agreement signed last December between the Malaysian government and a consortium comprising Iskandar Waterfront Holding (IWH) and China Railway Engineering Corp (CREC).
Credit Suisse is a buyside advisor on the deal to purchase a 486-acre plot of land to develop a new business district and major transport hub for Kuala Lumpur. The deal is a landmark in a number of respects, not least the participation of a Chinese partner after the Mahathir government pulled back from a number of Belt and Road projects following its general election win in 2018.
When it comes to completed deals, Credit Suisse notched up two during the awards period. The first was the $1.2 billion acquisition of Columbia Asia’s South East Asian business by TPG and the Hong Leong Group.
The second was the $160 million acquisition of an 80% stake in Paramount Corp’s pre-tertiary education business by Prestigion Education. Credit Suisse was the buy side advisor.
On the ECM side, Credit Suisse was the only international bookrunner for the largest IPO of the year, the M$1.1 billion ($266 million) flotation of poultry producer, Leong Hup.
It had a lucrative DCM year too, bringing two high yield deals for energy services group Serba Dinamilk, although investors are probably ruing the decision to purchase either of them after spreads blew out.
MONGOLIA
BEST BANK: Khan Bank
Khan Bank’s strategic transformation continues apace, enabling the bank to maintain its strong hold over Mongolia’s retail banking market and use that as a springboard to increase its corporate presence particularly in the SME sector of the economy.
When it comes to retail banking, the past few years have all been about making itself more customer-centric and a big push on digitisation. In 2019, the bank kicked off several internal process automation projects that should facilitate true omni-channel digital banking, providing a frictionless financial experience for all customers across all devices.
At the end of the year, digital usage had grown by 51%. The bank now accounts for 78% of the country’s ATM transactions, 45% of all e-banking transactions and 80% of mobile ones.
This all helps it to cement its hold, with deposit growth up 12.1% during the 2019 Financial Year. This gave it a 31% market share overall.
Loan growth jumped 10.8% over the same time period. But it was the business loan segment, which recorded especially high growth of 41%, partly because it was coming off a much lower base.
Targeting SMEs is a big focus for the bank and its efforts are starting to pay off. Khan Bank’s SME loan portfolio climbed from MNT752 billion to MNT1.2 trillion during 2019.
This enabled it to increase its SME market share by eight percentage points during 2019 to 30%. This was even more impressive than the five-percentage point growth it had registered in 2018.
The Mongolian economy is facing some headwinds in 2020 thanks to its geographical proximity to China and the impact of COVID-19. Khan Bank is well placed given its strong capitalisation, which stood at 21.65% at the end of 2019, up from 21.46% in 2018.
It has also been able to bring NPLs down. The ratio dropped from 8.84% in 2018 to 6.22% in 2019 according to S&P Global Market Intelligence data.
MYANMAR
BEST BANK: KBZ Bank
In Myanmar it is all about financial inclusion and that means digital. Figures from the Consultative Group to Assist the Poor suggest that 77% of citizens did not have a bank account in 2018.
That was the year that the country’s largest private sector bank, KBZ, launched its mobile wallet app, KBZPay. The bank said that it wanted to have signed up 30 million customers within a decade (Myanmar has a population of 53 million).
It appeared to be an ambitious target, but as other countries have previously demonstrated, take-up can be exceptionally fast. And it has proved to be the case.
Within six months, KBZ had signed up one million customers. As of February this year, it had five million, plus 285,000 agents and merchants.
Bank customers can now use QR codes and pay utility bills, loans and tuition fees, in addition to transferring money to each other. The app is now recording 11 million transactions per month.
In terms of percentages, KBZ’s digital retail customer base grew 347% in 2019 and its online payments grew 622% during the second half of 2019 alone.
The next step is to try and embed these customers into KBZ’s developing ecosystem. One target is insurance in a country where the penetration rate stands at just 0.24%.
The bank is using KBZPay as the carrot. Customers who transact with three merchants per month are eligible for free life insurance valued at three times the average monthly balance of their e-wallet.
PAKISTAN
BEST BANK: Allied Bank
This is the bank, which has been the contender to win the prize for a number of years in Pakistan. Until this year, it had to be content with praise for its momentum.
