Trade war threats, Brexit and other geopolitical events put pressure on institutions in 2018. Global Finance’s Best Investment Banks found ways to make the year a success.
It has been a decade since the worst financial crisis in a generation, and capital markets have had a strong bull run. Even so, investment banks endured another volatile year in 2018.
Digital transformation preoccupied the vast majority of institutions, with 85% of banks implementing new technology to spur efficiency, manage risk and reap more benefits from growth opportunities, according to EY’s Global Banking Outlook survey. The world’s largest banks have significantly improved their capital positions since the crisis, developing and institutionalizing recovery and resolution plans, often at the behest of regulators. Naturally, the cost of compliance has risen since the financial crisis, but appears to be stabilizing. EY believes the industry has crested the peak of investment driven by regulatory demands.
The focus on technology is partly driven by the revenue picture. Although markets globally saw some pockets of strong growth this past year, overall investment banking revenue fell to $79.7 billion, from $82.4 billion in 2017. Most regions were down as well: North America posted a 3% decline and Latin America a 24% drop, while the Middle East and Africa declined 15%, North Asia 20% and Southeast Asia 6%, according to Dealogic. Only Europe, up 2%; and Australasia, up 20%, recorded advances.
The winners of Global Finance’s Best Investment Banks 2019 awards stand out for their ability to maintain and even strengthen their market position in a difficult environment. The winners were selected by Global Finance’s editors with the input of industry experts using criteria ranging from market share to number and size of deals, service and advice, structuring capabilities, distribution network, efforts to address market conditions, innovation, pricing, after-market performance of underwritings, and market reputation.
Scoring the highest in all of these criteria and taking the top spot as Best Investment Bank overall, as well as Best in North America, was J.P. Morgan, whose global investment banking revenue share jumped to 8.7% in 2018 from 8.1% the previous year. J.P. Morgan’s performance is more impressive considering that the top 10 global banks collectively brought in roughly $1.5 billion less in total investment banking revenue last year than in 2017, according to Dealogic. Net income for J.P. Morgan in 2018 was $12 billion.
The bank also benefited from strong M&A and equity capital markets activity, shooting to the top of Dealogic’s ranking by booking $120 million more in revenue year-on-year. When Daniel Pinto, co-president and co-COO, spoke to investors earlier this year about the firm’s global investment banking operations, he said the bank is gaining market share at a faster rate than its peers. Across all regions, J.P. Morgan improved its share of the M&A market to 8.9%, its equity capital market share to 9.1%, and its debt capital market share to 8.3%.
J.P. Morgan participated in seven of the top 10 fee-paying M&A deals in 2018 and generated $7.5 billion in fees: a full-year record for the firm. One notable deal this past year was Walmart’s purchase of India’s largest online retailer, Flipkart, for $16 billion. This was India’s largest acquisition deal and the world’s biggest acquisition of an e-commerce company. J.P. Morgan also advised on Altria’s $12.8 billion investment in JUUL; and AXA’s all-cash, $15.3 billion purchase of property and casualty insurer XL Group.
In Western Europe, Barclays took the Best Investment Bank spot. Its investment banking division recorded revenue of $7.6 billion in fiscal 2018, an increase of approximately 5% from the previous year. Much of the credit for the jump went to the equities trading desk, which saw a whopping 25% increase in income over the previous year.
The bank also posted blockbuster bond deals in 2018, including CVS Health’s $40 billion bond sale—the third largest on record—for the purchase of Aetna; and prominent advisory work for deals, including KKR’s $5.57 billion—plus debt—purchase of Envision Healthcare.
Barclays’ management attributes its resilience to a long period of internal reform. “When we began 2018, we had all but reached the end of the huge restructuring of the business, which we had commissioned with our strategy in March of 2016,” Group CEO James Staley said on an earnings call. “Barclays today is consequently in its strongest state since the financial crisis. With our restructuring done, and now largely unencumbered by issues that have been such a heavy drag on our performance, we can look forward to enhancing shareholder returns and distributions.”
