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Monday, 17 December 2018

Domestic bank of the year

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As Asia’s local banks push for a bigger share of the region’s investment banking business, one stood out for making a success of an audacious acquisition. For delivering on a defined growth strategy, CIMB is IFR Asia’s Domestic Bank of the Year.

Domestic bank of the year

Domestic bank of the year

CIMB broke out of its comfort zone in 2013, reaping the benefits of an expanded investment banking platform and connecting issuers and investors across Asia.

An array of equity and advisory mandates showed the bank’s ability to make its new acquisition strategy work for its clients. While Malaysia’s second-biggest lender has expanded its footprint significantly, it has done so without diluting its focus or losing grip on costs.

“We are moving the platform out of Malaysia and into Asia Pacific,” said Kong Sooi Lin, deputy chief executive of CIMB Investment Bank. “We want to be strong in our local markets, but also in the cross-border business.”

CIMB bought most of Royal Bank of Scotland’s Asian equities and investment banking units in 2012 in a cherry-picked acquisition that complemented its existing South-East Asian platform. The acquisition included RBS’s cash equities, equity capital markets and investment banking businesses in Australia, China, Hong Kong and Taiwan, as well as its ECM and investment banking units in Malaysia, Singapore, Indonesia and Thailand.

The purchase presented a number of regulatory challenges, with the final licence falling into place in Taiwan only in June 2013, and brought together two very different banking cultures. With deal flows in Malaysia and Indonesia under pressure, however, CIMB’s expanded footprint paid dividends in 2013.

The bank completed 73 cross-border deals in 2013, up from 30 in 2012. It turned numerous former RBS customers into CIMB clients, using the newly acquired platform to break into IPOs in Hong Kong, structured finance in Australia and business trusts in Singapore.

“The RBS platform plays a big role in our cross-border business and we’ve also taken on several of RBS’s clients, such as China Huishan Dairy,” said Kong.

CIMB was a bookrunner on Huishan Dairy’s high-profile HK$10bn (US$1.3bn) IPO in September. It was Asia’s second-largest IPO of the year at the time, and was credited with reopening the city’s equity market for big new issues after a drought of several months.

CIMB’s roster of deals during IFR’s review period demonstrated a newfound ability to work on deals well beyond its home markets.

It advised on an A$532m (US$484.5m) securitised sale and leaseback of warehouses for Australian supermarket Wesfarmers, and underwrote an A$500m block trade in Australian miner Fortescue in November.

The bank was also a joint bookrunner on Asian Pay Television Trust’s Singapore IPO of US$914m in May, bringing a Taiwanese asset to the Singapore market for an Australian sponsor.

“Asian Pay TV is one of our biggest clients,” said Kong. “How did that business come about? It’s from our relationship with Macquarie in Australia.” Macquarie International Infrastructure Fund sold its stake in cable TV business Taiwan Broadband in the Singapore listing.

CIMB’s plans for a Philippines acquisition hit a stumbling block in mid-2013, but the bank chalked up an IPO mandate with the listing of casino resort developer Travellers in October.

It also worked with private-equity group CVC on its US$1.5bn re-IPO in April of Indonesian retail chain Matahari, one of the year’s most popular share offerings.

CIMB remained a leader in Malaysian equities in a less active year. Malaysia’s elections kept a lid on deal-flows in the early part of the year, followed by a sharp selloff in global emerging-market stocks and currencies during the summer.

The Malaysian equity market was less active, compared with the blockbuster 2012, but CIMB was involved in seven of the 10 largest Malaysian ECM deals during the period under review. The deals included the M$2.7bn (US$844m) IPO of UMW Oil & Gas, the biggest float of the year and the most popular, with an institutional order book more than 50x subscribed.

Demand for Malaysian securities throughout Asia in the period under review helped CIMB execute its expansion strategy.

“If you look at the individual markets in the region, investors demand Malaysian deals,” said Kong. “In Hong Kong, there’s a market for Malaysia.”

CIMB provided a full suite of banking services to support SapuraKencana’s acquisition of Seadrill’s oil-rig business, first, with a US$1.85bn syndicated bridge loan and, then, a US$488m share placement.

ASEAN leader

Across its core South-East Asia region, CIMB ranked fourth for all equity issues during IFR’s review period, and was comfortably the top Asian bank, despite substantially lower volumes in its home market.

CIMB ranked 17th as bookrunner of syndicated loans in the ASEAN region, underlining its ability to compete for investment banking business without leading with its balance sheet.

The bank remained dominant in debt capital markets across the region, with an 11.8% share of ASEAN bonds during the period under review. It arranged 28% more volume than its nearest competitor – no mean feat in a year when Malaysian bond volumes plunged almost 50%, a result of the election timeline and market volatility.

“CIMB has arguably the most regionally diverse debt capital markets franchise, and has the know-how across more currencies in the ASEAN region, relative to other domestic bond houses,” said Lee Kok Kwan, deputy CEO for group treasury and investments. “Our teams at CIMB are proud of our effort in harmonising ASEAN.”

CIMB led its home market, introducing new structures, such as Malaysia’s first Basel III-compliant capital securities, the first retail bond and an innovative electronic bookbuilding platform.

The bank has managed its expansion carefully to avoid distracting its focus at home, while also retaining tight control on costs. Investment bankers travel economy, and resources and personnel have been shifted to where they can generate the biggest returns, even if it has meant uprooting some of the higher earners from the former RBS platform.

“We are very mindful of returns for our shareholders and we look closely at the bottom line,” said Kong.

While the impact of the RBS acquisition has been most obvious in generating equities business, a number of equity-focused former RBS employees have been given broader responsibilities to encourage them to look at debt deals, supporting an important business line for CIMB. Following on from 2013’s achievements in equities, further expansion is planned for 2014 in debt capital markets, especially in North Asia.

At the same time, the sector coverage model of RBS’s investment bank has brought a new dynamic to the lender’s local teams, encouraging colleagues to think beyond their own market. The number of cross-border trades completed in 2013 suggest those efforts are already paying off.

To see the digital version of this report, please click here.

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