With the world's economy still struggling, the need for investment banks to come up with innovative ways to serve their clients is more important than ever. The Banker's Investment Banking Awards recognises those that have excelled in this field.

Judging panel 

Philip Alexander is finance editor at The Banker.

Luis Carlos Sarmiento is president of Grupo Aval, Colombia’s largest banking group. Former roles include president of telephony company Cocelco, and chief operating officer at First Bank of the Americas.

Damian Chunilal is managing director of Ocean Capital Management. Formerly, he was head of Asia-Pacific investment banking for Merrill Lynch. Before that, he was a managing director in debt capital markets and head of financial institution group DCM at Merrill Lynch. 

Water Cheung is the senior principal and Asia-Pacific CEO at Storm Harbour. Previously, he was with Royal Bank of Scotland as treasurer and head of emerging markets in Asia. Prior to that, in 2000, Mr Cheung joined DBS as the head of regional derivatives and credit products.

Tony de Castro is the founding partner and CEO of investment banking group African Alliance, where he is responsible for group strategy. Mr de Castro is also the founding partner and CEO of Umber Energy Corporation. 

Semion Epshtein is a specialist mergers and acquisitions and corporate finance lawyer and founding partner of Russian law firm Padva & Epshtein. 

Hisham Ezz Al-Arab is the chairman and managing director of Commercial International Bank. Prior to this, he has been a managing director at international investment banks in London, Bahrain, New York and Cairo.

Stefano Ghersi is CEO of Synergy Global Capital. Previously, he was head of capital markets at Nomura. Earlier roles include stints as managing director at Merrill Lynch and BNP Paribas.

Michael Grifferty is co-founder of The Gulf Bond and Sukuk Association. Formerly, he was a sovereign debt and markets advisor at the US Treasury. Previously he has consulted for the International Monetary Fund, and was a senior vice president at Government Finance Associates, an independent advisor to US state and local governments and public authorities.

Tom Humphreys is a partner at Morrison & Foerster and head of the Federal Tax Practice Group. He advises banks on capital developments such as trust preferreds, Tier 1 capital, mandatorily re-marketed or exchangeable debt instruments, and contingent convertible bonds. 

Geraldine Lambe is senior editor and investment banking and capital markets editor at The Banker.

Daniel Llambias is the chairman of Banco Galicia. He has been associated with Banco Galicia for nearly half a century. Previous roles at the bank include alternate director, director and CEO.

Herman Mulder is an independent advisor on corporate, social and environmental responsibility. A former senior banker with ABN Amro, he was made a knight in the Royal Order of Oranje-Nassau for his initiatives on sustainable development, the Equator Principles in particular.

Sergun Okur is managing director of Atlas Corporate Finance, a boutique mergers and acquisition house based in Istanbul. Prior to that, he has been the deputy CEO at Global Securities in Istanbul in charge of corporate finance.

Dr Armen Papazian is a founding partner and CEO of Keipr. Previously, he served as head of Islamic Finance at UBS. Before joining UBS, Mr Papazian was the vice-president responsible for innovation and development at the Dubai International Financial Exchange (Nasdaq Dubai). 

Selina Sagayam is a partner at Gibson, Dunn & Crutcher with particular expertise in corporate finance, equity and mergers and acquisitions. She has previously been seconded to the UK Takeover Panel and advised Kraft in its takeover of Cadbury. 

Daulet Saudabayev is president of Access ED Consulting and non-staff advisor to the prime minister of Kazakhstan. He previously served as the vice-minister of finance and held other executive level positions at the Ministry of Transportation and Communication, and the Ministry of Economy and Trade for the Republic of Kazakhstan.

Paul Wallace is Africa editor and capital markets writer, The Banker.

Four years on from the onset of the financial crisis, the business environment continues to be a challenging one for investment banks. They are squaring up to a wave of new and wide-reaching regulations, and must operate against perhaps the most difficult and unpredictable economic background they have ever had to face.As the sovereign debt crisis has intensified – creating ever greater challenges around banks’ own liquidity and capital requirements – and growth in developed markets has remained sluggish at best, existing business models have been challenged. Investment banks are being forced to reshape and refocus. Once again, banks have had to draw on all of their powers of reinvention in order to fit the emerging landscape.

Despite this hostile business environment, this year’s winners demonstrate the ability of investment banks to meet this challenge and to deliver the services and products that their clients need, when they need them. As markets have changed – such as the blurring of the lines between over-the-counter and listed markets – so the best banks have integrated their platforms to suit. As client requirements increasingly morph to span service offerings and asset classes, so banks have continued to break down silos – and silo mentalities – between the different parts of their businesses.

When the Investment Banking Awards were held in 2010, many hoped that the global economy would soon be on a firmer footing. This has not proved to be the case, and few bankers are prepared to say what the near future, let alone next year, holds for their industry or for their clients. Yet, if this year’s entries offer any kind of measure of the investment banking industry’s ability to come up with innovative responses for their clients – and to execute those strategies in often brief windows of opportunity – then we can be sure that the best banks will continue to demonstrate that they can withstand even the most difficult times.

Every year, The Banker’s Investment Banking Awards try to move away from measuring quality purely by scale, and to focus on genuine value creation for clients and markets. Our distinguished panel of independent judges – whose knowledge and skills come from every part of the market and every corner of the globe – were looking for transactions that generate real cost savings, real risk reduction or real returns for clients. 

Yet again, The Banker’s awards showcase the tremendous value that this industry can deliver. 

Most Innovative Investment Bank 

Winner: Deutsche Bank

Anshu Jain, Deutsche Bank

Faced with an onslaught of regulation, investment banks have had no choice but to restructure their business models. The great challenge has been to do this in such a way that the changes take account not only of the new regulations but also produce a more effective revenue-generating and client-interacting machine. 

In the view of the judges, Deutsche Bank has managed this transition the best and has ended up with a bank that takes cross-selling to a new level and which capitalises on all the sweet spots in the new environment – emerging market local currency bonds, commodities, initial public offerings (IPOs) for high-tech and mining companies. Given the pace of change required this is no mean feat. 

On top of this, Deutsche has managed to innovate in the areas of electronic trading platforms and insurance products. 

“If you chart the past four decades of wholesale banking, we have seen more changes in the past three years than in the previous 37,” says Anshu Jain, the head of Deutsche Bank’s corporate and investment banking division, who is set to take over as co-CEO – together with Juergen Fitschen – in May 2012 when current CEO Josef Ackermann retires

“The industry has gone through huge changes post-2008 and is subject to further changes still – there are new standards around liquidity to take account of; capital needs have increased four- or five-fold; compensation practices have shifted; the derivatives business has changed; and then we have the Volcker Rule, which requires banks to shed proprietary trading. Virtually all the key levers of this profession have changed dramatically in the past three years,” says Mr Jain. 

“So when we think about how to serve clients, how to allocate resources, how to organise people, the product mix we want to focus on, the geographies we want to serve, those trends have to be first and foremost in our minds.”

He adds that each of Deutsche’s major wholesale businesses – corporate finance, sales and trading and global transaction banking – had to be “recalibrated”, but on top of this they had to be brought together to end any silo-driven approach for ever. This was done under the code name of ‘Integra’ and lays down a new marker in terms of bank integration. Simply putting together corporate finance and markets is regarded by most practitioners as eminently achievable, but adding transactions into the mix adds a whole new dimension. 

But that is what Deutsche achieved in June, and then went on to set up a new client coverage model with a capital markets and treasury solutions group focusing on corporate treasurers and a corporate finance team focusing on CEOs and CFOs. 

If you chart the past four decades of wholesale banking, we have seen more changes in the past three years than in the previous 37

Anshu Jain

This has resulted in some spectacular cross selling opportunities with the transactions team giving corporate finance leads among start-up high-tech firms, debt capital markets bringing in transactions mandates and corporate finance bringing in markets’ business. 

In key areas of the market, Deutsche has improved its position, moving up the rankings in IPOs, working on many of the biggest global deals, including the $5.5bn IPO of Singapore’s Hutchison Port Holdings. 

“We got ahead of the IPO wave,” says Mr Jain. “Very early on we could see that tech companies would want to come to market to take advantage of compelling valuations, in mining the surge in commodities would produce a boom, and with banks the opportunity was in follow-ons. We put a lot of effort into this.”

In the emerging markets, Deutsche has been investing for many years and now has a full-service investment bank, debt and treasury presence in 73 different locations. “We haven’t followed gross domestic product, we early on saw that emerging markets would become pivotal,” he says.

This has been evident in Deutsche’s impressive performance in bonds issued in emerging market currencies, from arranging the first synthetic renminbi offshore bond – a Rmb3bn ($469m) three-year deal for Shui On Land, to acting as global coordinator on the Republic of the Philippines 44.1bn pesos ($1.02bn) 2021 bond issue, the country’s first ever global local currency offering. 

Other landmark deals have included a $1.2bn equivalent financing for Banco Santander Chile – which included a Chilean peso 10-year tranche, the first ever Eurolocal bond by a non-sovereign Chilean issuer – and the first ever Ukrainian hryvnia-denominated bond by a bank – a three-year deal for Ukreximbank. 

But Deutsche’s achievements have not only been about restructuring and issuance. The bank developed a new platform called ‘DB My Life’ that allows insurance companies to offer bespoke CPPI (constant proportion insurance policies) to customers without taking on excessive market risk, and also launched Autobahn Metals, the first trading platform for metal contracts to offer not just direct market access, but also request for trades, trading commentary and other tools. 

With the European markets still in turmoil, Deutsche can feel assured that it has carried out a restructuring that is the envy of its rivals and is well placed to take on business even in markets where the pickings are thin. For all these reasons, the bank is a deserved winner of The Banker’s Most Innovative Investment Bank award.

