Back to its best
In a record year for Asian investment banking revenues, one bank stood out for its ability to gain market share across asset classes and across the region. For its return to form, JP Morgan is IFR Asia’s Bank of the Year.
JP Morgan’s achievements in 2020 were all the more impressive given the backdrop of the coronavirus pandemic. In times of crisis, when companies turn to their most trusted bankers, its market share gains revealed the extent of the transformation in its business in the past couple of years.
The world’s biggest bank has kept a relatively low profile in Asia since US regulators began probing its hiring practices in 2013. Even after it reached a settlement in 2016 it did not begin to crow about its successes.
But that began to change in 2019. A lead sponsor role on the US$5bn Hong Kong listing of Budweiser Brewing APAC – Asia’s biggest IPO of the year – was a clear signal of its growing ambitions, and it followed up in 2020 with more high-profile wins.
Throughout the past year, rival bankers have complained that JP Morgan has been muscling in on their territory, often with the kind of bristling indignation that comes only from a combination of fear and respect.
It’s not hard to see why.
JP Morgan finished IFR’s awards period with a 5.1% share of Asian equity underwriting, up 1.6 percentage points from the 2019 review period – the biggest gain for any international bank. In debt capital markets, it rose to fourth in the G3 currency league tables, helped by an 18-place gain in China G3 issuance.
It doubled its share of Asia Pacific M&A deals, advising on 5.6% of announced transactions by value, and gained nine places in the bookrunner rankings for Asia Pacific G3 currency loans.
The bank still does not break down its earnings for the region, but in a year when every major investment bank posted record revenues in Asia, JP Morgan’s achievements went beyond league table data.
It displaced rivals on key deals, lured top bankers to its ranks and leapfrogged others in the race to establish a wholly owned securities business in China’s domestic market.
Chairman and CEO Jamie Dimon told analysts in January the bank had just had its “best year ever in Asia”, citing growth of around 20% – a rare reference to the region’s performance.
“We’ve seen the benefits across the franchise this year of the investments we’ve made across a multi-year horizon,” said Paul Uren, head of investment banking coverage for Asia Pacific.
JP Morgan made its presence felt across all aspects of capital raising in 2020.
When Covid hit in the first quarter, it was able to adapt quickly and help clients weather the storm. As well as handling recapitalisations in markets such as Australia, it used its balance sheet to support clients including CP Group, which was in the midst of an audacious acquisition of Tesco’s Asian business. JP Morgan was one of three underwriters on the US$7.2bn-equivalent financing – Thailand’s biggest ever syndicated loan.
“We are fortunate to have a really strong capital base,” said Uren. “We have touchpoints with a lot of different clients, and when they need our help we are well placed to offer it to them.”
JP Morgan used its knowledge of technology and the US capital markets to help Chinese companies crack the 144A bond market, again providing valuable liquidity in an uncertain environment.
Examples included a US$1bn debut for Xiaomi in April, Tencent Music’s US$800m debut in August and the Chinese government’s US$6bn benchmark in October – the country’s first in the 144A market since 2004.
JP Morgan was the only international bank to act as joint global coordinator on Bank of Communications’ Additional Tier 1 in November, the first offshore AT1 perpetual bonds from a Chinese bank. It also helped Korean insurer Tong Yang Life raise regulatory capital and helped lower-rated Alam Sutera in Indonesia and Lodha Developers in India avoid default.
With the Covid-19 crisis still fresh, JP Morgan was also quick to spot opportunities to bring companies to the equity market.
In Australia, it handled an A$880m placement for hearing implant maker Cochlear, and raised A$410m for plumbing products supplier Reece and A$1.2bn for Ramsay Health Care – all completed in March and April – as well as Qantas Airways’ A$1.4bn recap in the summer.
It also helped GlaxoSmithKline raise US$3.3bn from a stake in India’s Hindustan Unilever and worked on rights issues for Reliance Industries and Bharti Airtel, among others.
Kingsoft Cloud, which raised US$510m from a Nasdaq IPO in May, was an early demonstration that IPOs could still be done even with travel restrictions in place.
As markets found their feet and excess central bank liquidity found its way into global equities, JP Morgan was well positioned on the most important themes of the year.
Having helped bring Alibaba Group Holding to the Hong Kong market at the end of 2019, it was lead left on the US$3.1bn Hong Kong secondary listing for Netease in June, before bringing Huazhu Group and GDS to the market later in the year as the US escalated threats to restrict funding for Chinese companies.
In the hot China tech sector, it handled electric vehicle maker XPeng’s US$1.7bn IPO, quickly followed by a US$2.5bn follow-on offering after a staggering run up in the stock. KE Holdings was a similar success.
It helped position South Korean record label Big Hit Entertainment as a technology play ahead of its smash-hit IPO in October.
It showed its equity-linked expertise with convertible bond mandates from Kingsoft Corp, Trip.com and others, including a landmark US$3.9bn combo follow-on/CB for Xiaomi in December.
“We identified ECM as a focus for Asia and have invested in that,” said Francesco Lavatelli, head of ECM for Asia Pacific. “There is still lots of progress to be made, but we can see the ball rolling downhill.”
JP Morgan refreshed its Asia Pacific leadership in February 2020 with the appointment of Filippo Gori as Asia Pacific CEO, as Nicolas Aguzin took a global role heading the private bank.
Gori’s appointment continues an expansion he has overseen since being named head of banking for the Asia Pacific in February 2019.
Paul Uren moved from Sydney to Hong Kong as co-head of IB for the region in March 2019 alongside Murli Maiya (now CEO for South and South-East Asia).
In the same year, the bank added Jinsoo Ha from local brokerage NH Investment and Securities as head of ECM for South Korea, and moved Gregor Feige from San Francisco to a new role as head of technology ECM for Asia Pacific. Mark Fiteny, another US tech expert, was also named head of new economy coverage for Asia Pacific.
The bank added more expertise in 2020 with the recruitment of Peihao Huang from UBS as co-head of Asian ECM alongside Feige, bringing experience in onshore and offshore China offerings from her time as Asia ECM head at UBS. Rita Chan also joined from Goldman Sachs to head real estate coverage.
JP Morgan’s biggest investment in recent years has been the creation of an onshore China securities business, approved in December 2019 and officially launched six months later.
The majority-controlled joint venture (JP Morgan has 71%) has given the bank additional resources on the ground in China, as part of an integrated coverage team split between Hong Kong and the mainland.
Although it is early days for the bank’s A-share ambitions, the expanded onshore presence allowed it to continue to meet Chinese clients and complete due diligence requirements with travel restrictions still in place.
“We’ve really seen this year the importance of having that kind of footprint. It’s not something we anticipated 12 months ago, but it just highlighted for us how important it is to have bankers across the region, certainly across the China platform,” said Uren.
JP Morgan, like its peers, adapted quickly to the coronavirus pandemic in 2020 and stepped up for its clients. The Covid-19 shock drove some of the increased activity across Asia, but JP Morgan’s ability to gain market share during the crisis leaves it well placed for the future.
“Whenever there is a crisis or extreme volatility, clients are going to turn to banks much more, whether it is for liquidity, to raise capital or for ideas on what they should be doing,” he said. “The most important thing is to execute for clients and strengthen those relationships.”
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