But that momentum has now paid off. Allied Bank wins because it reports industry-leading efficiency and financial metrics that are all-important in a country, which regularly experiences pretty extreme economic peaks and troughs.
During 2019, Allied Bank had to contend with a sharp rise in interest rates, which it had foreseen in 2018. It switched is investment portfolio from longer-term maturities to shorter-dated assets.
This now puts it in a strong position to benefit from asset re-pricing in 2020.
Its extremely strong risk management systems mean that it has also been able to keep control of its loan portfolio in ways that many of its peers have not. In 2019, it had an industry-leading 3.2% NPL ratio (down from 3.54% in 2018) compared to an 8.1% sector average.
Its nearest competitor, MCB Bank, reported a 6.59% NPL ratio during 2019. Its coverage ratio was also strong: 95.6% coverage ratio compared to an average 84.7% figure for the rest of the sector.
Other strong metrics included a 3.25% NIM, up from 2.66% the year before according to S&P Global Market Intelligence data. ROAA rose from 1.01% to 1.06% and ROE from 11.86% to 13.13%.
Allied Bank prides itself on a sustainable growth model. This analogy can be interpreted two different ways.
The bank is growing at a clip, but one that it feels comfortable with. In 2019, net profits rose 11.1% according to S&P.
It is also focusing on green finance. When it gives out a loan it is checked against a scorecard to make sure that it does not breach any of the country’s environment laws. It has also gone one step further and stopped lending to the coal sector.
BEST INVESTMENT BANK: Habib Bank
Habib Bank (HBL) has a firm grasp over this award because it is able to execute size in way that its competitors cannot or do not. This remains important in a country where infrastructure development requires balance sheet-led project financing rather than capital markets fundraising.
That is not to say that HBL is inactive across the capital markets. It is advising the government on a 20% divestment in Pakistan Reinsurance, for example.
It also has the mandate for an inaugural Panda bond that has been on hold for the past year. During the awards period, HBL also completed an M&A deal for Shifa Hospitals: raising PRs1.96 billion ($12.7 million) from a strategic investor in return for a 40% stake.
But as ever, it is project finance, which stands out.
Its largest transaction during the awards period was a PRs136 billion ($877 million) syndicated loan for the Ministry of Water and Power’s Power Holding. HBL was mandated lead advisor, arranger and the agent for conventional and Islamic facility.
It was also structuring agent for a PRs25 billion ($160 million) sukuk bond issue for K-Electric, the country’s only vertically-integrated power utility. This represented the largest ever bond issue in Pakistan.
Unlike some of Pakistan’s other banks, HBL still finances the coal sector and in 2019 it was the financial advisor and lead arrange for a $527 million project financing for ThalNova. This is a joint venture between Hub Power and Thal, Novatex and a Chinese contractor.
HBL acted as exclusive financial advisor and the mandated lead arranger for the locally currency portion of the deal, as well as the inter-creditor agency and security trustee.
The final major deal it closed during the awards period was more environmentally friendly and in line with the current government’s new renewables energy policy. This comprised a $27 million project debt financing.
BEST BROKER: Topline Securities
It was a challenging year for Pakistan, yet another one. In the fiscal year ending June 30, economic growth will be negative for the first time in 68 years.
That is not a good result for an emerging markets country that is supposed to register strong growth as it rises up the development curve. It represents a difficult backdrop for the local brokerage industry, but it is testament to Topline’s smart strategy that it has been able to remain profitable.
During the awards period, it executed and managed deals worth PRs 19 billion ($121 million), which was quite an achievement in a market with precious few capital markets deals.
As we noted in last year’s awards, Topline is able to navigate choppy water by concentrating on blocks. This awards’ year saw it complete eight led by a PRs1.87 billion ($7.7 million) sale of shares in Hascol Petroleum to Vitol Dubai. This enabled the latter to increase its stake from 29% to 40%.
Other blocks were executed for: Nishat Mills, Nestle Pakistan, TPL Insurance, Murree Brewery, the Pakistan Stock Exchange, Unity Foods and Meezan Bank.
The exchange does not release brokerage market shares, but Topline estimates it has a 10% share in what remains a highly fragmented market.