Innovation of the Year 

Winner: Commerzbank’s €11bn two-step capital increase

Ute GERBAULET, COMMERZBANK

As market volatility soars, it seems hard to believe that Commerzbank raised €11bn, including €8.25bn from the capital markets, as recently as June 2011. The closing of the deal on June 6 not only represented the largest ever equity offering from Germany, amounting to 147% of the bank’s pre-deal market capitalisation, it also had to surmount hurdles in German securities law that could have rendered the deal impractical.

“We needed a structure that worked within German law, but could also appeal to international investors at a time when we were potentially competing with many other banks that needed to raise capital,” says Ute Gerbaulet, head of equity capital markets (ECM) at Commerzbank.

Commerzbank had returned to profit in 2010, a year ahead of schedule following the 2008 acquisition of troubled Dresdner Bank. That created a good story for investors, but also drove speculation over when the bank would repay the €16.4bn silent participation capital from the German government support fund SoFFin, injected in 2009 to tackle Dresdner’s financial difficulties. 

A pure rights issue from existing authorised share capital was ruled out because the capital needs were too large, as German law generally limits the size of such a resolution to 50% of the outstanding share capital. That meant finding new money via a capital increase, which required shareholders’ approval at an annual general meeting (AGM). But German law specifics requiring AGM notice and contestation periods would have led to unwanted exposure to market risk of up to four or five months.

“Our CEO, Martin Blessing, was very clear that we had to provide a fully fledged safety net. We needed to raise enough capital in one transaction, and we could not afford for the deal to fail. That meant a fully underwritten issue, but a four- to five-month underwriting period is too long for a bank’s risk committee to agree upon at reasonable terms,” says Ms Gerbaulet.

Commerzbank’s own specialist knowledge of German law proved crucial. As part of the bank’s steering committee for the capital increase, Ms Gerbaulet structured a solution together with the ECM team at Deutsche Bank, which acted as a process bank on the transaction. Using the financial sector stabilisation law that came into force in December 2010, the team crafted a two-step capital raising in one transaction to raise a total of €11bn.

In the first step, immediately following the transaction announcement on April 6, the bank issued €4.3bn in one-month Conditional Mandatory Exchangeable Notes (CoMEN). These allowed time for the AGM to approve a capital increase that would permit their conversion. For the underwriting banks with an initial exposure of €8.25bn, this first placement derisked their exposure after only 10 days.

The use of a bookbuild for the CoMEN with an active allocation process also allowed Commerzbank to broaden its investor base, a key aim because some large international funds had previously been under-represented among its shareholders. The deal raised €5.7bn (against an original target of €4.5bn), including €1.4bn by converting part of SoFFin’s silent participation into shares.

The second step was a €4bn rights issue to the newly expanded investor base, which achieved a take-up ratio of 99.94%. Again, SoFFin contributed €1.3bn by exchanging part of its silent participation. This allowed the state to retain its 25% plus one share in the bank without putting up large sums of new money. 

Other banks in Germany will be studying the success of Commerzbank’s deal. SoFFin still holds significant silent participation capital in WestLB and Hypo Real Estate, while two other landesbanken received capital injections from regional governments. And while the legal structure reflected the specifics of German law, the general process of raising capital to pay off state injections has a long way to run across Europe.

Most Innovative Investment Bank for Corporates

Winner: Barclays Capital

Shortlisted: BNP Paribas and HSBC

Larry Wieseneck, BARCLAYS

When Barclays acquired the US operations of Lehman Brothers in 2008, it inherited an investment bank organised around three pillars: a fully integrated global markets and risk division, a corporate finance division, and a mergers and acquisitions (M&A) division. All three reported into Hugh ‘Skip’ McGee, the head of investment banking at Lehman, who now holds the same role at Barclays Capital.

Larry Wieseneck, the head of global finance and risk solutions at BarCap, who previously held the same role at Lehman, says the integrated approach to client coverage embedded in the Lehman global finance model complemented the client focus implicit in the Barclays Capital structure. Where products were lacking – including equity capital markets and M&A in Europe and Asia, or risk advisory in the US – the bank built out the franchise to complete the business model. 

“One of our first priorities was taking an inventory of where we needed to change the mindset of businesses so that everyone started to think about how to deliver the best ideas to their clients, agnostic of product type. We spent the rest of 2008 re-engineering a structure and incentive system that puts client solutions first,” says Mr Wieseneck. 

One of the key changes he saw on joining from Lehman was adding BarCap’s corporate lending, foreign exchange (FX) and rates businesses to the existing US platform, to capture a wider share of each corporate client’s activity. The bank can now combine M&A advisory with acquisition financing, equity-raising and FX hedging on cross-border deals. BarCap’s trading presence today is dominant in several product categories, providing deep insight for advising clients. 

“The market intelligence we now have is far superior to what any of us had seen previously,” says Mr Wieseneck. 

Naturally, it helped to be hiring when other investment banks were laying off; but, Mr Wieseneck says, to attract the best staff, the bank was also helped by the clear strategy enunciated by management, at a time when rivals were struggling to find direction.

Examples of BarCap’s efforts to break down silo mentalities include teams specialising in enterprise risk management or tax and accounting issues that are able to draw on products right across the investment bank. With regulation driving capital conservation throughout the banking sector, Mr Wieseneck believes intellectual capital will be the competitive edge for the corporate and investment bank model.

“We have to attract, keep and motivate the best staff within a structure that enables them to operate in a client-focused, solutions-oriented way. What will distinguish us is our ability to deliver financial solutions to our clients worldwide and connect issuers with those who have the means and the desire to invest,” he says.

Most Innovative Boutique

Winner: Moelis & Co

Shortlisted: Evercore

Ken Moelis, Moelis&Co

Boutique investment banks have flourished in the past four years as their blend of independent advisory services has appealed to a growing number of clients in the wake of the financial crisis. None more so than Moelis & Co. So successfully has Moelis ridden this wave that it becomes ever more difficult to call the firm a boutique at all. 

It has worked on some of the most high-profile deals of the past 12 to 18 months, including as financial advisor to Australia’s Centro Properties Group on the $9.4bn sale of its US mall properties to Blackstone Group in February, and with Swiss pharmaceutical company Nycomed on its sale to Japanese pharmaceutical company Takeda for $9bn, the third Moelis transaction with Nycomed since 2009. It has advised on some of the most important restructurings in the same period, including Dubai World, MGM and Wind Hellas. 

Having grown a company with 500 staff in a matter of a few years, Moelis’s momentum continues. Earlier this year it acquired Asia Pacific Advisers in Hong Kong and established an alliance with Sumitomo Mitsui Banking Corporation and its subsidiary SMBC Nikko Securities in Japan. Also this year it has opened an office in Dubai and applied for a licence to operate in Beijing.

There is likely to be more expansion to come, but founder and CEO Ken Moelis says that the strategy is driven by people first, then geography. “Clearly we believe that Asia is an important place for us to be growing, but you need to move only when you have the opportunity to work with the right people. In Asia Pacific Advisers, we had the chance to bring on board some of the most talented people in their market, who are a great fit with our company. This kind of ‘people first’ strategy has really paid off for us.”

Moelis has also put together an impressive global advisory board. Led by its chairman, Lord Davies of Abersoch, the former head of Standard Chartered, it comprises former US trade representative Charlene Barshefsky; founder of luxury hotel group Banyan Tree, Kwon Ping Ho; former boss of Eli Lilly, Sidney Taurel; founding partner of Riverwood Capital, Michael Marks; and former French foreign minister, Hubert Vedrine. 

“I’m in touch with them even more than I thought I would be,” says Mr Moelis. “They are a fantastic sounding board and each brings something different – and important – to the table.” 

Having the right people in the right places is just as important for a boutique as for a bulge bracket, says Mr Moelis. “There is immense power in a global network,” he says. “The ability to gather information quickly and confidentially via your internal network is what makes the difference for your clients and your firm.”

Most Innovative Investment Bank for Growth Companies

Winner: Rothschild

Shortlisted: Houlihan Lokey and Jefferies

The key to the success of Rothschild’s mid-market business, says Nigel Higgins, CEO of Rothschild Group and co-head of global financial advisory, is the fact that the company does not differentiate between its multinational and growth clients. “We focus on industrial verticals rather than size of client in terms of how we organise our business,” he says. “This means that our expertise goes down deeper into the economies that we work in, which benefits our clients and our business.” 

The nurturing of long-term relationships with growing companies also sits well with the nature of Rothschild itself. “Our approach is to invest in long-term relationships with our clients – at whatever stage of development they may be. As a family-owned business ourselves, this suits us temperamentally as well from a business perspective.”

Our approach is to invest in long-term relationships with our clients – at whatever stage of development they may be

Nigel Higgins

The approach is working. According to Dealogic, Rothschild regularly sits among the top three advisors in global mid-market league tables. Key deals over the past 12 months include the sale of a 45% state in PT BFI Finance Indonesia to Trinugraha Capital and Co, a complex origination in which Rothschild sold shares from a group of different shareholders to one buyer consortium at a premium to the prevailing share price in the market but without knowing each others’ identities. 

Other key deals include Rothschild’s role as advisor to EFG Eurobank on a partnership with Raiffeisen Bank International (RBI) regarding EFG’s Polish operations. The latter was a sensitive deal, not least because Polbank EFG was not a legal entity with a Polish banking licence, but a branch operation of EFG Eurobank, regulated by the Bank of Greece, and incorporation was conditional upon a law being passed in the Polish parliament. Rothschild therefore had to make RBI comfortable with entering into a transaction with more regulatory and completion risk than normal.

It is continuing to build out its capability. In January it opened an office in Calgary, Canada, and hired Bob Gibson and Paul Moynihan, the co-founders and principals of boutique firm Mustang Capital Partners, to focus on oil and gas in the country. 

The firm sees particular upside in North America, says Jim Lawrence, co-head of global financial advisory. “We see big opportunities in the US where we are probably under-represented,” he says. “We probably cover about half of the industries in the US, so there is plenty of room for growth.”

However, it will be a long-term play, as the outlook for growth companies is as unsettled as for their larger brethren. “Actual activity was high at the beginning of the year, but the market and political turmoil mean that, while there is a lot in the pipeline transactions are going to prove harder to launch and to complete,” he adds.

