Asian banks sought for deals

Monday August 17, 2009

PETALING JAYA: In the aftermath of the global financial crisis, Asian banks are increasingly being sought after for deal-making and capital raising.

“The financial crisis has been an eye-opener,” said RHB Investment Bank chief executive officer Chay Wai Leong.

“International liquidity has been very tight and in recent large fund raising exercises, domestic liquidity had played a crucial role.”

Many things that were literally unheard of in the past are happening:
·Asian banks going on international roadshows for local clients; and
·Increasing number of requests to participate in bilateral and syndication loans.

“The investment banking community reacts very quickly,” Chay told StarBiz.
Seeing the successful capital raising and backstopping in recent rights issues, global banks now appear to have “more respect” for local banking names.

“We know where the distribution is,” said Chay.

“Asian liquidity is very strong and is likely to play a big part in the upcoming initial public offering of the Asian life unit of American International Group Inc.”

The recent oversubscription to the substantial rights issues of Malayan Banking Bhd (RM5bil), TM International Bhd (RM5.25bil) and DBS Bank (S$2.8bil) indicates the power of domestic liquidity and the dynamic role of local banks.

“In the past, it could not be done,’’ said Chay. “That has opened the eyes of a lot of people that local banks are capable of handling huge deals and that has become a lasting impression.’’

“We are being invited to do deals beyond Malaysian shores,” said Maybank Investment Bank CEO Mohammed Rashdan Yusof.

“We are also getting requests from foreign companies outside of Asean.”

Previously the domain of prominent global names, the deal-making and banking markets are now increasingly being opened to Asian banks that are now big names themselves.

“There is a lot of lending from the banking market as capital markets are still tight,” said Rashdan, adding that requests for funding involved infrastructure, utilities and property development in the region.

Pointing to a renewed focus on Islamic capital markets, Rashdan said a funding mix of syndication loans as bridgers during the construction period and bonds in the form of Islamic finance were also becoming popular.

Chay sees the potential for more bond deals, pointing to the resurgence in the ringgit bond and sukuk markets. RHB had completed a roadshow in Kuwait, Qatar and Saudi Arabia where interest in the Malaysian sukuk market was still strong.

Global offerings

In terms of global offerings, Asian banks are growing in prominence. “The Asian bid is getting much larger in proportion to the global order book especially for strong Asian credits,’’ said Lee Kok Kwan, deputy CEO and group treasurer of CIMB Bhd.

CIMB has just brought to market Petroliam Nasional Bhd’s global US dollar offering of five-year sukuk and 10-year bonds for which issuance was upsized to US$4.5bil, representing the largest issuance to date out of South East Asia in 2009.

“The Asian bid of the order book was particularly strong and respresents a solid turnaround for future issuances of Malaysian credits,’’ said Lee. “It is also a clear example of the coming of age of some Asian banks to competently bring global issues to the market for corporate clients in terms of syndication, distribution and execution.’’

Moreover, the far-reaching impact of the Asian recovery, post-crisis, is not just on investment but also commercial banking.

“Coming out of this recession, the East has piled up savings to invest in its own economies,” Lee said.

Upcoming trends, according to Lee, include the faster rate of recovery for Asia and the BRIC (Brazil, Russia, India and China) countries; higher intra-Asian investments coupled with a potentially more inward-looking region, which bodes well for further expansion in infrastructure development.

Hard infrastructure is likely to be the emphasis in India and Indonesia, while China, having built much of its hard infrastructure, is focusing on its soft infrastructure such as rural development.

Due to sheer proximity, Asian banks are projected to be the major beneficiaries especially in terms of their retail and mortgage businesses, regional activities and movements.

“Credit decisions can be made faster by Asian banks that understand local companies better,” said Lee, adding that moves by Asian countries to develop their own currencies, loans and deposits as well as capital market systems would benefit local banks.

“This will reduce funding costs,” Lee explained, adding that local banks had a higher competitive advantage in their ability to raise local currency deposits.

“Once the push to domestic economies gathers steam, the full array of banking activities from retail to corporate will rise,” he said.

This will enable Asian banks to realise their vision of becoming regional champions.

So far, it appears that vast opportunities await Asian banks in terms of further business development. In terms of mergers and acquisitions (M&As), it may be a different ball game.

“If we take Asia to include Australia, the recent acquisition of the Asian operations of the Royal Bank of Scotland by the Australia and New Zealand banking group indicates that a fairly strong Australian bank has achieved its target of becoming a super regional bank,” said Rashdan.

Otherwise, M&As remain challenging for South East Asian banks, some of which had just completed large acquisitions as in the case of CIMB and Maybank.

Rashdan suggested a Chinese or Indian bank could embark on an acquisition, which may not be easy to execute, as seen in the integration and cultural issues faced by Nomura Holdings when it acquired the Asian operations of Lehman Brothers.

http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4530770&sec=business