Much like last year, about 80% of its business comes from institutional clients and 20% from retail. It has a particularly strong showing among foreign investors.
It has, for example, an exclusive relationship with New York-based Auerbach Grayson. About half of its institutional business is from foreign investors,
This figure has dropped from 60% last year, but has held up well in the wider context of a big pull back of foreign trading from the Pakistan equity markets.
BEST INTERNATIONAL BANK: Standard Chartered
FinanceAsia has been giving this award out to Standard Chartered for what feels like as many years as the bank has been in operation in the country. Well perhaps not quite since it first set up operations in 1863.
But what the analogy represents is just how entrenched the bank is in the country and how well it is doing. It had a record year in 2019 with net profits up 16.3% according to S&P Global Market Intelligence data to PRs27.2 billion ($107 million).
It is doing well across the board. Its incredible 93% CASA to deposits ratio and sophisticated risk management have long proved a winning combination. It is also technologically advanced, giving it a clear edge over the rest of the banking sector.
Standard Chartered, therefore, boasts some enviable ratios. ROAE rose from 17.64% in 2018 to 23.63% in 2019, while ROAA rose from 2.05% to 2.66% and NIM from 3.84% to 5.23%.
Meanwhile on the expenses side of the balance sheet, the bank was able to make a substantial dent in its cost-to-income ratio, which improved from 39.59% in 2018 to 30.52% in 2019.
It did all of this against a dismal economic backdrop, reinforcing its safe haven status and a more aggressive push into Islamic banking. Overall, loan growth was up 14.6% in 2019 according to S&P.
As FinanceAsia went to press, the bank lost its CEO Shazad Dada who had been with it for five years. He is moving to a domestic bank. But while Standard Chartered may end up tweaking its strategy under his successor, it seems unlikely that it will cease to remain a profit-making machine for the overall group.
BEST INTERNATIONAL INVESTMENT BANK: Credit Suisse
The economic situation may have been grim, but Credit Suisse remains a consistent presence in Pakistan: a country that remains a key pillar for its frontier markets’ franchise.
Its deal flow was slightly down on last year’s awards period, but given the absence of activity from other international banks, this was still a remarkable feat.
At the close of the awards period, the Swiss bank had closed four deals and had five ongoing across structured finance and M&A. It is a country in which Credit Suisse has always readily deployed its balance sheet. Indeed, it is far better known for its presence in the syndicated loan market in Pakistan than it is in any other Asian country.
Loan deals executed during the period included: a $250 million syndicated term loan facility for the Ministry of Finance in May 2019 and another $155 million one in September, a $30 million facility for LCL Investment Holdings in June and a $250 million structured syndicated financing for Pakistan International Airlines in November.
The bank benefits from continued repeat business out of the government despite changes of administration. Its latest PIA deal marks its fourth for the national flag carrier, while the September term loan for the Ministry of Finance represented its eleventh.
Having developed and cemented strong government relationships, the bank is also planning to extend its investment banking activities further into the private sector. One showcase it can give the latter is its Asia Frontier Markets Conference. This year it is due to be held in London, virus permitting.
On the M&A front, the bank has two on-going deals: the privatization of two LNG-fired power plants and the $1.77 billion sale of a 66.4% in K-Electric to Shanghai Electric Power.
PHILIPPINES
BEST BANK: BDO Unibank
It was another very strong year for BDO Unibank and unsurprisingly it retains a tight hold over this award. The bank’s twin policy of promoting financial inclusion and boosting its consumer and mid-market lending continues to pay dividends.
During the FY2019 Financial Year, the bank saw net income rise an impressive 35% to P44.2 billion ($858.2 million), creating more clear water for itself as the country’s most profitable bank. This momentum also flowed through into nearly all of its efficiency metrics.
ROE jumped from 10.7% to 12.8% according to its own financials, while its NIM expanded from 3.6% to 4.2% and its CASA ratio rose to 73%.
Such a high CASA ration translates to an extremely low cost of funding. This enabled BDO Unibank to remain extremely competitive with its time deposit rates during the first quarter of 2020 as COVID-19 started to take hold.
This created a virtuous circle of attracting even more deposits. As a result, the ratio rose again to 76% by the end of the first quarter. It puts the bank in an even stronger position for when the Philippines economy returns to some form of normality.
