Beginning from this year, ICBC dabbed in the field of investment banking. The numerous remarkable moves of ICBC raised eyebrows in this market which is usually exclusive to securities firms and professional investment banks. In China, ICBC has been already the largest investment bank in the banking industry.
In the first six months, ICBC registered a record of RMB 8.666 billion in revenue generated from investment banking business, bringing the business forward by leaps and bounds for eight years in a row with an annual average compound growth rate of over 80%. Investment banking is now one of the most important and key revenue source from intermediary business.
In overseas, the wholly-owned investment banking arm of ICBC in Hong Kong ICBC International closed several large deals within a short timeframe and stepped into the limelight in the international investment banking market crowded with all the competitors.
Domestic and International Investment Banking Business Move in Tandem
Management system in China is based on separation operation. So ICBC adopts the approach of joining force between domestic and overseas branches. ICBC investment banking business in China, within the ambit of law, includes the underwriting and brokerage and dealing in interbank market, M&A and restructuring, financial advisory, structural finance and syndicated loan, asset securitization, asset management and derivatives dealing.
ICBC moves forward on two fronts in overseas. By virtue of the business licenses issued to the overseas subsidiaries, ICBC engages in stock underwriting, brokerage and dealing which are restricted in China. On the other hand, ICBC brings the benefit of the synergy by leveraging on its overseas professional platform to assist domestic branches in looking for new growth points.
As related by an executive with ICBC, this kind of deployment is a move to respond to client needs to a great extent. As the business philosophy, capital operation and internationalization gear up, more and more Chinese enterprises not satisfy with the conventional services provided by bank like deposit, loan or remittance.
Instead, they are asking for integrated banking services including investment banking such as corporate wealth management, bond issuance and underwriting, M&A and restructuring or structural finance. In the past few decades, western counterparts had their banks to assist them marching to the world and growing into multinational conglomerates.
Investment banking service was their bridge to the world. Back in China, Chinese enterprises are gathering their pace to "go global". Their imminent need is the professional investment banking services provided by Chinese financial institutions for them to invest overseas directly or manage their assets.
To ICBC, the launch of investment banking service extends the service range to the customers by a substantial margin, the ultimate choice to increase ICBC profitability and core competence. More important, ICBC's extensive global network and solid customer base offer rich resources and huge market potential for domestic and overseas branches to work together and pave a solid ground for the strong progress of investment banking business at home and abroad.
Comprehensive Investment Banking Product Lines
The blistering growth of ICBC investment banking business is an outcome of ICBC innovation strength in the area. At the moment, the scope of ICBC investment banking business in China extends from primary services in perennial financial advisory, investment/financing advisory to major areas of M&A and restructuring, syndicated loan, structural finance and bond underwriting.
In M&A and restructuring, ICBC concluded a total of 23 domestic M&A and restructuring projects during the first half of 2010. Revenue generated from the business grew by 117% year-on-year. In syndicated loan, ICBC won numerous international tenders. ICBC is the lead arranger to organize syndicated loan for many large projects including the largest electricity power project in Africa.
ICBC Asia, a subsidiary of ICBC, has repeatedly ranked No.1 in the list of HK lead arrangers for syndicated loan. In bond underwriting, ICBC is the largest bond underwriting firm in the country for three successive years. In 2009, ICBC lead underwrote a total of 73 short-term bonds and mid-term notes involving an amount of RMB 279 billion.
The annual average compound growth rate for the past three years was 90%, capturing nearly 25% market shares.
As innovation in financial services continues, private placement of equity and advisory service on direct investment are new investment banking areas that domestic commercial banks dabbing into. In overseas, ICBC International received several investment banking licenses issued by the Hong Kong Securities and Futures Commission.
With all the licenses, ICBC International is able to provide all-inclusive investment banking services to global customers, including issuance and underwriting of stocks, IPO sponsorship, mergers and acquisitions, debt financing, corporate restructuring, securities brokerage, direct investment and fund management.