In Latin America, where Dealogic reports that year-over-year investment banking revenue fell a staggering 24% to $1.5 billion and the political crisis in Venezuela continued to rock the region, this year’s overall winner was BBVA. Despite exiting the Chilean market and selling its BBVA Chile unit to Canada’s Scotiabank for $2.2 billion, the bank says it is still committed to Latin America. “We want to be the bank of first choice in the region for our clients,” says José Ramón Vizmanos, head of corporate and investment banking.
Among BBVA’s biggest Latin American transactions in 2018 was a $400 million term loan for Iberdrola, the first green loan in Mexico and the region. Since the deal closed in April, the bank has replicated the green loan structure elsewhere in the region. In October, it led the first such deal in Peru for Ferreycorp.
“Our success derives from our strong footprint in the region, with presence in several countries, which allows us to offer US dollar and local currency financing,” Eddy Lacayo, managing director of corporate lending for Latin America, said in a published report. This is “coupled with an extensive expertise in several products including corporate lending, project finance, leverage finance, debt capital markets and others.”
BBVA has also succeeded in the loan area. “The multicurrency structure is particularly useful to clients with operations in multiple countries across Latin America,” Lacayo was quoted as saying. For example, BBVA led hydroelectric supplier Enel Chile’s $2 billion bridge financing, which had dollar-denominated and peso-denominated tranches, in 2018.
Apart from the obvious political challenges in Venezuela, Vizmanos sees no political challenges in the near term for the rest of the region. “I think what we need to see is an economic recovery, with investment coming back to the region,” he says. “For a couple of years, investment was lower than in previous years; but I am optimistic we will see deals in the mining, airport, toll road and energy sectors.”
In Central and Eastern Europe, Russia’s VTB Capital took the top investment banking spot, scoring in the top three in M&A, equity and debt capital markets. Deal highlights in 2018 included “sole-leading an aggregate of $5 billion worth of sovereign bond issuance for the Russian Federation and leading both of the Russian ECM [equity capital market] deals completed in 2018,” says Riccardo Orcel, head of global banking. “In Turkey, VTB Capital was also busy, notably closing a $500 million eurobond issuance for petrochemical supplier Petkim Petrokimya.” Some deals have been delayed by sanctions.
Despite a challenging year, Orcel sees a strong pipeline of both initial and secondary public offerings in 2019 across a broad selection of industries. “The lifeblood of any emerging market should be new securities issuance,” he says, “and we are encouraged by both the quality and the diversity of companies that are potentially looking to approach the markets in 2019.”
Rounding out the winners regionally, DBS Bank won the Best Investment Bank award for the Asia-Pacific region, where it advised and lead-managed the largest number and highest value of equity deals on the Singapore Exchange. The Singapore-based institution lead or joint-lead managed a total of 19 equity issuances, including three IPOs, 11 placements, three rights offerings and two preferential offerings, raising approximately $3.2 billion that accounts for 80% of the total equity raised on the Singapore market.
Looking ahead, “ECM activity is expected to experience moderate growth on the back of global events that are expected to have a net neutral effect on the market,” says Tan Su Shan, group head, institutional banking group at DBS. “We continue to see increased cross-border investments in the region, with the buildup of liquidity across Asia. Even with the tightening of outflows from China, countries such as Singapore have increased their cross-border investment activities.”
While challenging macroeconomic climates dampened investor activity in Africa in 2018, Standard Bank shone in the region, earning a nod as Best Investment Bank. It announced or closed 20 M&A deals across the continent, with a combined deal value of $6.1 billion across financial services, consumer goods, mining, health care and industrials.
Finally, in the Middle East, Egypt-based EFG Hermes posted an excellent year, closing 19 transactions, and is Global Finance’s Best Investment Bank in the region in 2019. The third quarter was the firm’s most successful to date, with nine executed deals worth a combined $870 million. Transactions included the investment banking group’s first frontier market IPO, which launched Bangladesh microfinance lender ASA International on the London Stock Exchange in a transaction worth $163 million. Overall, EFG executed deals on five exchanges for companies based in six emerging and frontier markets.
