By Thomas Clouse
BEST CITY COMMERCIAL
Bank of Nanjing
China's more than 140 city commercial banks are facing increasing competition from each other as well as their bigger national counterparts and smaller rural finance neighbors. Against this competitive backdrop, some city commercial banks are distinguishing themselves from their peers and building national brands. Bank of Nanjing is one example. In the first half of the year, Bank of Nanjing derived more than half its revenue from areas outside the city while maintaining its focus on successful business practices. As a result, net profits increased by 37%, while the nonperforming loan ratio (NPR) stood at only 0.75%.
BEST CONSUMER BANK
China Merchants Bank
CMB has consistently posted strong revenue and profit growth, while earning a reputation for product innovation and customer service. CMB has strong credit card and consumer finance services and derives an uncommonly high 32% of its profit from its retail department. The bank has recently invested in new mobile banking and payment systems and increased its retail deposits by 12.7% in the first half of the year, the highest rate among China's small and medium-size banks. The bank’s strong reputation and innovative approach will be important as interest rate reform progresses in coming years.
BEST CONSUMER BANK (FOREIGN)
Few foreign banks have been brave enough to enter China's very competitive retail banking market. Among them, HSBC has been the most aggressive. The bank began offering retail services in 2007 and now operates 117 outlets in 41 cities, employing over 5,000 people. By assets, HSBC ranks as China's 26th-largest bank and the largest foreign bank by far. HSBC offers multicurrency debit cards and a variety of wealth management services. HSBC has also teamed up with Bank of Communications, in which HSBC owns a 19% stake, to jointly manage credit card operations.
BEST CORPORATE GOVERNANCE
Ping An Bank
Ping An Bank, formerly known as Shenzhen Development Bank, has taken on a number of domestic and foreign stakeholders in its two-decade history. In August, after financial conglomerate Ping An Group had bought up stakes in 2010 and 2011, the bank merged with PAG's banking operations and changed its name to Ping An Bank. The bank's diverse collection of owners has strengthened its corporate governance structures, and the trend will likely continue with PAG, which itself has diversified shareholders. Ping An Bank will also benefit from the strong capital base and wide distribution network of PAG.
BEST CORPORATE BANK
Industrial and Commercial Bank of China
ICBC is the world's most profitable bank and leads all Chinese banks in corporate deposits and corporate lending. The bank has not grown complacent in its success, however, continuing to diversify its product line and tailor its services to varying customer segments. For smaller corporate customers, ICBC employs a range of tools such as third-party guarantees, small-enterprise joint guarantees and portfolio guarantees to better manage risks and facilitate lending. For its larger customers, ICBC has taken advantage of its rapidly growing international network to help Chinese corporations realize their own international ambitions.
BEST CORPORATE BANK (FOREIGN)
Citi has utilized its international and domestic networks to help multinational companies operating in China and Chinese companies operating abroad. The bank has in recent years set up China-focused desks in London, New York, Dubai, Johannesburg and other locations around the world to facilitate international transactions for its clients. Citi has also helped domestic businesses tap new sources of funding through dollar-denominated and renminbi-denominated (dim sum) bond issuance, syndication, bridge financing and asset-based financing. As a result of its efforts, Citibank China's operating profit for its corporate banking business rose more than 51% last year.
BEST BOND UNDERWRITING
Industrial and Commercial Bank of China
China's large companies are increasingly turning away from bank lending to raise money less expensively through bond issuance. ICBC has taken advantage of the growing market for underwriting of those bonds. ICBC has been the largest underwriter of corporate bonds in China for the past five years and will likely retain that title for 2012. The pace did slow slightly in the first six months of the year, however, with the bank underwriting bonds worth RMB130 billion ($20 billion), down from RMB134 billion in the same period last year.
BEST BOND UNDERWRITING (FOREIGN)
While mainland China's bond market has been heating up, foreign banks have so far been left out in the cold. Only HSBC has received approval to underwrite bonds in mainland China. HSBC likely won the approval of regulators based upon its success in underwriting renminbi–denominated bonds in Hong Kong, also known as dim sum bonds. Over the past year, HSBC has underwritten more dim sum bonds than any other bank and in May issued the first renminbi-denominated bonds in London. The bank also worked on Sinopec's $3 billion bond offering in May, the largest ever dollar-denominated bond offering by a Chinese corporation.