Most Innovative Team

Winner: HSBC (sovereign advisory)

Most Innovative Investment Bank for Sovereign Advisory

Winner: HSBC

Shortlisted: Lazard and Rothschild

The financial crisis in 2008 crystallised an idea already forming in the minds of executives at HSBC: to build on their existing relationships as a primary bond dealer for many European governments, and create a coherent public sector advisory business across different products. The range of government-related business conducted by the bank right across its global banking and markets division over the past year confirms the success of this project.

“We recognised early the beginning of a new era in which governments were adopting more responsibility for various private sector activities such as guaranteeing bank funding, injecting bank capital and committing to large infrastructure projects. Our approach gave us the opportunity to think through more holistically what governments would ultimately do with this outright or contingent risk and the equity stakes they had acquired,” says Spencer Lake, co-head of global markets at HSBC.

The bank has widened its relationships from the debt management offices, to include the central banks and finance ministries that designed financial stability packages. HSBC is the only bank to manage all the bond issues for EU financial stabilisation agencies, and was the first bank to advise the Irish Treasury on the creation of the National Asset Management Agency (NAMA). This has led to follow-on business around Spain’s bank restructuring fund FROB, and now the Hellenic Financial Stability Fund.

We recognised early the beginning of a new era in which governments were adopting more responsibility for various private sector activities such as guaranteeing bank funding, injecting bank capital and committing to large infrastructure projects

Spencer Lake

“NAMA gave us a tremendous insight on matters such as EU state aid rules, so other governments have come to us to draw on that experience in deciding whether to create a bad bank,” says Stephane Pilloy, managing director in HSBC’s financial institutions advisory team.

Another area of strength for HSBC has been advising both national and local governments on financing large public infrastructure investments in straitened times. Furthermore, since March 2011, HSBC has advised the French local authority association AEAFCL on the creation of an agency that can access the capital markets and on-lend proceeds to the local authorities. Similar initiatives are now being explored elsewhere in Europe.

The bank’s network in emerging markets has provided both expertise and a source of sovereign investors for developed markets. In terms of expertise, HSBC has arranged multilateral-backed infrastructure financing programmes in countries such as the Philippines and Brazil. It is now working on a similar structure in Spain, backed by the European Investment Bank.

In terms of investors, sovereign wealth funds view infrastructure as a good match for their long-term investment mandates, and many reliable assets are in the hands of governments in developed countries. In December 2010, HSBC helped to arrange the Kuwait Investment Authority’s €600m co-participation alongside the French government in a capital increase for France’s nuclear energy group, Areva.

Most Innovative Investment Bank from Western Europe

Winner: BNP Paribas

Shortlisted: HSBC, Barclays Capital and Deutsche Bank

Alain Papiasse, BNP Paribas

The start of the second half of 2011 was a torrid time for Europe’s banks. BNP Paribas’s experience was no exception, its share price falling 37% between July 1 and the end of August as investors fretted about its exposure to the eurozone’s peripheral members and a possible downgrade of the French sovereign.

The stock’s woes could hardly be blamed on the recent performance of BNP Paribas’s corporate and investment bank (CIB), however. Over the course of the year, it has further consolidated its position as a top five Europe, the Middle East and Africa investment bank and a major player elsewhere.

The CIB’s revenues rose 6% year on year in the first half to €2.9bn, despite markets being turbulent throughout the period. The division also had a cost-to-income ratio of 56%, the lowest among its main rivals.

Alain Papiasse, head of BNP Paribas CIB, attributes much of this to having a diverse source of revenues. He attaches a lot of importance the bank’s financing businesses arm (which includes cash management and trade finance products and is one of three in the CIB, with fixed income, and equities and advisory).

“BNP Paribas’s model is not to be too dependent on pure investment banking, which is by definition volatile,” says Mr Papiasse. “Advisory business can stop as soon as companies decide against acquisitions or initial public offerings. But trade business and daily cash management services don’t stop, regardless of how markets are.”

The bank did maintain a strong showing in fixed income and equities, however. It won The Banker’s award for interest rate products (thanks in part to its use of realised volatility swaptions and curve premium indices) and was shortlisted in the equity derivatives, prime brokerage and leveraged finance categories.

Asia is a major focus for BNP Paribas, and is the region where Mr Papiasse foresees the highest growth rates in the near future. The bank hopes, in particular, to bolster its offering of investment banking flow products there. “If we win the pan-Asian cash management business of a certain company, then we can gather all its foreign exchange flows between the different countries,” says Mr Papiasse. “That’s very important for us.”

BNP Paribas’s near-term fate will mostly hinge on the eurozone crisis, however, and its resolution still seems a long way off. But Mr Papiasse says it was wrong of the markets to think otherwise. “I don’t believe it’s possible to come up with technical solutions – issuing Eurobonds, say – if you haven’t first settled the governance issue, which involves questions around more fiscal integration and the European Commission having more control over individual countries,” he says. “The markets thought the governance problems could be resolved in one meeting and that Eurobonds could be issued the day after. That makes no sense.”

Most Innovative Investment Bank from Central and Eastern Europe

Winner: Wood & Co

Shortlisted: VTB Capital

Pawel Tamborski, Wood & Co

As troubled western European banks relinquished ground in central and eastern Europe (CEE), Czech investment bank Wood & Co decided the time was right to build a presence from scratch in major regional markets such as Poland, Romania and Croatia. After a raft of hires from UniCredit and ING in 2010, the firm has emerged as the first pan-regional standalone investment bank from the CEE region, with promising deal-flow despite tough market conditions.
“What might look innovative from the outside to us looked entirely logical after the post-2008 shake-up. There was not so much a niche as a gaping hole in the market for an investment bank that could combine local expertise with a much bigger international reach than that of the pure domestic players,” says Jaroslaw Derylo, Wood & Co’s head of investment banking for Poland.
The rise of Warsaw, Vienna and London as hubs for listing companies based right across the region also encouraged Wood to think across borders. The approach is already paying dividends, including the firm’s involvement in the initial public offering (IPO) of the Warsaw Stock Exchange itself, and the flotation of Austria-based catering company Do&Co in Istanbul – the first foreign listing in Turkey.
“In a difficult market for IPOs, corporate clients appreciate us having the local and international legs. Larger banks may not be interested in listing CEE mid-cap companies, but if international investors take up even just a quarter of such a deal, it can make the difference between success and failure for the IPO,” says Pawel Tamborski, head of CEE investment banking for Wood & Co.

Universal banks emphasise the advantages of an investment bank with a relationship lending capacity attached. But Mr Tamborski, one of the arrivals from UniCredit, has met just as many clients who worry that balance sheet involvement might influence investment banking advice, and prefer an independent player. In one instance, Wood acted as advisor to a potential issuer on its selection of lead managers for a Eurobond issue.

As capital flows and acquisition activity between the different CEE markets grows, this can only favour Wood’s pan-regional model. Polish mutual funds were the largest single group of foreign investors in Do&Co’s Turkish listing, while investors in Warsaw would welcome more listings there by Ukrainian agribusiness or retail companies.

“The total size of funds based in London is still much larger than those based in CEE, but if you consider the restrictive investment policies of the London funds and the proportion they are prepared to allocate to the emerging Europe region, then that gap is not so big any more,” says Mr Tamborski.

Most Innovative Investment Bank from Asia-Pacific

Winner: Citic Securities 

Shortlisted: Maybank and SBI Capital

Cheng Boming, CITIC Securities

China’s Citic Securities has played a major role in a number of key deals this year, a time when it has also charted its course for global expansion by partnering with Crédit Agricole CIB, the corporate and investment banking arm of the French bank. 
Citic Securities achieved a number of firsts in its deals over the past 12 months. The share offering for Dalian Port in November 2010 was the first time a Chinese share offering combined a public offering, private placement and both a cash and assets subscription. In its issuance for Taikang Life Insurance, Citic Securities was the sole manager and bookrunner for the first subordinated bond for a Chinese insurance company. And the initial public offering for Hui Xian Real Estate Investment Trust (Hui Xian REIT) was the first renminbi-denominated REIT in the world and the first renminbi IPO outside of mainland China. 
Looking further afield to Europe, Citic Securities made a key move in June 2011 when it announced it would buy a 19.9% stake in each of CLSA, Crédit Agricole’s Hong Kong-based Asian broking arm, and Cheuvreux, the bank’s pure-agency European equity broker. The deal gives Citic the opportunity to gain an in-depth understanding of global operating and management models. 

Cheng Boming, general manager of Citic Securities, says: “We are of the view that the investment in CLSA will mainly bring about recessive income, and will help upgrade the company’s service platform in the delivering of comprehensive global services. Leveraging CLSA’s strong sales network in Asia-Pacific and its widely trusted research capability, we can further tap into our existing business, producing positive synergies.”

Mr Cheng adds that the investment in CLSA and Cheuvreux is only part of Citic’s global expansion strategy. For the next 12 to 18 months, Mr Cheng says that the priority is to take advantage of its leading position in conventional businesses and gain higher market share. After this, Citic Securities will aim to develop new businesses such as margin-trading, short-selling and market-making transactions. 

Another focus is strategic acquisitions and the burgeoning private equity businesses. “Regarding these businesses, it is of vital importance for us to recognise and seize every investment opportunity, and we strive to find the best balance between profits and risks,” says Mr Cheng. Also, Citic Securities is focusing on extending its service capacity into overseas markets. “We hope that through complementary business platforms we will be able to seize every opportunity that comes along with China’s financial globalisation. As such, we will be better positioned to serve the diverse needs of our customers, and to generate new revenue,” adds Mr Cheng. 

