The Banker celebrates the most innovative players in the investment banking field over the past 12 months, handing out 31 awards to the industry’s great and good, from global behemoths to boutiques.

Ever since 2008, the timeline for a full recovery of investment banking has remained strikingly consistent: next year. Sure enough, executives are talking hopefully about 2013. But there has been a marked change of tone over the past year, given the sheer depth of the challenges facing the industry. There is a growing sense that headwinds will remain gale-force for the foreseeable future.

The eurozone crisis has undermined the business models of many European banks, while a deluge of regulation on both sides of the Atlantic is transforming all aspects of investment banking, from capital usage to trading operations. The ghosts of scandals past and present, from Libor to the ‘London whale’ trading losses, are haunting senior executives. For the first time, several investment banks have shut down entire business units.

But necessity is the mother of invention, and adversity has stimulated some impressive entries to this year’s Innovation in Investment Banking awards. With only one exception, all the major global investment banks, together with a growing number of regional banks from emerging markets, felt able to provide examples of innovation that clearly demonstrated our criteria of helping clients and navigating the ongoing transformation of the financial markets.

The top performers have moved fast to identify those markets and segments that still offer growth opportunities. They have also pioneered more efficient balance sheet usage that will enhance their prospects when markets eventually stage a sustained recovery. However, the dislocation of the industry also presents an opportunity for alternative models and independent investment banks, some of which have performed particularly well in our awards this year.

If the past year has been painful for the banks, spare a thought also for our panel of expert judges, who have had some tricky decisions to make. Few major banks have escaped scrutiny over Libor rigging. Ironically, Barclays enjoyed the best increase in its share of the global fee pool of any European bank in the first half of 2012 according to Thomson Reuters. But the loss of the investment bank’s key architects raises uncertainty about the future. Similarly, Nomura’s international franchise has undergone a profound transformation, especially in its financial institutions group offering. But an insider trading scandal in Japan cost the jobs of its leadership team and threw strategy into doubt.

Our focus on innovation at least makes these awards a little more straightforward to judge. Regardless of changes at the top, investment bankers can and do still demonstrate great skill in what they deliver for clients – from fund managers to governments – on a daily basis. These awards showcase those who, despite all the disruption, have simply rolled up their sleeves and got on with the job.

Most Innovative Investment Bank

Samir Assaf

Winner: HSBC
Only a few years ago the investment banking business was a lot more straightforward. It consisted of mergers and acquisitions (M&A), equities and debt, and a team of bankers specialised in each of these different products. But since the global financial crisis, a combination of regulation, costs and changing market conditions has made this approach impossible – now it is a question of providing across-the-board solutions in specific sectors and geographies.

HSBC, which wins The Banker’s Most Innovative Investment Bank award for 2012 (on top of a slew of others in foreign exchange, inflation products and risk management), was early out of the traps in pursuing this new direction. During 2008 and 2009 it was busy integrating key businesses so that, for example, payments and M&A were no long alien to each other but part of a joined-up product suite that the bank could offer to a client.  

There was also foresight in identifying market trends such as the growth of the renminbi and other emerging market currencies; the demand for infrastructure and project financing solutions – and the role that supranationals, agencies and pension funds would play in this process as investors; as well as the growing needs of both sovereigns and banks for liability management.

But HSBC’s chief executive of global banking and markets, Samir Assaf, is keen to point out that this is not a result of the bank using its balance sheet, for example, to win project finance markets. In fact, the bank often figures more highly on advisory tables than on financing tables.

“We have been on the leading edge in the transformation of infrastructure financing, where we have worked a lot on the advisory side and worked on creating a new capital market,” he says. “Banks in the future will not easily be able to finance infrastructure because of the new capital and liquidity rules.

This mean working with the supranationals, agencies and the private sector from the investor side to cultivate new flows of finance.”
HSBC’s co-head of global banking, Kevin Adeson, says: “We are advisory led. But to be credible in advisory you need to be active in the infrastructure financing market. We are, but we don’t lead the market with our balance sheet. ”

The kind of stand out deals that attracted the judges’ admiration included a Turkish mall construction project using a flexi-swap whereby the client could draw down amounts linked to specific milestones in the project’s development.