Global Finance’s 2019 award winners managed to carve a successful year out of a volatile landscape punctuated by political turmoil, trade wars and the unique ordeal of the Brexit negotiations. Many, if not most, are expecting the current year to see some of these issues ironed out and a less volatile market for growth emerge.
WORLD'S BEST INVESTMENT BANKS 2019
|Global Best Investment Bank||J.P. Morgan|
|Best Boutique Investment Bank||Allen & Co.|
|Best in Emerging Markets||VTB Capital|
|Best in Frontier Markets||Kazkommerts Securities|
|Best Equity Bank||J.P. Morgan|
|Best Debt Bank||DBS Bank|
|Best M&A Bank||UBS|
|Best Up & Comer||Capstone Headwaters|
|Best Bank for IPOs||Morgan Stanley|
|Best Bank for New Financial Technology||Citi|
|North America||J.P Morgan|
|Central & Eastern Europe||VTB Capital|
|Middle East||EFG Hermes|
|Angola||Standard Bank Angola|
|Argentina||Banco de la Nacion Argentina|
|Austria||Raiffeisen Bank International|
|Canada||RBC Capital Markets|
|Dominican Republic||Banco Popular Dominicana|
|Georgia||Galt & Taggart|
|Iceland||Straumur Investment Bank|
|India||Kotak Investment Banking|
|Iraq||Investment Bank of Iraq|
|Ireland||Allied Irish Bank|
|Japan||Mizuho Financial Group|
|Jordan||Al Arabi Investment Group|
|Kenya||Faida Investment Bank|
|Kuwait||Markaz Investment Banking|
|Malaysia||Maybank Investment Bank|
|Mongolia||Mongolian Investment Banking Group|
|Mozambique||Banco Nacional de Investimento|
|Nigeria||Coronation Merchant Bank|
|Oman||Gulf International Bank|
|Philippines||BDO Capital and Investment Corporation|
|Qatar||Qatar National Bank|
|Saudi Arabia||Samba Capital|
|South Africa||Standard Bank|
|South Korea||Hana Financial Group|
|Taiwan||Fubon Financial Holding Co.|
|UAE||First Abu Dhabi Bank|
|United States||J.P. Morgan|
Global Finance editors, with input from industry experts, corporate executives, investors and consultants, used a series of criteria in order to select the winners of these awards.
Criteria included market share, number and size of deals, service and advice, structuring capabilities, distribution network, efforts to address market conditions, innovation, pricing, after-market performance of underwritings and market reputation.
We used information provided by the banks, as well as material gathered from the other sources, to score and select winners, based on a proprietary algorithm that assigns a different weight to each component. Deals announced or completed in 2018 were considered.
In the review process, Global Finance has focused on the full spectrum of banks, from relatively small ones in frontier markets that have barely appeared on Wall Street’s radar screen to global banks that lead the league tables for equity, debt and M&A worldwide. The same applies to Deals Of The Year and Best Derivatives Providers: They are selected not just based on their size but on their relevance.
This year, greater weight has been assigned to innovation and new technology than in previous years, in light of current trends in global capital markets. As a result, for the first time we have assigned an award to the banks Best For New Financial Technology on a global and regional base, as applied to investment banking.
Many winners submitted, in support of their applications, information and perspectives that may not be publicly available. Banks that do not submit entries can still be selected as winners through Global Finance’s review process, because editors execute their own unbiased original research in addition to evaluating entries. However, experience shows that the banks that submit entries successfully presenting themselves as model financial institutions, with detailed explanations of differentiation in services for corporate clients as compared with services provided by peers, achieve better results.
Financial institutions that submitted entries provided information in the following areas: 1) Key financials, including earnings, ROE, and market share; 2) Details of key capabilities and services offered, including deal-structuring capabilities, distribution network and staff dedicated to investment banking; 3) Innovation in financing and new product introduction; and 4) Competitive pricing and after-market performance of underwritten securities. Global Finance adheres to journalistic best practices for protecting the confidentiality of information supplied in the entries.