Most innovative Investment Bank from North America

Winner: Bank of America Merrill Lynch

Shortlisted: Morgan Stanley and JPMorgan

Tom Montag, Marrill Lynch

Bank of America may be beset by worries related to mortgage lawsuits and its capital position but on the investment banking side it has recorded a stellar performance. The integration of the Bank of America and Merrill Lynch franchises has been done very effectively with the result that the bank was ranked number one in North America investment banking revenues (June 2010 to June 2011) with a 10.6% market share, and number two globally with an 8% share. 

Bank of America Merrill Lynch has a strong position across the debt capital markets globally, especially for financial institutions groups, high-yield and securitisation sectors. 

The bank has worked on some of the most important equity, debt and financial institutions deals over the past 12 months. Standout deals in equities were its role as joint active bookrunner and advisor to the management and private equity consortium on the initial public offering (IPO) of Bank United – the first bank IPO following Federal Deposit Insurance Corporation intervention – and global coordinator on the largest IPO in history for General Motors. 

BAML was financial advisor on several of the largest North American and global merger and acquisition transactions over the period, such as the AIG restructuring (for which it was also global coordinator for the re-IPO on the New York Stock Exchange) and the BHP Billiton takeover of Potash. 

In terms of innovation, BAML has been at the forefront with creative liability management solutions, in structuring and pricing flexible capital solutions across the credit spectrum as well as monetising assets outside of traditional equity markets. 

Co-chief operating officer Tom Montag says: “We are delighted to win this award which recognises the successful integration of the Bank of America and Merrill Lynch franchises and how this has enabled the bank to better serve its customers. 

“Despite persistent economic headwinds, the global capital markets have still been active over the past 12 months and BAML has led the way in introducing innovative transactions to meet client and investor demands.”

In North America over the past 12 months BAML was number one in financial sponsor-related transactions based on fees with a 12% market share. Deals included acting as lead left bookrunner on the IPO of HCA Holdings, the largest ever IPO of a financial sponsor-backed company.

Most Innovative Investment Bank from Latin America

Winner: Itaú BBA

Shortlisted: BTG Pactual

Candido Bracher, ITAU BBA

Itaú BBA has been growing quite a franchise over the years. It has secured a number of high-profile deals in Latin America, including the world’s largest ever equity offering – the 120bn reais ($70bn) equity offering for state-controlled oil company Petrobras, which was three times the size of the second biggest equity deal, the Agricultural Bank of China’s initial public offering brought to the market last year. The deal also represented 7% of all equity issuances in 2010. Itaú BBA also worked on Petrobras’s $6bn bond offering, which again broke the record for the largest ever debt issuance for a Brazilian company.

Smaller but significant deals are the first listing of a Brazilian shoe retailer, Arezzo; and the first fixed-income issuance of a company that had yet to start generating cash, OGX. The bank also placed the first initial public offering out of Argentina since 2007, for farmland venture Adecoagro. 

“We have banked 3000 of the largest corporations in Latin America, specifically in Brazil, Argentina and Chile, for many years now and we make it our goal to learn their needs in depth,” says Itaú BBA chief executive Candido Bracher. “This is what has given us a special edge.”

The growing strength of Latin America’s economies has attracted much attention from international investors interested in acquiring local companies, particularly in Brazil. Itaú BBA has shown an impressive merger and acquisition portfolio, which included advising on the $4.8bn sale of AEI’s assets to a consortium led by Spain’s Iberdrola involving 10 different assets through eight countries. The bank also advised Indian group Shree Ranuka Sugars on its $1.6bn acquisition of Equipav in a deal that introduced the buyer to the Brazilian market for the first time.

But it is not only investors who have been attracted by Latin America’s appeal. All major international investment banks are present in the region and fighting for its deals, making sure that there is no risk of Itaú BBA becoming complacent. 

“The fee pool that Latin America, particularly Brazil, represents compared to the rest of the world is relevant,” says Jean-Marc Etlin, Itaú BBA executive vice-president for investment banking. “What we see is that this market has become the hunting ground for everyone – ourselves, international banks, boutiques. Competition is intense and our view is that it will continue to be more intense in the future. But this is a good thing.”

The Banker’s judges were also impressed with BTG Pactual’s growth and ambition, which have resulted in merger negotiations this summer with Chile’s financial and brokerage house Celfin, a firm that also has operations in Colombia and Peru.

Most Innovative Investment Bank from the Middle East

Winner: Samba Capital

Shortlisted: Kuwait Finance House and NCB Capital

Headquartered in Riyadh, Samba Capital, the investment banking subsidiary of Saudi Arabia’s Samba Financial, has carved out a name for itself in offering superior advisory and arranging capabilities across multiple product areas, together with excellent placement capabilities and access to investors in both Saudi Arabia and the Middle East.

From April 2010 to March 2011, Samba Capital has lead managed more than 80% (by value) of all Saudi riyal-denominated term offerings in the country’s local debt capital markets. It acted as joint lead manager and bookrunner for Saudi Electricity Company’s landmark SR7bn ($1.87bn) Islamic bond (sukuk) offering in May 2010 that attracted a total orderbook of SR27bn. This is the largest ever riyal-denominated debt capital markets deal in the country.

Samba is currently engaged as a joint lead manager on the first project finance sukuk offering in Saudi Arabia, which is expected to come to market later this year.

The bank also boasts the leading equity capital markets franchise in both Saudi Arabia and the Middle East. Since 2010, it has been awarded five initial public offering (IPO) mandates with a cumulative estimated transaction size of more than SR2.5bn.

On the corporate advisory front, in March 2011 Samba Capital completed a strategic review for Arabian Centre Company Limited, one of the Middle East’s largest shopping mall developers, to help it identify financing options that support its growth strategy.

In 2010, it also extended its industry-specific expertise and innovation to some of the largest project finance transactions in both Saudi Arabia and the Middle East. In particular, the bank plays an active part in the Saudi power industry, supporting developers prior to bid submission in arranging appropriate financing structures.

We see most of the opportunities over the next 12 to 18 months, coming from government-linked entities and private sector companies that are directly or indirectly benefiting from government spending with large projects requiring external financing

Eisa Al Eisa

Samba was chosen as one of the banks supporting the preferred Japanese/South Korean bidder consortium of Sumitomo/Kepco in Shuweihat 3, Abu Dhabi’s first independent power project, with a project value of approximately $1.5bn. The bid was successfully closed in May 2011.

Samba has also helped close a number of other key regional transactions over the past year, acting as mandated lead arranger for Abu Dhabi’s state-owned International Petroleum Investment Company’s (IPIC) $3.6bn three-year multicurrency term facility, and Qatar Telecom’s $2bn revolving credit facility.

It has also been actively involved through its roles as an arranger, as well as an advisor, in almost all syndicated loans transactions concluded in Saudi Arabia since June 2010. 

“We see most of the opportunities over the next 12 to 18 months, coming from government-linked entities and private sector companies that are directly or indirectly benefiting from government spending with large projects requiring external financing,” says Eisa Al Eisa, chairman of Samba Financial. 

“Similarly, a number of companies in the construction sector are in the process of scaling up their operations and we believe this will result in opportunities across different areas, with increased merger and acquisition, IPO and corporate and project financing activity.”

Most Innovative Investment Bank from Africa

Winner: Rand Merchant Bank

Shortlisted: Standard Bank

Rob Hamer, Rand Merchant Bank

Rand Merchant Bank (RMB), a subsidiary of FirstRand, has long been a major player in South Africa’s competitive investment banking sector. It has a diverse set of strengths, having been the leading mergers and acquisitions adviser in the country last year and possessing one of its biggest fixed-income prime brokerages.

Elsewhere in Africa, however, RMB has lagged Standard Bank, which has the continent’s biggest investment banking business.

But RMB is catching up. “Our main focus [in the past year] has been to push into the rest of sub-Saharan Africa,” says Rob Hamer, co-head of investment banking at RMB.

It has established representative offices in Angola, Kenya and Nigeria, three of Africa’s biggest markets for investment banks. In due course it hopes to have even more of a presence in each. “In Nigeria there are some good lending opportunities, particularly in oil and gas,” says Mr Hamer. “We also see advisory business emanating from the consolidation of the financial sector.”

RMB is targeting Kenya partly because it views the country as a hub for Indian companies entering Africa, a growing trend it hopes to capitalise on. “One of our strategies is to exploit the India-Africa and China-Africa trade and investment corridors,” says Mr Hamer.

RMB has a branch in India and a representative office in China (as well as a co-operation agreement with China Construction Bank) to help it do this. It aims to win mandates whereby it can finance firms from the two countries carrying out trade or making direct investments on the continent.

Investment banking in Africa requires a hefty balance sheet and RMB has shown its willingness to fund clients in the past year, including providing financing to Zain Ghana, a telecoms operator, Petra Diamonds, which has mines in Tanzania and South Africa, and Kosmos Energy, a US firm operating offshore oil assets in Ghana.

RMB has made a strong start to its expansion beyond South Africa. But it will be some time before it is satisfied. “Africa is an exciting, rapidly growing market,” says Mr Hamer. “But it is very competitive. There’s effectively a new scramble for Africa in the financial services industry. So gaining significant market share takes time.”

Most Innovative Investment Bank for Asset and Liability Management

Winner: Moelis & Co

Shortlisted: Credit Suisse, Deutsche Bank and HSBC

Christopher Ryan, Moelis & Co

Asset and liability management (ALM) crosses investment banking disciplines. For this reason, the vision pursued by Moelis & Co since its creation has proven ideally suited to advising ALM clients.

“One of the tenets of the firm is not to have separate P&Ls [profit and loss accounts] by product silo, geography or client segment. That brings people together to work on an individual client’s behalf, so we tend to excel in complex risk advisory assignments that require broad collaboration,” says Christopher Ryan, managing director and head of capital markets at Moelis.

This collaboration was vital in advising a monoline guarantor on its insured exposures, liquidity and capital structure, ahead of potential liquidity support transactions. The assignment brought together financial restructuring, the guarantor’s regulatory and solvency requirements, plus a portfolio of exposures that included US municipals, international project finance, and complex structured credit with underlying real estate assets.