Bank officials noted a strong upsurge in digital banking this spring, with some products witnessing a five-fold jump in online transactions. However, the Philippines remains a branch-oriented country and long queues were also reported at the branches BDO Unibank was able to keep open while the country was under lockdown.
This physical presence is the main reason why BDO Unibank still reports a relatively high cost-to-income ratio on a regional basis, although it did decline from 66.3% to 63.8% over the course of the financial year. During 2019, the bank rolled out its targeted 150 branches and was planning a similar number this year.
This expansion is now likely to be temporarily scaled back, as are plans to boost the SME loan book. The latter doubled from P1 billion to P2 billion ($19.9 million to ($39.8 million) last year and while it still represents just 0.1% of the overall loan book, it is a sector showing huge promise and equally high returns.
BEST SUSTAINABLE BANK: The Bank of the Philippine Islands
There was only ever going to be one winner of this award in the Philippines. The Bank of the Philippine Islands (BPI) has been at the forefront of sustainable financing ever since the International Finance Corp (IFC) chose it to partner with to develop sustainable energy finance back in 2008.
Since then it has come a long way. Last year, saw a number of big steps forward included the establishment of a green finance framework in the summer.
BPI then proceeded to issue two bonds off it: a CHF100 million Asean green bond and a $300 million Asean green bond. Proceeds are being used to fund energy and green building projects.
The bank’s next step is to issue a social bond, which it is currently working on. Its overall aim is to remain at the forefront of sustainable financing, but not to outrun the country’s ability to keep up with it.
Over the longer-term, its parent, the Ayala group, is also determined to make its overall portfolio of companies more environmentally friendly and has pledged to divest from any coal-fired projects by 2030.
At the end of 2019, BPI had a P390 billion ($7.8 billion) outstanding balance in loans tied to the UN’s Sustainable Development Goals (SDG) metrics. This was equivalent to an impressive 35% of the bank’s overall corporate loan book.
As of December 2019, BPI had financed a total of 344 projects. By project number, 158 were energy efficiency projects, 30% climate resilience projects and 84 renewable energy projects. In terms of issuance amount, renewable energy topped the list on 63%, followed by energy efficient 19% and climate resilience 18%.
BPI is particularly proud of its work helping the bank’s clients to understand that energy efficiency can actually mean cost savings for their capex. As part of its partnership with the IFC, it has a 20% cost saving target across a building’s water, electricity and carbon footprint.
BEST INVESTMENT BANK: First Metro Investment Corp
This was a tricky award to unpick in 2019 as the main investment banking players all had different strengths. What eventually tipped the overall award in First Metro’s favour, even though it did not win best ECM House or Best DCM house, was its M&A showing.
It had a clear lead in this segment, which we always give higher weight to because of the complexities and timeframes involved. It came second in ECM too and had a good mix of DCM deals including maiden issues for Asia United Bank and ORIX METRO.
This made it balanced across the board.
Its flagship transaction was its advisory work for GT Capital, which divested its 51% stake in Property Company of Friends (Pro-Friends) in a P20 billion ($396 million) asset-for-shares swap. The deal was triggered by a rise in property prices in the area, which no longer made it viable to embark on low-cost housing projects as planned.
First Metro had to co-ordinate with third parties to value Pro-Friends’ land portfolio and assess the accounting, legal, regulatory and tax implications of the move. In total, it took about a year to finalise the deal and transfer the 702 hectares in Cavite.
In addition to this, First Metro was also understandably the advisor after its parent decided to make Metrobank Card Corporation a fully owned subsidiary (it had been a joint venture with ANZ).
On the ECM front, there was very little activity during 2020. There were only three IPOs above $10 million in size and First Metro was on two of them.
The largest was the P4 billion ($109 million) flotation of coconut products producer Axelum Resources. This was the first deal to come to market after the stock exchange introduced a new system to try to boost retail participation.
As a result, the deal saw just over one third placed with small accounts compared to a 10% to 15% range normally.
BEST ECM HOUSE: BDO Capital
BDO Capital was the runaway winner for this award, doubly underlined if preferred deals are included in this category rather than as debt.
It was a year when equity capital markets were quiet, but BDO was the only bank that was active across all the main categories.
