Bank for Governments: HSBC

IFR Awards 2018
9 min read
Gareth Gore, Steve Slater

For its commitment to public-sector clients through good times and bad, and for its reputation as the go-to bank for sovereigns in need of financing and advice, HSBC is IFR’s Bank of the Year for Governments.

HSBC may no longer brand itself as “the world’s local bank”, but its on-the-ground presence in every corner of the world remains a major calling-card for the bank’s public sector business. With a presence in 66 countries, the almost 100 bankers on the team are only ever a phone call away from the bank’s wealth of local relationships and insights – whether in Algeria or Chile, Lebanon or Vietnam.

Those bonds are important enough during the good times, but they really come into their own when things get tricky. For many governments, 2018 will go down as a year that falls into the latter category. Rising rates, a soaring US dollar and geopolitical tensions wrought financial pain on countries around the world. Many of the worst-affected turned to HSBC for its expertise during their most difficult hour.

Argentina is a case in point. A darling of the markets ever since it struck a historic deal with creditors in March 2016, it priced US$100bn of deals in a short period, until sentiment began to change at the start of the year after its central bank ditched inflation targets. As the year progressed, the peso would halve in value against the dollar, forcing the government to seek help from the International Monetary Fund.

Through it all, HSBC was by the country’s side. The bank pushed Buenos Aires to tap markets early in the year, to sew up funding before things got too choppy. It led a US$9bn triple-tranche bond deal in January. Its long-standing partnership with the country – it has had an active role on US$35bn of the US$44bn of bonds printed by the sovereign since the return to markets – was key.

In March, as things were getting tougher, the bank showed its commitment by closing a US$1bn sovereign repo facility with Argentina that would provide 18 months of funding needs – all secured by dollar bonds issued by the country. It was the third repo deal that HSBC had done with the country, and – during its moment of need – illustrated the bank’s dedication, even as others pulled back.


That commitment during the difficult times can pay dividends when the good times return. Such a transition played out for the bank in Egypt during 2018 when, after a few difficult years, the country began to enjoy a dramatic turnaround. HSBC, which had helped the country plug a hole with a US$2bn repo transaction during those difficult times, was a natural partner once markets reopened.

“Egypt is another country where we have a very large on-the-ground presence,” said Michael Ellam, head of public-sector banking. “Clearly, over the past few years they have been going through a process of quite challenging economic circumstances and we have been able to work with them and assist them by mobilising our international network of expertise and by bringing in overseas investors.”

In February, it led Egypt’s US$4bn sovereign bond issue. It is a leading adviser on the country’s vast privatisation programme that will raise E£80bn (US$4.5bn) of much-needed funds for the government, and has already been mandated as a lead on the IPO of Alexandria Mineral Oil Company. It has arranged numerous export finance transactions – including a vital US$1bn facility for the Egyptian General Petroleum Corporation.

“We were sole coordinator, sole underwriter and sole bookrunner, and there we delivered the funding within 30 days and syndicated it within 60 days,” said Ellam. “We had to move quickly, and the significance of the transaction for the country and the company was that it did enable the EGPC to clear their arrears with the international oil companies and put them on a more stable funding.”


In Saudi Arabia, which has also embarked on a vast overhaul of its economy, HSBC has become a key adviser to the government. It has been chosen as a financial adviser on a series of public-private partnership projects in the health and education sectors. It was also a lead arranger on a US$11bn loan for the kingdom’s Public Investment Fund, which is bankrolling vast projects across Saudi.

The bank’s local subsidiary SABB was one of five banks – and the only one with an international parent – to be appointed as primary dealers. The appointment shows the importance of HSBC to Riyadh: the bank was joint lead manager on both bond deals done by the kingdom during the year; it also increased its commitment to Saudi when the country upsized a sovereign loan to US$16bn.

“The numbers are pretty well known: the country has done US$52bn of syndicated dollar deals, and we are the only bank that has been involved in all of them,” said Hector Snuggs, a public-sector debt banker at the bank. “We have helped them expand the investor base, and that’s the real story here: from around 300 on the first deal to around 1,500 in total on the last count.”

In Indonesia, HSBC has been a key partner for the government as it embarks on an ambitious US$400bn five-year infrastructure programme. It was sole structuring adviser on the first ever Green sukuk issue, which was done by the country in February. The issuance was the bank’s seventh mandate from the sovereign in three years. It has also been central to developing the burgeoning Komodo market.

“We’ve been in the country for well over a century, and for the sovereign we are a consistent, repeat underwriter for them,” said Snuggs. “This year we helped them structure their Green sukuk, helping them meet their COP21 objectives, profiling the work they are doing. There was a lot of work done with various ministries to make this work.”


HSBC has also been heavily involved in advising and arranging finance for vast infrastructure projects around the world over the year. In Sri Lanka, it was sole arranger on three deals linked to China’s Belt & Road Initiative. It was a mandated lead arranger on a US$4.9bn loan for an LNG facility in Mozambique, and a US$2.5bn financing backing the extension of the Dubai Metro.

It hasn’t all been about emerging markets. In Europe, the bank was bookrunner on the three sovereign bond deals from Spain (which is IFR’s SSAR Issuer of the Year), including the €10bn deal that was the largest euro-denominated transaction of the year. It also did deals for the UK, Austria, Portugal, France and Sweden.

It was also involved in a number of major liability management exercises, including an exchange offer from Greece to consolidate €30bn of private-sector involvement notes, which were swapped into five new benchmarks that helped to normalise the country’s yield curve. It also did two LM exercises for Uruguay, a switch tender offer for Romania and a tender and exchange for Slovenia.

In October, the bank was financial adviser to French state-owned railway operator SNCF Mobilites on its disposal of an 80% stake in a 4,000-unit housing portfolio, which helped to raise €1.4bn for the government. The deal was a landmark for the French real estate market, being the largest residential deal since 2009.

“Our commitment to public-sector clients is global, and it spans both developed and emerging markets,” said Snuggs. “It is multi-currency, multi-product, and we are consistent and repeat underwriters and advisers. We are a primary dealer in all eurozone countries, as well as several other countries around Europe – the only bank in all of those.”

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Bank for Governments: HSBC