Drawing on such experiences with clients, Moelis also developed a new valuation technique for commercial mortgage-backed securities, designed to reduce the risk of individual traders making biased performance assumptions. “Once we finish a client contract, we go back to the drawing board to think about what can we take away from the assignment that could be applicable to other clients and issues,” says Yadin Rozov, a managing director at Moelis.

Moelis’s work with investors holding about C$10bn ($10.1bn) in the Master Asset Vehicle II restructured asset-backed commercial paper conduit shows the firm’s increasingly broad network. Potential sellers of the complex assets include Canadian banks and pension funds, while hedge funds are among the possible buyers, and regulators keep a watchful eye on the process.

“Collectively, the deal must make sense for all the constituencies to improve the securities, but you need to present the same facts in a slightly different format to each party,” says Mr Ryan.

Moelis is expecting the next wave of ALM business to come from public sector advisory work, and from capital management as banks prepare for Basel III. 

“There are a lot of things that banks can do on a balance sheet to manage it more efficiently without raising capital, and that is where we can be value-creative,” says Mr Rozov.

Most Innovative Investment Bank for Bank Capital

Winner: JPMorgan

Shortlisted: Credit Suisse and HSBC

David Marks, JPMorgan

Capital markets for financial institutions are globalising fast, according to David Marks, chairman of European financial institutions group (FIG) capital markets at JPMorgan. The advent of Basel III and international accounting standards is breaking down national barriers. 

That creates an opportunity for a FIG business with a global presence, and JPMorgan continues to seize it. Deal flow over the past difficult year has covered US Treasury sales of its preferred shareholdings in Citi and Ally Financial, issuance across the eurozone, the first Islamic bank sukuk deal from Saudi Arabia and the first FIG non-step hybrid issue in Australia.

Subordinated debt has been particularly challenging, and Mr Marks says regulatory uncertainty stymied some issuers from raising money when market conditions were favourable. Even so, JPMorgan delivered innovative hybrid deals designed to be Basel III-compliant for banks as varied as UniCredit in Italy and OCBC in Singapore, as well as a Solvency II future-proofed deal for reinsurer Hannover re.

“Even when the cash market dries up in periods of duress, investors still express their view through the synthetic market. We are able to provide the trading capability in the cash, single-name or index synthetic markets, and that constant feedback from the market is particularly helpful for our dialogue with issuers,” says Mr Marks.

Equally important is a senior FIG team, some of whose members have been with the bank for 25 years. Many FIG rights issues the bank has led over the past year were multiple repeat clients for JPMorgan. 

That institutional track record gives JPMorgan an edge in launching capital increases, whether they are growth-related for strongly positioned banks such as Standard Chartered, or challenging recapitalisations such as those for Germany’s Commerzbank or Portugal’s BCP. Ina De, co-head of European equity capital markets at JPMorgan, says the experience of earlier rights issues for financial institutions after the 2008 crisis provided vital lessons.

“One of the most important lessons from previous transactions is that if issuers can credibly show that they are raising the right amount of capital, and therefore will not need to come back for more, investors are more likely to be supportive,” says Ms De.

Most Innovative Investment Bank for Bonds

Winner: Deutsche Bank

Shortlisted: HSBC and JPMorgan

Miles Millard, Deutsche Bank

Even discounting the tumultuous six weeks or so over July and August, the past 12 months have been an uneven time in the bond markets, veering from record volumes to the worst volatility on record. The key to success in such a challenging environment was positioning a business to exploit any opportunities and having the execution capabilities to get deals done when a window of opportunity opened. 

Deutsche Bank has done just that. Some 18 months to two years ago, the bank was of the opinion that the overarching themes in the bond markets would be the increasing internationalisation of emerging market debt, financial institution refinancing and sovereign debt. Miles Millard, global head of capital markets and treasury solutions (CMTS) at Deutsche, says the bank moved early to get the right resources in the right places. 

“The market has experienced periods of volatility but the main themes remained the same as for the previous six to 12 months, and we have proactively sought to position our origination and trading platforms to tackle all these trends,” he says. 

As a result, Deutsche has been involved in the key deals in these spaces: It worked on the first Asian local currency bond for the Republic of the Philippines; reopened the bond market to financial institutions after a six-week shutdown in May, following with the first subordinated deal since the crisis; and worked on vital deals for some of the most challenged sovereign borrowers, including Spain. 

Central to Deutsche’s success has been the creation of the CMTS group as part of a corporate and investment bank integration programme, which brought together its treasury product and debt capital markets businesses, the latter previously headed by Mr Millard. 

“The creation of CMTS has enabled us to extend our coverage and to work in a more coordinated and connected way for our clients. In this kind of challenging market, being able to bring clients to market with the right product in the right currency whenever there is a window of opportunity is essential,” says Mr Millard. “This has worked to the benefit of both our capital markets and our treasury products businesses, as we can see from the global diversity of the deals that we have done.”

Most Innovative Investment Bank for Climate Change and Sustainability

Winner: Bank of America Merrill Lynch 

Shortlisted: Citi and Nedbank

When Bank of America acquired Merrill Lynch, it married two businesses that had both established multi-faceted, multi-billion commitments to address climate change. While the global commitment to the Kyoto principles and beyond may have wavered, the combined entity of Bank of America and Merrill Lynch is proving that great deals in the climate change and sustainability arena can still be done that are both profitable and beneficial to the environment.

Bank of America Merrill Lynch’s sustainability commitments span the bank, from mainstream initial public offerings and tax equity financings of renewable energy companies, to more esoteric and surprising deals such as Project AMP. This was the world’s largest ever distributed rooftop solar generation project, on which Bank of America Merrill Lynch was sole financial and structuring advisor and sole lender. It will generate more than 10,000 jobs across 28 US states and provide enough solar energy to power about 100,000 homes. 

The macro environment is our biggest challenge. Given where emission markets are, it is hard to say how much demand there will be for carbon credits

Abyd Karmali

Another important deal was a project with Nuru Energy to provide affordable, clean, off-grid LED lighting in sub-Saharan Africa. The project displaces the use of kerosene with rechargeable LEDs, cutting carbon as well as costs for local communities. 

The nature of the deal (which had both carbon finance and microfinance elements) meant that Bank of America Merrill Lynch had to think laterally, and had to draw on different areas of the bank – including part of its community development, carbon markets and other derivatives businesses.

“This transaction stitches a lot of different capabilities together,” says Abyd Karmali, global head of carbon markets at Bank of America Merrill Lynch. “The counterparty [Nuru Energy] was very interesting, but [it was] at a very early stage, which meant we couldn’t offer a straightforward loan. Dodd-Frank restrictions meant that an equity investment wasn’t possible.” 

The solution the bank came up with was to provide upfront capital via an option premium to purchase carbon credits. “This means we can take the price and delivery volume risk, which we’re comfortable with, and Nuru gets the capital it requires,” says Mr Karmali. 

He hopes this kind of project can be replicated or done on a bigger scale. “So far Nuru has hit all of its performance metrics, so there are clearly opportunities to scale up the project. But the macro environment is our biggest challenge. Given where emission markets are, it is hard to say how much demand there will be for carbon credits,” he adds. 

Most Innovative Investment Bank for Commodities

Winner: Deutsche Bank

Shortlisted: Barclays Capital and Morgan Stanley

David Silbert, Deutsche Bank

Deutsche Bank has been at the forefront of innovation in the ever-growing commodities sector over the past year.

In September 2010 it launched Autobahn Metals, an electronic trading platform for metals contracts. Like other platforms, it allows for the execution of spot, forward and options trades. But it differs by being the first for metals contracts to offer requests for trade (RFQs) and trading commentary as well as direct market access.

Autobahn Metals’ key facet, however, is the way in which investors can execute trades. The RFQ facility allows them to get quotes from Deutsche rather than always having to place bids that appear on other traders’ screens, which can make it hard to achieve tight pricing.

Autobahn Metals also enables traders to place ‘iceberg’ orders, which is when a single bid is split into smaller ones that are fed through the market so that they do not distort pricing as much as one large one might, a fairly common phenomenon when a lack of liquidity pervades.

“Our platform allows people to execute orders in a more discreet manner,” says David Silbert, global head of commodities at Deutsche Bank. “They can launch RFQs for that order or split it into smaller ones. The latter creates less market disruption and can enable you to get better pricing.”

The bank plans to launch similar platforms for other commodities soon, including those in the energy sector.

Deutsche also launched the first ever sterling-hedged gold exchange-trade commodities platform in April. This has allowed investors who do not want exposure to the US dollar still to invest in the commodity, which tends to be priced in the US currency. “A lot of our retail clients like gold or commodities as an asset class,” says Mr Silbert. “But there is certainly concern about the US dollar, especially among non-US investors. Giving clients access to commodities in multiple currencies is good if they have a negative view of the dollar. It also benefits corporates that don’t have dollar exposure.”

Most Innovative Investment Bank for Equity Derivatives

Winner: Société Générale Corporate & Investment Banking

Shortlisted: BNP Paribas and Credit Suisse

Stephane Mattatia, Societe Generale

From the May 2010 ‘flash crash’ on Wall Street to the wild gyrations in August 2011, volatility has been the dominant theme in equity markets. Long classified as a hidden or unrewarded asset, unlocking the volatility premium in an accessible and cost-effective way has proved elusive for equity derivatives teams.

Société Générale Corporate & Investment Banking (SG CIB) has broken the mould in the past year, launching the VIX 1x2 strategy using call options on the VIX US stock market volatility index, and a suite of indices and exchange-traded funds (ETF) offering volatility exposure. The VIX 1x2 strategy has already attracted trading volumes of about $25bn, while the VIX Futures Enhanced Roll ETF overcame the high cost of rolling monthly futures contracts.

Stephane Mattatia, head of global equity flow engineering at SG CIB, says the needs of investors were at the forefront in designing such products. Investors prefer to use a small allocation to volatility products – about 5% to 10% of their portfolio – to hedge tail risk and reduce the volatility of the overall portfolio. 