The other two elements needed to make project finance work are local currency financing and the ability to deal with inflation – areas of particular HSBC expertise.

Spencer Lake, co-head of global markets, says: “In a perfect world these projects are financed in local currency format and have inflation protection – those are the big risks they face. We have built tremendous capabilities and expertise in both local markets and inflation risk management. We have turned both into meaningful product suites.”

The steady internationalisation of the renminbi has played to HSBC’s strengths as a global bank with its roots in Asia. The bank has a steering committee to monitor the development of China’s currency regulations and ensure it is catering to any new opportunities that arise.

“By any measure we are the bank that is abreast of all the international happenings with the renminbi,” says Mr Assaf.

As far as other emerging currencies go, Mr Assaf makes the point that HSBC’s global footprint involves dealing with issuers, investors and depositors in local currencies. “We have better expertise than most of our competitors,” he says.

Currently, the global bond market is static at the same level it had five years ago, but the composition of issuance has changed dramatically, with eurozone volumes reduced by one-third and the slack taken up by the renminbi and other emerging market currencies. This trend plays to HSBC’s innate strength.

HSBC was quick to spot that the upheavals in banking and in the eurozone would provide huge opportunities in liability management for both banks and sovereigns. HSBC’s role as a primary dealer in Greece put it in pole position to win mandates such as being the joint closing agent on the E205.5bn exchange offer known as the Private Sector Involvement (PSI). The bank has also been tasked with doing privatisation work for the Greek government.

Again reflecting its global reach, HSBC has worked on sovereign liability management exercises in the Philippines, Uruguay, Colombia and Chile. As a trade-oriented bank, foreign exchange should be and is an obvious strength but less well known is HSBC’s growing M&A capability – particularly significant since an earlier attempt to build an M&A franchise ended in failure.

“We have a fast-growing and focused M&A capability but we have built it in a way so that it becomes part of the offering in the sectors and geographies where it makes sense for us,” says Mr Assaf.

These include resources and energy, petrochemicals, financial institutions and telecoms. A lot of the deals consist of Asian or emerging market buyers getting hold of developed world assets, for example, petrochemical deals in the US.

In the old days, HSBC’s clients would have done their cash management and trade finance with the bank and gone to a bulge-bracket firm for M&A advisory. Now they can have all their needs taken care of in one place.

Investment Banking Awards 2012: Judges

Philip Alexander is senior editor, investment banking and capital markets, of The Banker.
Jaloul Ayed is chief executive of BMCE International, the UK arm of Morocco’s BMCE Group. He was finance minister of Tunisia during the interim government of 2011. He previously founded and led BMCE’s investment banking arm, BMCE Capital.
John Beck is finance editor and central and eastern Europe editor of The Banker.
Patrick Butler is international adviser to European fund manager Petrus Advisers. He was previously the management board member for investment banking, capital markets, treasury and financial institutions at Raiffeisen Bank International.
Christophe Cordonnier is a founding partner of commodities investment fund Belaco Capital. He was previously a managing director responsible for commodities structuring and investor sales at Société Générale Corporate & Investment Banking.
Omar Cruz is chief investment officer of Philam Life insurance company in the Philippines. He was Philippines national treasurer from 2005 to 2007.
Terri Duhon is the managing partner of B&B Structured Finance consultancy and training firm in London. She spent a decade as a credit derivatives structurer and trader for JPMorgan and later ABN Amro.
Melissa Hancock is Middle East editor of The Banker.
Harris Irfan is managing partner of Islamic finance boutique Cordoba Capital in Dubai. He was previously the global head of Islamic finance at Barclays, and a founding member of Deutsche Bank’s Islamic finance team.
Sean Kurian is director of structured solutions at Towers Watson Investment Services in New York, where he advises large institutions on the structuring and execution of structured products and other derivative instruments.
Philip Marcovici is an adjunct professor at the Singapore Wealth Management Institute. He was previously an international tax partner at law firm Baker & McKenzie in Zurich and Hong Kong.
Silvia Pavoni is economics editor of The Banker.
Henrik Pedersen is chief investment officer of specialist currency risk manager Pareto Partners. He was previously a director of the foreign exchange risk advisory group at Citigroup.
Martin Redrado is a member of the World Trade Organisation dispute settlement unit and president of Argentine economic policy think-tank Fundacion Capital. He was governor of the Central Bank of Argentina from 2004 to 2010.
Sushil Shah is co-manager of CapeView Capital’s Azri European long/short equity fund.
Paul Wallace is Africa editor and capital markets writer of The Banker.