It was one of two bookrunners on an IPO: the P896.55 million ($17.66 million) flotation of well-known fruit and beverage kiosk operator Fruitas. The deal was small, but it came during an awards period when there were only four IPOs.
More significant was the work it did for Travellers International Hotel Group and Cemex.
The former decided to undergo a P6 billion ($118 million) take private exercise and delist itself from the local bourse. BDO had to be careful as it was the original listing advisor and the key with all take-private deals is persuading minority shareholders that they are being offered a fair valuation.
The bank guided Travellers (a joint venture between Andrew Tan’s Alliance Global and Malaysia’s Genting) throughout the entire tender offer and delisting process, which was completed in October. The transaction had many moving parts including arranging funding for the payment of tendered shares other than held by non-public major shareholders, then crossing them on the exchange.
BDO’s biggest equity deal of the year was also the market’s largest: a P12.8 billion ($251 million) stock rights offering for Cemex Holdings. The only other bookrunner was HSBC.
Cemex is a repeat client for BDO, underlining the bank’s strong investment banking franchise. The deal faced a challenging environment given the emergence COVID-19 and was exacerbated locally by the eruption of the Taal volcano.
But it got done and its completion in January proved to be fortuitous given what followed. Proceeds are being used to finance the expansion of one of its cement plants.
BEST DCM HOUSE: China Bank Capital
This is always a hotly contested award given that DCM is the bread and butter for all the Philippines’ banks and securities house. This year also marks the third time in a row that it has been won by China Bank Capital (CBC).
BDO ran CBC a very close second because the former has a very strong roster loans in addition to its run of deals in the bond market. But in the end, we decided that CBC was more balanced across all of the main bond market products: preferred deals, corporates, sovereign-related, financials, foreign currency, sustainable finance.
Dealogic also ranks it number one among the domestic houses with an 8.8% market share during the awards period.
Highlights included three sole-led issues for AyalaLand, Phoenix Petroleum and Century Property Group. The P7 billion issue for Phoenix also represented the largest-ever preferred deal executed on a sole books basis since 2011.
Another standout was the number of G3 currency bonds it executed: AYC Finance, AC Energy and Aboitiz Equity Venture’s respective $400 million bonds, plus Jollibee Worldwide’s $600 million perpetual capital securities. This latter deal was the first capital markets transaction from the holding company of the Jollibee group.
Other debut issuers that CBC helped bring to market included San Miguel Food & Beverage following its local listing in late 2018.
When it comes to green financing, one deal in particular stands out: the Development Bank of the Philippines P18.1 billion ($360 million) Asean sustainability bond. This was not only the largest local bond issued by a government financial institution in the country, but also just the first offering from a P50 billion ($990 million) programme.
BEST BROKER: First Metro Securities
This award recognises the work that First Metro Securities has done to develop a more active retail investor base in the Philippines. It has certainly been necessary over the past year.
Foreign investors turned net sellers in 2019 and after a brief resumption of buying towards the end of the year, retreated again early this year after the COVID-19 pandemic began to gather steam. Domestic retail investors took their place: something the government is also encouraging to develop greater liquidity on the local bourse.
At the peak of the country’s lockdown, First Metro was experiencing 100 retail account openings per day compared to about 40 back in 2018. It also witnessed a big swing in trading volumes from a 60%/40% retail/institutional split to an 80%/20% one.
First Metro is ensuring it is serving retail investors better by giving them more access to research. It has split its research team into two so that one group purely concentrates on what retail investors want to read.
It is also conducting a lot more webinars: an average of two to three per day. It boasts that it produces more each year than calendar days.
First Metro is also the only private sector entity that sells government bonds to retail investors online, starting in 2019. The other two deals are government entities: Lank Bank of the Philippines and Development Bank of the Philippines.
Another big initiative is digital. Recognising low bank account penetration rates in the country, First Metro facilitated e-wallet funding in 2019 through GCash and has also partnered with 7-11.
BEST PRIVATE BANK: BDO Private Bank
When FinanceAsia was assessing the awards this time last year, the whole industry was awaiting the government’s Comprehensive Tax Reform Programme as a potential boost to AUM through the repatriation of offshore money onshore.