“Investors now focus on the question of how to hedge their exposures just as much as on the question of asset allocation itself. People are no longer just using very generic hedges – hedging can be as important, adaptable and diversified as the asset allocation itself,” says Mr Mattatia.

Meanwhile, poor liquidity deterred many investment banks in 2009 from offering single-stock equity derivative transactions to assist corporate mergers and acquisitions (M&A). SGCIB maintained its presence, a decision that paid off in 2010 and 2011. Low valuations mean acquisition targets are more attractive, but high volatility increases the execution risks, making equity derivatives essential.

If the praise of competitors is the truest tribute, then investment banking rival Deutsche Bank’s selection of SG CIB for equity derivative support on its September 2010 voluntary tender to buy out Deutsche Postbank is praise indeed. The innovative cash-settled equity swap between Deutsche Bank and SG CIB helped in the framework of a Ä3.8bn voluntary public tender offer for which SG CIB acted as joint financial advisor alongside Deutsche Bank’s own investment bank.

“For mergers and acquisitions derivative transactions like this, we are not looking at innovative pay-offs, but at the quality of the accounting, legal, solvency and regulatory advice that we can provide,” says Olivier Buttier, head of SG CIB’s strategic equity transactions team.

Most Innovative Investment Bank for Equity Linked

Winner: JPMorgan

Shortlisted: Bank of America Merrill Lynch and Credit Suisse

Equity-linked markets have been rocked by the recent weaknesses in global stocks. In the US, convertible bond prices fell 6.6% between the start and the middle of August, an even worse performance than that of high-yield bonds.

As such, issuance has been low in the past 12 months and, thanks to fragile demand, banks have had to tailor deals specifically to each client. “There has been a move in the past year away from pure vanilla deals to ones that really fit to each issuer’s needs,” says Rupert Fane, managing director, Europe, the Middle East and Africa equity-linked capital markets, at JPMorgan.

The $620m convertible bond for US biotech firm Dendreon in January, perhaps JPMorgan’s most innovative equity-linked note this year, demonstrates this trend. The bank, which was sole bookrunner, helped eliminate risks to the company’s share price by buying borrowed shares from convertible arbitrage investors and selling them to long-only equity investors. This new structure was called Mitch (managed investor targeted convertible hedge) and differed from the normal practice on an overnight deal of an issuer buying back its own stock, chiefly because Dendreon, a fast-growing company, did not want to use spare cash for that purpose.

The call spread brought about a very high effective conversion premium [of 90% on the five-year tranche and 110% on the longer one]

Jeff Zajkowski

JPMorgan was also bookrunner, along with Citi, on a $1.7bn five- and seven-year convertible note for Mexican cement maker Cemex in March. The borrower needed to raise subordinated capital but eschewed pure equity, so as not to dilute shareholders, and had to rule out a straight subordinated bond, given that the markets were seen as too weak to absorb almost $2bn of such debt. 

As such, JPMorgan helped structure a convertible bond that was the first from Latin America to see an issuer purchase a call spread at the same time as the offering. This helped push up the call premium and therefore minimise shareholder dilution. “The call spread brought about a very high effective conversion premium [of 90% on the five-year tranche and 110% on the longer one] and thus came as close as possible to the company’s ideal security, which was a straight subordinated bond,” says Jeff Zajkowski, JPMorgan’s head of equity-linked origination for the Americas. 

In Europe, JPMorgan’s achievements included leading the first ever convertible notes for Belgian and UK real estate investment trusts.

Most Innovative Investment Bank for Foreign Exchange

Winner: Citi

Shortlisted: Deutsche Bank and HSBC

Anil Prasad, CITI

In a commoditised business such as foreign exchange, there is little to differentiate the big FX houses in terms of pricing, trading and risk management solutions. This means that to stand out from the crowd, businesses must take a different approach to innovation; one that embraces processes and services as much as products. 

“We look at innovation in two ways: the first is to try and improve things which are already out there and the second is to plug any gaps in our services, or spot gaps in those of others. For instance, as a whole, the FX business is doing more volumes than ever before. Not too long ago we would have struggled to process 300,000 deals a day; now we have capacity to process several million. An example of the second is something like our CitiFX Vault initiative, which allows clients to see their exposure with all of their prime brokers in a single ring-fenced location,” says Anil Prasad, global head of FX at Citi.

Another clever idea has been the creation of CitiFX Wire, a news offering that employs three (soon to be four) journalists to harness the power of Citi’s 1600-strong FX headcount across 83 countries. They pull together Citi’s formal research product and ad hoc intraday comment to create a one-stop information shop. Launched in August 2010, it is delivered over a built-for-purpose, low-latency network, using the same principles that are applied to pricing and trading. 

“A network such as ours contains an incredible amount of valuable information. CitiFX Wire is a way for us to harness it, collate it, and make sense of it for our clients,” says Mr Prasad. “It has been so successful that we are rolling it out across other asset classes.”

Among other developments, Citi has also added to its suite of indices. The PAIN (positive alert indicator) indices, a collaboration between the bank’s G-10 strategy and quantitative investor solutions group, provide a measure of investor positioning in G-10 currencies versus the US dollar, and are constructed by measuring empirical relations between currency returns and the returns on active currency managers. 

“It provides a way for users to quantify sentiment and see when the market is overdone,” says Mr Prasad. “Back-testing to 2006 showed that the indices are a powerful indicator of when to enter contrarian trades.”

Most Innovative Investment Bank for Inflation Products

Winner: Barclays Capital

Shortlisted: BNP Paribas and Royal Bank of Scotland

Ralph Segreti, Barclays

Quantitative easing on a huge scale across most of the developed world in the past three years has left many investors nervous about the prospect of inflation. Recent fears of lingering slow growth in Europe and the US only served to reinforce these concerns, with many still uncomfortable at the spectacle of rising prices in several emerging markets.

The result has been a growth in demand for inflation-linked products. “Central banks have been the largest marginal buyers of inflation products in the past year to 18 months,” says Ralph Segreti, managing director and global inflation-linked product manager at Barclays Capital, which has been among the quickest of its peers to exploit the trend. “Pension funds and insurers have also become more involved in hedging risks.”

In fixed income, Barclays Capital has structured for its clients several dollar-denominated inflation-linked credit-linked notes (iCLNs), which typically offer higher coupons than vanilla inflation-linked bonds.

Among its deals have been iCLNs issued by banks off their medium-term note shelves and which pay a monthly coupon calculated as annual inflation multiplied by a leverage factor. Such a structure is hardly rare. But Barclays Capital has innovated by, for example, using a well-known AA+ rated corporate as a reference entity, thus making a default less likely.

It is not just fixed-income investors that have been worried about inflation, however. In April, Barclays Capital launched an equity inflation response index. This comprises stocks from 10 sectors that have performed well relative to others during periods of high inflation, based on data from 1927 to 2010. The industries chosen include healthcare, petroleum, natural gas, defence, beer and spirits and agriculture. “The 10 selected sectors are usually associated with a high pricing power,” says Mr Segreti. “Even in weak economic times, they can pass through price increases.”

Of Barclays Capital equity inflation response indices, its Asian and emerging market ones have proved the most popular (it has also launched US and European versions). “A large insurance company in Asia has been considering the index as a potential underlying for a capital-protected product aimed at retail distribution,” says Mr Segreti. “Other clients with real assets are looking at the index to enhance their returns in periods of high inflation, which is the main objective of the index.”

Most Innovative Investment Bank for Infrastructure and Project Finance

Winner: HSBC

Shortlisted: Citi and Société Générale

David Gardner, HSBC

For the third year running, HSBC has proved to be the most accomplished infrastructure and project finance house around. The bank continues to display a product portfolio scale that is hard to beat, with 48 deals closed between June 2010 and June 2011 and project volumes of more than $50bn across 25 countries. 

Even more importantly, HSBC showed an innovative approach to deals, developing traditional project financing structures in parallel with new bond financing tranches. It acted as joint lead arranger and joint swap counterparty for the first ever cross-border project bonds in Asia, structured in an Islamic format for the Trans Thai-Malaysia (TTM) gas pipeline – a RM600m ($200m) sukuk. 

It was also financial advisor, coordinating bank and mandated lead arranger on the first petrochemical plant in Russia to be financed on a project finance basis for RusVinyl, a Russian chemical joint-venture, as well as being the sole arranger and joint dealer on an innovative £1.5bn ($2.43bn) financing structure to finance the acquisition of Eversholt Rail Group by EIG investment consortium – the first acquisition in the infrastructure sector to close with a multi-sourced loan and bond debt package with an investment grade debt rating.

“I don’t play favourites with our projects but TTM is a very special one,” says David Gardner, HSBC’s global head of project finance. “It was a cross-border project bond transaction which incorporated an Islamic structure, and there was a previously successful financing precedent done in the bank market which established a competitive benchmark. We gave the clients – PTT and Petronas – a structure that had more favourable conditions and stretched tenors.”

Project bonds are becoming more relevant in an environment where bank liquidity might reduce in the future and where investors might be interested in new structures, to diversify away from traditional corporate debt or sovereign debt. But structuring a project finance-related product that appeals to the debt market is something many have yet to master. 

HSBC also managed to successfully structure and sell Brazil’s first project bond, a $1.5bn issuance by engineering group Odebrecht. “A lot of people were talking about it in Brazil but we were able to put together the technology to structure it. There are lots of banks with distribution capabilities but the ability to properly structure the deal and then get the appropriate rating from the rating agencies, that’s where the real secret lies.”

Most Innovative Investment Bank for Initial Public Offerings

Winner: Bank of America Merrill Lynch

Shortlisted: Goldman Sachs and JPMorgan

Dan Cummings, Bank of America

The market for initial public offerings took a battering in early August when stock markets across the developed world plummeted. High-profile deals across Asia, Europe and the US were pulled.

But the first half of the year saw several iconic transactions, particularly in the US. Bank of America Merrill Lynch (BAML) was a bookrunner on several of those.