Most innovative investment bank for corporates

Thierry Varène, head of European investment banking, BNP Paribas

Thierry Varène, head of European investment banking, BNP Paribas

Winner: BNP Paribas
The traditional strengths of BNP Paribas in bonds, derivatives structuring and the energy and natural resource sector add up to a compelling offering for large corporate clients. In the past year, the bank’s efforts to continue the deeper integration of its corporate and investment bank (CIB) model have clearly paid off.

“We are focusing both on clients who are frequent users of investment banking-related solutions, and the second category, that is mostly corporate banking-driven flow business. We have doubled our capital in less than five years, and we are one of the few banks that has been able to offer clients a constant relationship and a growing variety of solutions backed by a solid balance sheet,” says Thierry Varène, head of European investment banking and a member of BNP’s CIB executive committee.

The bank continues to arrange groundbreaking bond deals, including the first ever cross-border issuance from a privately owned company in Azerbaijan – Baghlan Group – and the first Peruvian local currency project bond for the Linea Amarilla toll road project. Mr Varène says the bank will continue to develop its investment banking capabilities in selected regions, Europe and Asia, building on its existing well diversified universal banking model. Even in its more mature home market in Europe, BNP Paribas’s cash management business is making good progress.

At the same time, the bank has moved swiftly to address the shortage of dollar liquidity in Europe. It has successfully helped the transition of European companies from relying on bank lending in dollars to the Yankee bond markets, while providing the currency-hedging solutions to enable clients to risk manage cross-currency exposures. BNP Paribas designed flexible exercise options on cross-currency swaps, which allow clients to fix the euro size and repayments of any dollar refinancing from the time that the issuance takes place – or not, if the issuance does not take place.

“Banks are still providing a large part of financing in Europe, and we are willing and prepared to finance key clients. But we have also been able to develop our skills to finance our clients through the market, in line with the disintermediation trend, and to exceed the market thanks to our global presence,” says Mr Varène.

Ongoing priorities are to grow the bank’s origination strength while increasing the advisory content, and to develop distribution capabilities in order to provide clients and investors with more diversified debt and equity products.

“We are developing better advisory capabilities, for structuring transactions and in mergers and acquisitions, and we see a good potential from the trend for these two needs to become closer together,” says Mr Varène.

Most innovative boutique

Winner: StormHarbour

Antonio Cacorino, co-founder and managing principal, StormHarbour

Antonio Cacorino, co-founder and managing principal, StormHarbour

Shortlisted: Evercore, Moelis
In the year following the collapse of Lehman Brothers in September 2008, plenty of boutique banks were established, their founders often blithely believing that bulge-bracket institutions were soon to be confined to history. Many of those firms have closed or faded into obscurity, though a few have turned themselves into viable banks with a long-term future seemingly all but assured. StormHarbour, which boasts an impressive record despite an existence of just three years, sits firmly in the latter group.

Part of its success lies in the fact its founders decided on a business model combining brokerage, advisory and capital markets operations, unlike many other boutiques, which tended to focus on broking or advisory. Crucially, it was also decided that StormHarbour would operate globally (it now has offices in New York, London, Copenhagen, Singapore, Hong Kong and Tokyo). “The idea of building a global organisation from the start was considered by many people the riskiest proposition we had,” says Antonio Cacorino, the bank’s co-founder and a managing principal.

