Banks of the Years

From small beginnings in the early 1980s, the IFR Review of the Year and gala awards dinner have grown to become the capital markets industry’s version of the Oscars. Highly coveted and fiercely competitive, the league table of former winners is a reminder of institutional consolidation.

In the early days of the IFR Awards there were very few awards; the write-ups took up just a few pages in the magazine and the awards were given out in our offices to no great fanfare over a few glasses of wine with a very small group of attendees. How times have changed. The IFR Review of the Year that is now published each year and the gala awards dinner that attracts 1,200 attendees are huge undertakings that take months of planning.

The substantial annual reviews of the capital markets kicked off in earnest in 1989 with a Review of the Decade; since 1990 we have published reviews each and every year. The reviews have given us a very solid track record of success in the capital markets for more than 20 years; they’ve also created an unrivalled account of the recent history of the markets, not only in terms of market themes but also in terms of the institutional side of the industry, be it investment bank M&A, or changes in thinking around clients and organisational optimisation.

And the Oscar goes to …

IFR’s Bank of the Year award, arguably the most hotly sought-after capital markets industry award, has been won by a total of 12 banks since 1990. The winner in that year was Deutsche Bank, but Deutsche had to wait a full 13 years before winning it again in 2003. Since then, it has won the award two more times. Its four winning slots put it at the top of the Bank of the Year league table. Deutsche has a claim to five if you roll in Bankers Trust, IFR’s Bank of the Year in 1991.

Deutsche acquired Bankers Trust in 1998. In so many ways, BT was the 1980s version of what Deutsche would aspire to become in the 2000s. It was the first bank that could be described as a global derivatives powerhouse. BT spawned a generation of creative and aggressive derivatives pioneers through the 1980s that took the world by storm.

Head of the group Allen Wheat’s departure from BT in 1990 with a team of around 20 professionals to set up Credit Suisse Financial Products in some ways marked the beginning of the end of BT’s derivatives dominance; CSFP became the most successful derivatives house of the 1990s.

Wheat ended up as CEO of Credit Suisse. In fact, Credit Suisse’s current CEO Brady Dougan was among the team that moved with Wheat. Jerry del Missier, co-CEO of Barclays Capital, didn’t make the move, working at BT until 1997. At the time of his departure for BarCap, del Missier was senior managing director of derivative products.

By the time Deutsche came to acquire BT, BT had itself acquired Alex Brown, the Baltimore-based investment bank and broker-dealer, so the platform had some scale. Unfortunately, BT’s innovation had ended up getting the better of some clients and ultimately the bank itself: derivatives scandals ensued and BT was successfully sued in 1994 by Gibson Greetings and Procter & Gamble over derivatives trades. As much as anything else, Deutsche’s US$10.1bn acquisition was a tremendous face-saving event for the US bank.

Goldman Sachs and Citigroup have been IFR Bank of the Year on three occasions each. The latter won for the first time as Citicorp and twice as Citibank/Salomon Smith Barney, evidencing the various versions of the firm on the road to becoming the first global one-stop shop financial supermarket.

Citi/SSB had been formed out of the merger of Sandy Weill’s Traveler’s Group with Citibank. Weill had amassed a series of investment banks, broker-dealers and insurance companies under the Traveler’s umbrella, including Shearson, Smith Barney and Salomon Brothers (as well as Lehman Brothers and EF Hutton in earlier iterations).

The merger with Citibank created for the first time a multinational group that ran the full gamut of retail and consumer finance through corporate banking and into retail and institutional brokerage, advisory and underwriting. Citi was the first bank to win the Bank of the Year award two years in a row (1999 and 2000); Goldman Sachs repeated the feat in 2006 and 2007.

Product winners more concentrated

Of the global asset class awards, Deutsche Bank has done best overall, although mainly on the DCM/debt derivatives side. Deutsche has won Bond House of the Year a league-table topping five times since 1999, to Citigroup’s four (the last time in 2002) and Morgan Stanley’s three (although not since 2000).

Today’s Bond House of the Year award started out life quite modestly in the late 1980s as Syndicate Desk of the Year; and it was awarded as much to the individuals on the desk as it was to the firm. Back then, there was less focus on strategy, client optimisation models or global distribution. IFR focused on desks that very simply had a good read on the market and were able originate, price, distribute and hold the price in the grey market.