One of the most notable was BankUnited’s $900m initial public offering (IPO) in January. The lender was established in 2009 when it was taken over by a private equity consortium from the Federal Deposit Insurance Corp, which had seized the Florida-based firm at the height of the financial crisis.

The deal was the first US bank IPO post-crisis. “BankUnited was one of the first US lenders to come back from very trying times,” says Dan Cummings, global head of equity capital markets at BAML. “It was a very exciting transaction because of this. It symbolised a change in the outlook for the financial sector and served as a catalyst for other bank IPOs.”

US insurer AIG’s $8.7bn re-IPO in May, on which BAML was global coordinator, marked another stage in the market’s revival. “AIG’s was a landmark deal, partly because of its sheer size,” says Mr Cummings. “But it was also a clear sign of the resurgence of the markets.”

BAML helped emerging market companies raise capital through IPOs in the first half. It was left lead on a $1.4bn deal in April for Arcos Dorados, an Argentine company that operates McDonald’s restaurants throughout Latin America.

BAML structured the offering, the largest consumer-sector IPO out of the region to date, so as to be Securities and Exchange Commission-registered, rather than 144a. This was rare for a Latin American transaction, but allowed it to be marketed to a wider group of investors. It was also one of the first IPOs from the region to have a dual-class share structure.

Many fear IPO markets globally will not recover fully before the end of 2011. Mr Cummings says stock markets will need to strengthen before investors are once again inclined to buy shares in debut companies. “Investors need more stability in the secondary markets,” he says “They are naturally more focused on what they already have in their portfolios than what they can add to them.”

Most Innovative Investment Bank for Interest Rate Derivatives

Winner: BNP Paribas

Shortlisted: Royal Bank of Scotland and HSBC

Kara Lemont, BNP Paribas

The market volatility across most asset classes over the past year has presented both a threat and an opportunity for market participants. The rising cost of protection against adverse interest rate movements on the one hand has been matched by opportunities to take profit on existing positions and enter new ones on the other. 

BNP Paribas’ fixed-income structuring business has come up with some imaginative yet simple ideas. One such innovation is realised volatility swaptions, which were designed to help clients reduce the cost of hedging interest rate risk by reducing the cost of options. They differ from normal swaptions in two crucial ways: the premium that the client pays depends on the realised volatility of the rate underlying the swaption, and the premium is paid at maturity of the option. 

The inspiration of this transparent hedging alternative came directly from a client, says Thanos Thomopoulos, head of interest rates structuring at BNP Paribas. “We were approached by an insurance company operating in a non-euro market, where the price of swaptions was expensive and the market was liquid. We came up with the idea that the client would only pay the options premium at maturity. In this way, we could more directly link the cost of the swaption to the cost that the bank would incur.”

Another innovation, BNP Paribas’ Nova Index, has been created to optimise how investors access the volatility market. The traditional way to take a view on volatility is via volatility bonds, where a lot of the value of the trade comes from the shape of the yield curve, rather than actual volatility. 

“You can have a very volatile environment where the rate at the end of the period is the same as it was at the beginning, so it’s not a perfect way to express a view on volatility,” says Kara Lemont, head of fixed-income structuring at BNP Paribas.

BNP Paribas’ Nova Enhanced USD 1-10 Indices optimise the monetisation of the volatility risk premium in US dollar one-month, 10-year swaptions by dynamically adjusting positions based on two indicators which aim to distinguish between different market environments. 

This kind of thinking is the key to BNP Paribas’ approach, says Ms Lemont. “We are always trying to find better ways to do existing types of business.” 

Most Innovative Investment Bank for Islamic Finance 

Winner: Citi

Shortlisted: HSBC and CIMB

Citi established its global Islamic banking operations in 1981 in London, and in 1996 became the first international financial institution to set up a separately capitalised sharia-compliant subsidiary, when Citi Islamic Investment Bank (CIIB) opened in Bahrain.

During this time, it has played an instrumental role in the development of Islamic finance products and over the past year has continued to innovate, leading some of the most creative sharia-compliant transactions from around the world. 

In August 2010, Citi led the $100m Islamic bond (sukuk) issue for Kuveyt Turk Participation Bank, Turkey’s first ever sukuk offering. The transaction achieved well-diversified demand, with 48% sold into the Middle East, 47% in Europe and 5% in Asia.

In December 2010, it sole-led the first ever exchange, tender and consent solicitation executed in the sukuk market for Ras Al-Khaimah in the United Arab Emirates.

The liability management and $400m issue was a multi-issuer and multi-currency (UAE dirham and US dollar) liability management exercise which met all stated objectives of optimising Ras Al-Khaimah’s finances, and established a precedent for sukuk liability management. 

In December 2010, it co-led Malaysia’s $2bn sukuk – the largest global sovereign US dollar sukuk offering in history and the first not to use the ijara structure.

Citi remains focused on innovation and developing both the geographic as well as product aspects in the industry. The bank has consistently played a pioneering role in the development of Islamic finance globally, having successfully arranged several billion dollars-worth of sharia transactions for issuers in the Middle East, Asia, Europe and Latin America.

Sovereign or semi-public issuers will rely, among other project finance sources, on sharia-compliant papers

Samad Sirohey

Aside from the origination, structuring and distribution of numerous landmark sukuk, it is heavily involved in syndications, project financings, Islamic advisory and investment products.

“We believe that the growth of sharia-compliant fund management and associated services will be important for this industry to take the next step forward,” says Samad Sirohey, chief executive officer of Citi Islamic Investment Bank and head of global Islamic banking. 

“Additionally, the huge infrastructure spending planned by the Gulf Co-operation Council and other governments in the region means that sovereign or semi-public issuers will rely, among other project finance sources, on sharia-compliant papers that are customised to meet different specific needs. Developing a deep buy-side institutional market for this is critical as the project financing sector moves away from bank financing to capital markets in parallel.”

Most Innovative Investment Bank for Loans and Leveraged Finance

Winner: Credit Suisse

Shortlisted: Royal Bank of Scotland and BNP Paribas

Mathew Cestar, Credit Suisse

Credit Suisse has never been much of a powerhouse in the investment grade corporate debt markets, be it for syndicated loans or bonds. Instead, it targets the more lucrative leveraged loan and high-yield bond markets.

This year the bank has demonstrated its prowess in these. It led the European junk bond league tables after the first half of the year, and was a top five bookrunner in the US. Its performance in leveraged loans was similarly strong.

Credit Suisse chases hardest after mandates for cross-border, multi-currency, multi-product deals that almost by definition have complex structures and require distribution in both the US and Europe.

Among those it has led in the past 12 months is Italian telecoms group Wind’s €6.6bn-equivalent refinancing in November. This comprised €2.7bn of dollar and euro high-yield notes (the largest junk bond globally in 2010) and €3.9bn of bank debt.

Credit Suisse’s ability to adapt structures to fit unique circumstances was shown in March, when it was the main bookrunner on a €2.25bn high-yield bond for Kabel BW, a German cable firm. The bank had to create a warehouse structure, unusual in the capital markets, so that the debt could be issued before the borrower’s takeover by Liberty Global – which the notes were funding – had received regulatory approval.

Moreover, the deal, still the biggest junk bond year-to-date by early September, was seen as a bellwether and helped spur the wave of issuance that followed soon after.

Credit Suisse’s innovation was manifested most clearly when it led a €500m floating rate note (FRN) for Grohe, a German kitchen and bathroom fitter, in early March. The transaction was very rare, given that the vast majority of junk bonds tend, unlike leveraged loans, to be fixed-rate assets. Such was its popularity, however, that it was followed by many other floaters. “Grohe’s FRN appealed to typical loan investors who wanted a secured floating rate asset, but were suffering from a lack of supply in the loan market,” says Mathew Cestar, Credit Suisse’s head of leveraged finance in Europe, the Middle East and Africa. 

“It also interested regular bond buyers concerned about inflation and who wanted to balance their portfolios by having assets that would protect them against sharp rate rises.”

Most Innovative Investment Bank for Mergers and Acquisitions

Winner: Rothschild

Shortlisted: Goldman Sachs and Citi

Nigel Higgins, Rothschild

In 2010, merger and acquisition (M&A) deal volumes increased by 10% on 2009, and the market got off to a good start in 2011. The improved availability of debt and increased corporate activity raised confidence in the market. Corporates that had reduced their debt levels over the previous two years were in a strong position to make acquisitions to grow their businesses. 

The collapse of confidence about the global economic recovery and political turmoil in the eurozone and the US has meant that such positive trends have not come to fruition this year. Still, the past 12 months have seen some landmark deals – and Rothschild has worked on many of them.

One such transaction was Chinese automotive firm Zhejiang Geely’s acquisition of Volvo car company from Ford, on which Rothschild was the exclusive financial advisor to Geely. The result of three years of hard work, it had all the hallmarks of a groundbreaking deal: it was not just cross-border, but across multiple borders. It also involved dealing with the stakeholder culture in Scandinavia, and two very different private companies in the US and China. It was a deal that many people believed would never happen, least of all be the success that it has been. 

“This was one of the most significant and challenging deals of the past 12 months,” says Nigel Higgins, CEO of Rothschild Group and co-head of global financial advisory. “It has deep industrial merit, it saves and develops a great global brand, and it fits perfectly with the acquirer’s business. It ticks all the real world boxes as well as the corporate finance boxes.”

The outlook for M&A hinges on an improvement in confidence about economic recovery. In the US, typically the lynchpin of M&A markets, much depends on the outcome of the ‘super committee’, a meeting of six representatives from Congress and six senators later this year to come up with further deficit reduction plans. “If that committee is successful, I think there will be a burst of activity in early 2012. If it is unable to craft a compromise, the beginning of next year will be much more bleak,” says Jim Lawrence, co-head of global financial advisory at Rothschild. 