But it was a decision that continues to pay dividends today, with StormHarbour able to pitch deals to investors in virtually all the world’s main sources of liquidity. “That was a bold move to make,” says Amir Hoveyda, a managing principal at the company. “This was in late 2008, early 2009. It was not a pretty time. But it gave us the ability to originate locally and execute globally.”

StormHarbour, which now has more than 200 staff, has continued to hire senior bankers in the past year. Among the highest profile of those was Eric Daniels, who joined in January having previously been head of Lloyds Banking Group.

StormHarbour’s approach to capital markets mandates has been to concentrate on its speciality sectors of financial institutions, infrastructure and renewable energy, and real estate, although it is also building a presence in the transportation, natural resources and media industries. “We don’t want to be all things to all people,” says Mr Hoveyda. “We don’t really get involved in plain vanilla and commoditised businesses – be it in sales and trading, advisory or capital markets. Our focus is on the innovative, bespoke and complex end of the businesses we operate in.

“Through our sales and trading presence, we have deep market insights and access that we tap in to for our advisory and capital markets businesses.”
Its flexibility has enabled it to win mandates as diverse as arranging a £28m ($45.5m) mezzanine loan in April for the construction of a surgical hospital in Kent, UK, and advising Russian oil group Lukoil on the divestment of some Latin American subsidiaries.

It has also shown an ability to execute global transactions for large-cap companies. In May, it advised one of Europe’s biggest banks on a private tender and buyback of a large yen-denominated subordinated bond.

Most innovative investment bank for growth companies

Winner: Jefferies
Shortlisted: Investec
Mid-cap and growth companies have been among the hardest hit by economic volatility in Europe and the US over the past year. For parts of that period, the equity markets have been all but shut to these types of firms. Rich Handler, chairman and chief executive of Jefferies, the winner of this year’s award for growth companies, says this had a significant impact on the way the bank went about executing transactions for clients. “The most obvious effect has been a volatile stock market, which much of this year has been closed to smaller companies,” he says. “This has required companies to access capital privately and or to seek merger and acquisition [M&A] alternatives.

“As a result, for the past 12 months we have been focused on executing private equity placements and providing sell-side M&A services to our higher-growth clients, and in these areas we have had good success.”

Jefferies has in many ways thrived since the financial crisis of 2008 and has been able to hire bankers from rival firms badly damaged by the turmoil. Between 2009 and 2011, its total revenues and investment banking revenues rose by a respective 17% and 137% to $2.5bn and $1.1bn. Its headcount in the past year alone went up by almost 20%. And it has maintained a strong and liquid balance sheet, which was particularly in evidence when it was able to fend off an aggressive and what it felt was a malicious short-selling attack in the wake of the collapse of MF Global last November.

One business it has excelled in recently has been wall-crossed equity transactions, in which deals are marketed privately before being sold publicly. Its use of this innovative technique has been valuable amid jumpy markets, allowing it to minimise the discount for issuers and selling shareholders. Among its deals was a $398m secondary sale of shares held by healthcare group Elan in biopharmaceutical firm Alkermes. The transaction was executed on an overnight basis after a confidential wall-crossed marketing period.

In the 12 months to the end of June this year, Jefferies acted as a bookrunner on 26% of wall-crossed equity and equity-linked deals, more than any other bank. “The confidential marketing process allows Jefferies to target key institutional accounts over a limited marketing period to generate meaningful investor feedback and demand,” says Mr Handler. “The demand generated… is utilised to message transaction momentum at the launch of the accelerated public marketing period. This execution strategy allows our clients to raise significant equity capital without taking stock price risk during the marketing period.”

Wall-crossed issuance has increased significantly in the past two years and will probably continue to gain in popularity among mid-cap companies. If so, Jefferies is well placed to capitalise on the trend.