The award morphed into Eurobond New-Issue House and Eurobond House. In the early days, IFR had a separate Bond Trading House of the Year award, reflecting the more artful approach to trading back then. The trading award was ditched in the early 1990s and merged into the syndicate award. As the bond market globalised through the 1990s, the award was expanded to include the US market, then emerging markets and Asian DCM as those markets started to take root through the 1990s.

Derivatives domination

JP Morgan broke the flow in 2008 when its six top award wins (including Bank of the Year) might easily have seen the title rebranded JP Morgan of the Year

Away from bond underwriting, Deutsche Bank has dominated IFR’s derivatives awards. Of the global derivatives house award that IFR has given out in the past 18 years, Deutsche has won a staggering nine times to JP Morgan’s five. Through the 1990s and 2000s, Deutsche and JPM slugged it out for IFR’s derivatives accolades, invariably in a two-horse race. Of the seven years between 2004 and 2010, Deutsche picked up the Derivatives House award six times, a remarkable achievement. JP Morgan broke the flow in 2008 when its six top award wins (including Bank of the Year) might easily have seen the title rebranded JP Morgan of the Year.

Breaking derivatives into its constituent parts, JP Morgan and Deutsche have both won the interest rate derivatives and credit derivatives awards five times each since 1997, although BarCap has broken the stranglehold, winning the rates award in 2008 and 2011 and the credit award in 2009 and 2010, as Deutsche and JPM reduce their focus on derivatives in favour of vanilla flow products.

On the equities derivatives side it is a different matter with Societe Generale dominant. The French bank has won the award five of the 15 times IFR has given it out, including three successive years between 2004 and 2006, a run fortunately broken before the trading loss of Jerome Kerviel was discovered.

UBS has won the equity derivatives award twice; first under the Warburg Dillon Read moniker in 1999 and the second as UBS Warburg in 2002. As with Citigroup, the nomenclature describes various stages of the group’s evolution. Prior to the creation of the IFR Derivatives House award in 1994, Swiss Bank Corp, another component of today’s UBS group, had won what was then called the Options House of the Year award, three times between 1991 and 1994. SBC also won IFR’s Equity-Linked House of the Year award three times.

Swiss Bank Corp’s derivatives prowess was born from its 1989 acquisition of O’Connor Associates, the Chicago-based global options specialist. O’Connor was merged into SBC’s capital markets group, and legacy O’Connor specialists were put to work throughout SBC’s network to great effect. SBC’s global build-out was given significant further boosts with the acquisition in 1995 of SG Warburg (creating SBC Warburg) and in 1997 of Dillon Read (creating the Warburg Dillon Read that won IFR’s equity derivatives award a couple of years later).

UBS, which had previously acquired Paine Webber, and SBC merged in 1998 (creating UBS Warburg); the Warburg name was dropped in 2003.

ECM and loans

If Deutsche Bank and JP Morgan have dominated IFR’s Derivatives Awards, Goldman Sachs and Morgan Stanley have equally dominated IFR’s global ECM award. The two firms have won the award seven times each, making for 14 wins out of a total of 21 awards. Merrill Lynch’s three awards effectively give the three US equity behemoths a slam-dunk command of ECM. CSFB in 1990 and UBS in 2007 – thanks to a strong showing in BRICs countries – are the only European-centred firms to win, and First Boston was a major help in CSFB’s win.

In 2011, Goldman garnered an 8.9% global ECM market share for a commanding lead in volume terms; Morgan Stanley ran GS second for a 7.6% share of the market. Morgan Stanley winning the award showed that, while overall activity (i.e. league tables) will make banks relevant, IFR continues to credit banks for their read of the market, execution, key relationships and leadership.

In structured equity (principally convertibles), Goldman has won the IFR Award four times to JP Morgan and SBC’s three each.

The syndicated loan award has similarly been dominated by JP Morgan and Citigroup, with five wins each. Again, if legacy banks are rolled up into current groups, Chase Manhattan Bank’s two loan award wins in 1996 and 1998 give JP Morgan the edge.

As a lending bank it’s worth remembering that JP Morgan is the culmination of a series of mergers between major US money-centre lending banks. Chemical Bank had acquired Chase Manhattan and Manufacturers Hanover before acquiring JP Morgan to form JP Morgan Chase in 2000. In 2011, JP Morgan had a market-leading share of 12% of global lending with a fairly remarkable tally of US$413bn to its name.

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