ICBC International successfully established its presence in less than 18 months since the opening of business in May, 2009. In 2009, ICBC International ranked No.7 in the HK ranking of 36 investment banks participating in IPO. ICBC International is showing its huge potential to eye for large international IPO mandates and foray to international capital market.
Projects Boost the Investment Banking Brand
To an investment bank, playing the main role in large deals not only constitutes an important option for business expansion but a direct reflection of market dominance and company strength. In recent years, ICBC underpinned its position in the investment banking market by operating a batch of key projects at home and abroad of high technological demand and strong market influence.
Example was a range of influential M&A and restructuring projects: the acquisition of Ba Yi Iron & Steel by Baosteel Group, the equity transfer of Changyu, the corporate restructuring of Chenming Paper Holdings. The syndication project of USD 750 million for Jiangsu Hynix-ST Semiconductor lead organized by ICBC won the Euromoney Asia Pacific Award for "Project Finance Deal of the Year (Manufacturing)".
The structural finance and syndicated loan for Henan Zhongyuan Expressway led by ICBC also won considerable concern and laurel from the industry.
In international market, in June 2009 ICBC successfully won the export buyer's credit syndication tender of the project for Botswana's Morupule B Coal-Fired Power Station. The syndication involved an amount of 825 million US dollars. Currently distribution of the syndicated loan is running smoothly. In May this year, ICBC won another international tender to organize a structured trade finance syndication of 1.
2 billion US dollars for Ghana Cocoa Board. The distribution of the syndicated loan was completed as scheduled. ICBC was recently appointed as the financial advisory body on the Vietnam's Mong Duong Thermo-power Plant project invested by AES Group. Since January this year, ICBC undertook the account custody services for Turkish Silopi Power Company's USD 220 million export buyer's credit and the Angolan Ministry of Finance's USD 2.
5 billion loan. ICBC is gaining pace in tapping the market.
ICBC International also shows impressive performance. On August 12 this year, ICBC International entered partnership agreement with Taiwan SinoPac Securities, opening a new chapter for financial institutions from two sides of the Strait to serve the capital market. ICBC International, acting as the capacity of SinoPac's financial consultant, underwrote the Taiwan depositary receipts of USD 120 million issued by the Yangzijiang Shipbuilding (Holdings) Ltd. and participated in the listing, debut of ICBC International in the Taiwan capital market.
On August 23, ICBC International concluded another IPO deal, the listing of West China Cement in Hong Kong, issuance of new shares and delisting from the Alternative Investment Market of the London Stock Exchange. The IPO opens a new ground in the industry and receives wide applause from the public.
Reaping the Result in Investment Banking Business
Market veterans said that the today's success of ICBC in investment banking business is an outcome of its foresight very early. The road to achievement runs only through hardship.
As related by an executive with ICBC, ICBC entered domestic investment banking market in 2002 and the first among the peers to set up Investment Banking Department. Eight years ago, a group of 10+ staff started the business. Today, the business is operated through a large nationwide service network and a strong team of more than a thousand corporate financial planners. ICBC has set up an investment banking research center in the Head Office and organized the first team of investment banking analysts among the domestic banks
Worthy of note is that ICBC has been successful in stepping forward into investment banking business that tailored to the needs of customers, meeting the domestic regulatory framework, under the financial market environment and the constraint conditions of internal and external business. ICBC investment banking business has four product lines: financial advisory, M&A and restructuring, asset transfer and securitization, and direct financing.
In terms of license-type investment banking service, ICBC worked with Bank of East Asia in 1998 to jointly acquire the Asia business team of Westminster Securities to set up an investment banking unit. Since then, ICBC has accumulated rich experience in international capital market operation and established a talent pool within these 10 some odd years.
ICBC officially started its own wholly-owned investment banking branch in Hong Kong in 2009. After all the efforts in the space of more than a decade, ICBC is reaping the result and enjoying the rich return.
The ICBC spokesperson continued, on the ground of the established market scale, service quality and brand influence, the global network and professional team will be leveraged to offer even more comprehensive and professional investment banking services to customers. ICBC is forging investment banking business as the core service brand and profitability source.