BEST CREDIT CARD
Industrial and Commercial Bank of China
ICBC launched several new products in the past year to enhance its popular credit card services. A multicurrency credit card was among those new products. It allows users to charge items in renminbi and ten other currencies without incurring any conversion fees. ICBC also expanded its credit card merchant network, added SMS (text) notification options, and improved its online services. As a result, the bank's credit card consumption volume increased by 36% year-on-year in the first half of the year, and ICBC maintained its industry-leading position in number of cards issued, consumption volume and overdrafts.
BEST CREDIT CARD (FOREIGN)
Citi issued an independently branded credit card in China in August, marking a first among Western banks. The landmark move comes after years of successful credit card cooperation with Chinese banks such as Shanghai Pudong Development Bank and Guangfa Bank. Citi will benefit from its experiences in these partnerships as well as its expertise globally in the credit card business. Citi's new credit cards offer both renminbi and dollar services and use Unionpay’s domestic network and Mastercard and Visa networks overseas.
BEST EQUITY UNDERWRITING
CITIC Securities leads all banks and securities firms in total value of the deals on which the firm has worked so far this year. According to data provider Dealogic, CITIC worked as bookrunner on 22 deals worth almost $4.7 billion through mid-September. Those deals included the $219 million IPO of China Daily's online news portal in Shanghai as well as several smaller IPOs on the ChiNext exchange in Shenzhen. In July, CITIC purchased Hong Kong–based brokerage CLSA Asia-Pacific Markets, marking the first major acquisition of a foreign competitor by a Chinese securities firm.
BEST EQUITY UNDERWRITING (FOREIGN)
While the IPO market has slowed in China, follow-on issuance has picked up drastically, increasing 64% year-on-year through mid-September, according to Dealogic. Goldman Sachs has adjusted its strategy accordingly, acting as joint bookrunner for Bank of Communications’ $8.9 billion private placement in March, the largest follow-on offering in 2012 to date. Goldman also acted as bookrunner for VIPshop's $72 million IPO, the first US IPO by a Chinese company since August 2011, and Country Garden's $400 million accelerated-book-build offer, the largest equity offering from the Chinese property sector since 2010.
BEST INFRASTRUCTURE LENDING
China Construction Bank
A few years ago, China responded to the financial crisis abroad by launching infrastructure projects at home. Many banks took advantage of the government's infrastructure investment plans to drastically expand their lending portfolios, sacrificing some asset quality in the process. CCB took a more measured approach, and now that the dust has settled, the bank is ramping up its investments in infrastructure projects, many of which are already under way. CCB's infrastructure lending totaled more than RMB2 trillion at the end of June, accounting for 43% of the bank's total corporate lending portfolio.
China International Capital Corporation (CICC)
While equity markets struggled this year, China-related mergers and acquisitions soared to a new record, led by a 32% increase in outbound M&A. CICC has advised on 21 China-related M&As so far this year, according to Dealogic, more than any other domestic or foreign firm. The firm advised Lenovo on its $150 million acquisition of Brazil's largest PC maker, CCE, and assisted Ping An Group in its successful purchase of Shenzhen Development Bank.
BEST M&A (FOREIGN)
Goldman led all banks and securities companies in total value of its China-related M&A deals, advising on deals worth more than $34 billion through mid-September, according to Dealogic. One of those deals, CNOOC's $19 billion bid for Canadian oil company Nexen, will rank as the biggest overseas investment of any Chinese company to date, if Canadian regulators approve. Goldman also advised internet video company Youku in its acquisition of its primary competitor Tudou, as well as Yum Brands’ $587 million privatization of Chinese restaurant chain Little Sheep.
Best Mutual Fund
It has been a rough year for China's capital markets, as tight monetary conditions limited investment and dampened enthusiasm. Despite the challenging conditions, China AMC maintained its industry-leading 9% market share and manages the three top-performing funds over the past five-year period. In the past year, China AMC invested in three new investment centers, bringing its total to 16, and implemented new technological upgrades to improve customer service and expand investment options.
