Bank of the Year: Credit Suisse

Heavy hitters

Investment bankers had to work hard to hit their targets in Asia in 2019, but one firm stood out on the key themes of the year. For its commitment to Asian clients and for doing more with less, Credit Suisse is IFR Asia’s Bank of the Year.

Credit Suisse has punched above its weight in Asia for years, and it moved up a division in 2019 with an impressive list of deals across the region. A leaner operation than most of its investment banking rivals, the Swiss bank took the title with a powerful combination of wealth management coverage and product expertise, proving that its business model can go the distance in the competitive Asian market.

A genuine contender for this award for each of the past five years, Credit Suisse was a worthy winner in 2019 as South-East Asia took on greater significance and trade tensions reined in dealmaking in the vast Chinese market.

“A growing demand for diversity played to our strengths,” said Edwin Low, co-head of investment banking and capital markets for Asia Pacific. “This business is all about picking trends, and we spotted early on that clients were looking for an alternative to China.”

Credit Suisse makes no pretence to be all things to all people. When it comes to investment banking, it picks its targets and does them well.

It ended IFR’s review period once again as the top international underwriter of Chinese high-yield bonds. It shone in structured equity and in equity underwriting for Chinese technology companies, getting involved in the top three US equity issues from China.

The signature deal of the year came at the end of IFR’s review period, when Credit Suisse launched a US$12.9bn Hong Kong listing for long-term client Alibaba Group Holding.

Credit Suisse’s knock-out move is its ability to connect the private bank and investment bank in a way that rivals have tried to emulate but have yet to master.

Credit Suisse brands itself the Asian entrepreneurs’ bank and is known for its deep relationships with business owners, especially in South-East Asia. Armed with decades of experience and a full picture of its clients’ assets, it has a reputation for taking on deals that others cannot.

Those relationships remain important, but growth in recent years has come from technology. Credit Suisse got in early with China’s emerging internet champions and has turned those connections into a hugely successful revenue generator. Impressively, it has managed to replicate the model, bringing in new clients each year that then become repeat fee payers.

The IPO of Luckin Coffee is exactly the kind of franchise deal Credit Suisse aims to win.

Credit Suisse had worked with Luckin chairman Charles Lu Zhengyao on the Hong Kong IPO of car rental company Car Inc in 2014, and was quick to support his vision for a new, technology-enabled coffee chain in the growing Chinese market.

With Credit Suisse’s assistance in private fundraisings, Luckin Coffee grew from a single store in Beijing to 2,370 outlets in 28 cities within just 18 months, using a cashier-free model built on mobile apps. Despite a short operating history, Credit Suisse guided the company to a US$695m IPO in May 2019, successfully pitching it to US investors as a play on both technology and Chinese consumption. The listing was one of the year’s biggest hits – despite pricing in a market spooked by threats of tariffs from US President Trump.

Technology was again a driver in 2019, even without the giant overseas listings that dominated volumes the previous year.

Notable wins in the capital markets included convertible bonds for Bilibili, Nio and Qudian, where Credit Suisse did not have the home field advantage of working on the IPO.

In the bond markets, it handled a tender offer and concurrent new issue for 21Vianet, a rare high-yield issuer from China’s tech sector. It also helped Car Inc – still controlled by Luckin’s chairman – manage its liabilities through an exchange offer.

In the private market, Credit Suisse raised over US$3bn for Alibaba’s Local Services Group, formed from merger of food delivery apps ele.me and Koubei.

“The digital economy penetrates everything that we do, and CS has that in its DNA,” said Zeth Hung, co-head of investment banking and capital markets alongside Low. “Everyone has to understand technology.”

Credit Suisse’s entrepreneur credentials were again important in the IPO of HomeCo, the only successful big Australian listing of the year. The large-format landlord, set up by a consortium of individual investors in 2016 – including some UBS bankers – raised A$325m in October, again underlining Credit Suisse’s ability to sell a concept despite a short operating history.

Private wealth clients were also important in the debt business.

Credit Suisse’s private bank is not restricted to deals originated by the investment bank, but close collaboration means the origination team knows what kind of deals will sell well.

High-yield bonds are an attractive asset for yield-hungry private banking clients, and Credit Suisse was the top international underwriter of high-yield financings for Chinese property companies – by far the biggest segment of the Asian market.

INSTITUTIONAL REACH

Wealth management distribution is not Credit Suisse’s only move. Its institutional connections helped the bank excel in its target markets, and it was once again a dominant player in South-East Asia and frontier markets.

It advised Singapore’s Temasek Holdings on the sale of a US$5.9bn stake in Indonesian lender Danamon to MUFG.

In a quieter year for equity issuance in Vietnam, Credit Suisse helped Vingroup raise US$1bn from a strategic investment by South Korea’s SK Group to support its diversification into telecommunications.

Credit Suisse also worked with financial sponsors in Australia, with leveraged buyouts of MYOB for KKR and Greencross pet stores for TPG.

During the review period, the bank was also involved in loans for frontier market sovereigns such as the Islamic Republic of Pakistan and the Lao People’s Democratic Republic. For Pakistan, it led two loans totalling US$495m, in what were its ninth and 10th financings for the South Asian sovereign.

The bank also took action to improve its use of capital in 2019 with the launch of the Asia Pacific trading solutions (ATS) business, which connects wealth management clients with the bank’s global markets division. Yves-Alain Sommerhalder, who had rolled out the model as co-head of international trading solutions in Zurich from 2017, took charge of the Asian financing and markets groups.

RESULTS

Credit Suisse is the only global bank to report detailed numbers for Asia Pacific, having separated the unit into its own division in 2015, reporting directly into group CEO Tidjane Thiam.

Asia Pacific is a major contributor to group earnings, posting net income of SFr667m (US$675m) in the first three quarters of 2019 for an enviable 15.9% return on regulatory capital, well ahead of a 10.4% return at the group level.

The advisory, underwriting and financing business has been a consistent performer, with revenues exceeding SFr200m for 11 consecutive quarters, according to Credit Suisse’s second-quarter update.