That legislation never materialised and is now considered to be well and truly on the backburner. But BDO Private Bank, nevertheless, had an impressive 2019.
AUM rose 12.65% to P451.69 billion ($8.91 billion) and the bank was able to double its NIM. Together this helped BDO to more than double net profits from P301 million ($5.91 million) in the 2018 Financial Year to P878 million ($17.32 million) the one after. The overall number of clients also rose from 8,171 to 8,397.
One driver was a piece of legislation that did get passed. The government reduced death duties on estates from 20% to 6%.
Bankers say this move encouraged some of its older clients to engage with a subject they had been previously been loath to address and has boosted the bank’s inheritance and tax planning business.
COVID-19 has also prompted a change of strategy that will embrace digital far more actively. BDO has noted that clients not only want more digital access, but were also far more engaged with the bank’s content during the Philippines lockdown.
The bank’s webinars attracted far more attendees. They were also far more willing to ask questions than they had previously been at physical events.
A third driver of the bank’s profits is the changing mix of foreign and domestic investments. The Philippines’ relatively shallow capital markets means that foreign-currency products are particularly important.
The bank runs an open architecture platform and deepened its relationship with a number of international fund managers including Blackrock, which added a suite of new products alongside the ETF funds it had previously been providing. BDO also introduced physical gold as part of its potential portfolio mix.
As a result, the ratio of peso and foreign currency holdings moved from 60% local and 40% foreign the previous year to 55% and 45% respectively during 2019.
BEST INTERNATIONAL BANK: Citi
With an overall strong business case, it was hard not to hand this award to the US bank. A strong financial year, producing a 10% increase in pre-tax profits and a 14% increase in total income, Citi is the largest foreign bank by number of employees, customers, asset base and profitability.
As to be expected, Citi performed well in fixed income and debt execution, working on nine deals during the awards period.
Stand out transactions include its joint global co-ordinator role on Jolibee’s $600 million perpetual bond. The transaction represents the largest-ever debut US dollar-denominated senior perpetual issuance by a Philippine corporate. It also achieved the lowest-ever coupon for an unrated perpetual from Southeast Asia.
In the markets business, Citi also enjoys the status of being the only foreign bank to be classed as a market maker by the government. In terms of market share within the FX, FX swaps, and fixed income sectors, it occupies 15%, 18%, and 12%, respectively.
On the transaction banking side, Citi partnered up with Bayad Center last year to launch a multi-currency payment solution to overseas Filipino workers abroad via the Bayad Center mobile app – it has proven a popular tool with airlines, payment service providers and online marketplaces
BEST INTERNATIONAL INVESTMENT BANK: BofA Securities
This was the toughest category of all to judge in the international awards this year.
UBS has held the crown in the Philippines for a very long time and has an enviable and unsurpassed track record. It also had a good 2019, with a roster of pipeline deals that seems highly likely to put it back on top next year.
But in the end it came down to one deal, the $1.3 billion acquisition of Metro Pacific Holdings by KKR. This was an unusual deal because of its dual track structure.
BofA Securities had the mandate for the M&A process and UBS had the mandate for an IPO that was aborted after KKR made a pre-emptive bid a few weeks before the official deadline. The investment bank had to deal with a highly complex transaction with multiple parallel moving parts.
Over 40 investors had initially been shortlisted before KKR entered the fray, necessitating speedy negotiations and due diligence in just over one week. The result was the largest-ever private equity investment in the Philippines and the largest-ever healthcare M&A deal in the country.
BofA Securities other strong calling card is its green credentials. It is one of the most active investment banks in the sector and the Philippines is starting to take one of the leading roles in South East Asia.
The investment bank put its knowledge to good use in 2019, helping the Bank of the Philippine Islands (BPI) to establish a green finance framework. In September, it then went on to act as bookrunner on BPI’s $300 million Asean green bond, the first by a Philippines’ bank.
One day later, it was also the bookrunner on a $300 million sustainability bond for Rizal Commercial Banking Corp (RCBC). This also represented the debut sustainability bond from the Philippines.
Then there was SMC Global Power. It came to the international bond markets three times between April and October 2019, raising a total of $1.3 billion. BofA Securities was a bookrunner on all three deals.
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