BEST RURAL FINANCE
Chongqing Rural Commercial Bank
While China's economy is showing signs of slowing, the inland city of Chongqing continues to post miraculous growth numbers. The city's GDP rose by 14% last year, and foreign trade soared by 174%. Chongqing Rural Commercial Bank has benefited from its location, but it has also benefited from its preparation. The bank operates efficiently and transparently; it became the first rural lender to list publicly with its 2010 Hong Kong IPO. In the first half of the year, Chongqing Rural Commercial Bank strengthened its personal banking business, which now contributes more to its net profits than its corporate business.
BEST RURAL FINANCE (FOREIGN)
As China's policymakers seek out more-balanced economic growth, both foreign and domestic banks are finding new opportunities in China's rural areas. Some foreign banks, such as ANZ and Rabobank, are partnering with domestic banks, while others, such as HSBC, Citi, and Standard Chartered, are going in independently. HSBC got the earliest start, opening of its first rural outlet in 2007. The bank has continued to expand its rural network, opening its 17 th rural outlet last year.
BEST SMALL-BUSINESS LENDING
China Minsheng Bank
As China's big state-owned corporations look to equity and bonds markets for financing, the country's banks are increasingly focusing their attention on smaller private companies. China Minsheng has explicitly identified this area as its business focus and branded itself as a bank for “small and micro enterprises” (MSEs). In the first six months of the year alone, the bank increased its number of MSE clients by 40% to more than 640,000. The bank also sold MSE bonds on the interbank market to raise RMB50 billion for MSEs in China.
BEST SMALL-BUSINESS LENDING (FOREIGN)
Standard Chartered has arguably invested more time, energy, and money in China's small and medium-size enterprises than any other foreign bank. SMEs rarely have the necessary collateral to obtain bank loans, and Standard Chartered takes a radical approach by not only basing loan decisions on companies' growth prospects but offering management training for those small companies as well. The bank offers a special no-collateral business installment loan, which comprises the majority of the bank's SME loan portfolio and offers the lowest NPL rate among its SME products.
BEST SUPPLY CHAIN FINANCE
Bank of Communications
Banks are increasingly relying on supply chain finance services to manage risks while courting smaller, private companies in China. Bank of Communications has been developing its capabilities in this area for years under its Win-to-Fortune Supply Chain Financing program. The program pulls together not only core companies and their suppliers but also insurance and logistics companies to systematically share risks. The bank has recently expanded the reach of its supply chain financing through its extensive branch network and improved online capabilities.
BEST SUPPLY CHAIN FINANCE (FOREIGN)
Standard Chartered has drawn from its experience in markets around the world to offer innovative supply chain financing services in China. The bank molds its supply chain finance solutions around its anchor clients and supports both suppliers and distributors of those anchor companies. By June of this year, Standard Chartered had expanded its services to 27 anchor clients and 360 suppliers and distributors. Assets and volume for the bank's supply finance services both grew by more than 20% in the first half of the year.
BEST TREASURY AND CASH MANAGEMENT
Industrial and Commercial Bank of China
With relatively tight monetary conditions and slowing revenue growth, companies are increasingly careful with their treasury and cash management, and well-prepared banks are capitalizing on those concerns. ICBC has increased the number of its cash management clients twelvefold over the past five years. The bank offers a wide range of cash-pooling, card-related, and remittance services. Last year ICBC updated and added some 20 new products, including an account manager service that allows clients to control current, time, agreement and other types of deposits under one account. The bank's rapidly growing international network has beefed up its global transaction services as well.
BEST TREASURY AND CASH MANAGEMENT (FOREIGN)
DBS Bank has expanded rapidly in China in recent years, largely on the strength of its treasury and cash management services. The bank's cash management revenues have grown at a compound annual growth rate of 50% over the past five years, and the bank's treasury and markets division contributes more than one-third of DBS China's revenue. This T&M division works together with the Global Transaction Services division, which helped the bank expand its deposit base by 50% in the first seven months of the year.