Most Innovative Investment Bank for Prime Brokerage

Winner: Bank of America Merrill Lynch

Shortlisted: Barclays Capital and BNP Paribas

John Addis, Merrill Lynch

Regulatory changes are having a big impact on prime brokerage markets. Many brokerages have spent plenty of time and resources over the past 12 months guiding their clients through these changes.

But few have gone as far as Bank of America Merrill Lynch (BAML), which was one of the first to realise that major prime brokerages could no longer give cursory attention to such a service. Towards the end of last year it set up a Europe, Middle East and Africa (EMEA) strategy team, which is dedicated solely to interpreting the effects of regulatory changes on its broking clients.

The team of three people comprises financial specialists, including one who used to work at the UK’s Financial Services Authority. “Our business has dedicated discreet resources to this endeavour rather than having people performing these functions in addition to their daily tasks,” says Stu Hendel, head of global prime brokerage at BAML.

John Addis, head of EMEA global markets financing and futures at BAML, says the sheer volume of new regulation was what pushed the investment bank to establish the team. “It came out of the realisation that the volume of regulatory change which needed to be tracked was significant,” he says. “We had our work cut out keeping up with it for our own business. That led to the conclusion that our clients were probably facing the same issues and that it was worth investing in a team like this.”

He says most clients have been receptive. “We met a number of them to talk about the implications of, for example, Dodd-Frank on their business,” says Mr Addis. “And many, especially the non-US ones, hadn’t appreciated the extent to which it was going to have any impact.”

Elsewhere, BAML’s recent innovation includes creating the US market’s first integrated synthetic finance, derivatives and securities lending channel. “The concept was to improve coordination,” says Mr Addis. “At a lot of institutions swaps, delta one and securities lending desks are part of distinct units. Some might be in financing, some might be in derivatives. Lines of communication can be blurred and there is often competition between the desks.

“We saw the opportunity to break this down and provide clients with a combined sales force across all the different products we offer.”

Most Innovative Investment Bank for Restructuring

Winner: Houlihan Lokey

Shortlisted: Lazard and Moelis & Co

Ansgar Zwick, Houlihan Lokey

The 2008 financial crisis triggered a new kind of restructuring cycle. Capital structures contain far more mezzanine debt. Collateralised loan obligations (CLOs) had become significant buyers of leveraged loans. Credit default swaps (CDS) created unpredictability about who would ultimately negotiate the restructuring. And globalisation meant restructurings in untested jurisdictions.

In the past year, Houlihan Lokey tackled restructurings that embodied all these complications. Joe Swanson, one of three co-heads of its European financial restructuring team, says the firm embraces the challenges.

“We look to mesh the legal alternatives with the financial data to create transparent options fully vetted by everyone on the deal. And it means implementing the solution that stakeholders want in whatever jurisdiction is most appropriate. The US and UK still have the most advanced legislation, but there is high professionalism in other jurisdictions now as well,” says Mr Swanson.

Houlihan advised Truvo, a European directories publishing business that filed for Chapter 11 bankruptcy in the US. This advice included triggering a default to allow a CDS auction and bring long-only creditors into the open, and devising a dual holding company structure post-Chapter 11. This helped banks and CLOs to retain debt exposure to the company, while converting hedge fund investors into equity to fulfil their ‘loan-to-own’ strategy.

Similarly, Houlihan introduced a trading platform for non-bank creditors in Swiss industrial OC Oerlikon, to maximise the equity exposure for their fund clients in the new capital structure. The funds could trade their residual debt exposure for equity held by bank creditors that did not want an equity stake, allowing a debt-for-equity swap without antagonising bank creditors. This technique has already been applied to other restructurings.

“Europe will become more like the US, in that the concentration of bank debt in restructurings will reduce. New regulations and the increasing need for capital are forcing European banks to sell loans to non-bank investors,” says Ansgar Zwick, another of the European restructuring co-heads at Houlihan.

While the firm’s mix of business in Europe is about 60% debtor advisory versus 40% creditor advisory, its experience in the US was historically on the creditor side. Mr Swanson says this has given the firm an unparalleled network among the US hedge funds whose role in European restructurings is growing.

Most Innovative Investment Bank for Retail Structured Products

Winner: Société Générale Corporate & Investment Banking 

Shortlisted: Barclays Capital and Royal Bank of Scotland

The creation of a cross-asset solutions approach at Société Générale Corporate & Investment Banking (SG CIB) is beginning to pay off in its retail structured products business. Extreme financial market uncertainty in 2011 has created demand for products that do not commit investors to a single view on a single asset class.

Combining asset classes allowed for better pay-offs, such as SG CIB’s hybrid range accrual product devised for a Latin American private bank. This combined capital protection, a stable basic return linked to three-month interbank rates, and an attractive pick-up linked to the performance of the US S&P500 stock index.

“Where we had historical partnerships with clients on equity derivatives, we have been able to show them that we can offer other ideas such as credit and interest rates, and we have gained market share in these areas,” says Veronique Sabbah, equity-linked structured products manager at SG CIB.

SG CIB also distributed a ‘best-of’ basket via the retail network of a European bank that has its own rival structured product factory. This restored investor confidence in basket products that had fallen out of favour after the financial crisis, when ‘worst-of’ baskets were badly damaged if they held the stocks of banks that had to be bailed-out.

“Investors had turned to indices instead of baskets, but this means missing the opportunities to arbitrage the volatility differentials and correlation of a basket. We wanted to prove to clients that a basket of the best-performing 30 could offer better returns than simply buying the Eurostoxx50 index,” says Ms Sabbah.

Perhaps the most innovative way to tackle market volatility in a liquid and transparent format was the UK Managed Alpha Tracker, an Actively Managed Tracker (AMT) that effectively breaks down the barriers between listed products and fund management. Using strong procedures devised by SG CIB, the AMT manager makes weekly discretionary changes in weights between equities, commodities, government bonds and cash. 

“In this current environment, it is no surprise that investors are seeking a solution that allows for flexible allocation due to the regular reweighting, alongside the liquidity that listing on an exchange can provide,” says Alexandre Houpert, SG CIB’s head of listed products for northern Europe.

Most Innovative Investment Bank for Risk Management

Winner: Barclays Capital

Shortlisted: HSBC, Deutsche Bank and Royal Bank of Scotland

Martin Woodhams, Barclays

Economic downturn, low interest rates, high commodity prices and volatile financial markets have posed big challenges for banks’ clients and led them to demand new risk management tools. “We’re seeing investors become much more aware of risk factors that used to be considered secondary,” says Geoff Smailes, head of fixed income, currency and commodities structuring at Barclays Capital. “They’re looking at inflation and there’s a greater focus on currency risk.”

BarCap has been at the forefront of designing new risk management products in the past year. Notable among these was the $1.15bn volumetric production payment (VPP) it structured and underwrote for US firm Chesapeake Energy in October 2010.

VPPs, by which an issuer monetises its known energy reserves by raising non-recourse financing against them, are common in the US. Chesapeake’s differed, however, because it was structured to be sold to institutional investors rather than banks. BarCap managed this by getting public ratings for the deal, the first time this had happened on a VPP.

“The VPP market has been limited by the fact that most deals target banks, few of which have the expertise to buy these assets,” says Martin Woodhams, head of commodity investor structuring at BarCap. “Chesapeake’s will definitely become a common structure because Basel III makes it much more difficult for banks to keep VPP assets on their balance sheets. So this is the way of the future.”

BarCap also developed a new method for insurance companies to hedge their books of guaranteed minimum withdraw benefits (GWMBs), a type of option that allows holders to protect their retirement investments against falling markets. Insurance companies tend to hedge GWMBs with vanilla options, which usually are only up to one year. BarCap designed a structure that hedges the risk for 10 years, which more closely matches the actual liabilities.

In the credit markets, BarCap pioneered the use of credit default swaps (CDS) in the absence of underlying bonds when it started pricing runs in December for the CDS of General Motors (which, after it emerged from bankruptcy in 2009, had no bonds). This led other banks to follow suit and enabled investors to have a clear, liquid pricing reference for the credit of GM, which the market expects to issue bonds in the next five years.

Most Innovative Investment Bank for Structured Finance

Winner: Royal Bank of Scotland

Shortlisted: Barclays Capital and Goldman Sachs

Lee Rochford, RBS

The structured finance business is still rebuilding after its role at the epicentre of the financial crisis. In the past year, Royal Bank of Scotland (RBS) has reopened the market for a number of structures, and found investors for wholly new structures.

In Europe, RBS reintroduced a leveraged loan collateralised loan obligation, as well as residential mortgage-backed securities (RMBS) for Italian issuers, and for the UK’s Northern Rock. Lee Rochford, head of financial institutions structured finance at RBS, says the deal for Northern Rock, the first since its rescue in 2007, demonstrated the strength of RBS’s investor education and interaction process.

“We made sure the structure addressed investor concerns, so there was no master trust, there was high-quality collateral, and there were fast- and slow-pay tranches to suit investors with different maturity preferences. In addition, we worked hard to show that today’s Northern Rock is really a new bank,” he says.

Meanwhile, the close integration between structured finance and the wider debt franchise is demonstrated by RBS’s leadership in corporate secured debt. A long-term capital-raising relationship with UK airports operator BAA put RBS in the pilot’s chair for the first non-investment grade issue by a European utility holding company, a structure already replicated by three water utilities.

“We were confident that high-yield investors would like the credit story, and we found that some investment-grade investors who knew the company well were willing to go down the capital structure and receive the extra yield,” says Andrew Paulson, executive director in secured debt markets at RBS.

Across the Atlantic, RBS has competed successfully with the US giants thanks to a stable, experienced structuring team. The bank worked with the Federal Deposit Insurance Company (FDIC) for five months to structure a wrapped RMBS deal to dispose of assets from 17 failed institutions, to replenish FDIC funds without selling collateral at a loss.

RBS also placed the first Australian asset-backed securities in the US for Macquarie. Investor education was vital once again, as US investors were unfamiliar with Macquarie’s novated auto lease structure. The deal secured 30 investors, compared with 10 on Macquarie’s previous domestic deal. 

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