Most innovative team

Winner: Rothschild
(restructuring team)

Most innovative investment bank for restructuring

Winner: Rothschild
Shortlisted: Houlihan Lokey, Lazard
The combination of renewed recession in Europe, widespread bank deleveraging and a heavy redemption schedule has been particularly difficult for the most indebted companies and countries. This has prompted a very strong field of entries for the restructuring category, and with this expertise rarely more valuable than today, Rothschild’s restructuring team is a worthy winner of our Most Innovative Team award.

The development of modern debt restructuring techniques over a decade ago frequently focused on finding a way to transfer the transaction into a jurisdiction with a well-tested framework for work-outs – most often the US or UK. But over the past year, Rothschild was also able to translate and improvise trusted restructuring techniques from the US and UK into less-tested jurisdictions.

These included closing a rare lender-led restructuring deal for high-yield bondholders of life sciences firm Novasep in France in March 2012. This was an important deal at a time when French courts have shown growing determination to maintain jurisdiction over restructuring processes involving local companies. With liquidity moving east, Rothschild also delivered an important first by arranging a ground-breaking investment for Chinese diesel engine manufacturer Weichai Power into distressed yacht-maker Ferretti through an Italian insolvency process.

“We do not view the European restructuring business as a London hub with continental spokes, but rather as a genuine five-hub team in the UK, France, Italy, Germany and Spain. We share techniques, but implement deals in a local way. This business is about knowing the people who matter on the ground, not just numbers in a spreadsheet,” says Andrew Merrett, European head of restructuring at Rothschild.

Mezzanine lenders have tended to suffer in restructuring deals since the crisis. This is the result of highly leveraged buy-outs before the crisis, and the rapid withdrawal of banks, suppliers and customers once companies run into trouble, leaving junior lenders well out of the money. But in the case of German packaging manufacturer Kloeckner Pentaplast, in June 2012 Rothschild advised junior lenders led by Strategic Value Partners on the acquisition of the distressed company from sponsor Blackstone. The juniors refinanced senior lenders led by Oaktree Capital, who had made their own bid for the company, while Jefferies provided E630m of new debt facilities.

“The economic value lay with the junior lenders, but since the crisis that has been a challenging position to express via a transaction. In this case, junior lenders were highly motivated to get the result, willing to put in new money and tap US markets. That kind of motivation is essential, because any deal like this will run into difficulties somewhere along the way,” says Mr Merrett.

Most innovative investment bank from western Europe

Winner: Deutsche Bank
Shortlisted: BNP Paribas, Rothschild
Within its investment banking arm, the strategic review by Anshu Jain and Jurgen Fitschen on becoming joint chief executives of Deutsche Bank in May 2012 continued the overhaul begun with Project Integra, which had helped the bank win our overall award last year. The touchstone remains closer integration of product lines and client coverage within the bank, to offer the most comprehensive and coherent package of services.

“We are well aware of the poor reputation of banking generally at the moment, and we continue to respond to that by intensifying our efforts to ensure the client gets what they need, and that products we sell do what they say on the box,” says Ivor Dunbar, head of client franchise development and a member of the Corporate Banking & Securities (CB&S) executive committee at Deutsche Bank.

Within the regulatory constraints of informational firewalls, the bank is integrating the technological infrastructure and specific services for CB&S and Deutsche’s wealth management division to avoid duplication of effort. Mr Dunbar says Deutsche has withdrawn from proprietary trading, and would have done so even without regulatory pressure. But he emphasises its continued commitment to the universal banking model, and sees no change of perspective on this from the bank’s management, shareholders or customers. If anything, changing market conditions make the model even more relevant.

“Sources of finance are changing, capital is a scarce commodity for banks, and that means large companies have to look more to the capital markets. But we still have many changes to make in terms of the efficiency of our portfolio of business, assessing each component by its contribution to the overall client franchise and to the bottom line, and its appropriateness for the bank,” he says.

The bank recently announced headcount reductions in Asian equities. Mr Dunbar says that growth in emerging markets will not be linear and capacity will be scaled back in downturns, but the end-game remains the same: a world where emerging markets are likely to contribute an ever greater share of investment bank revenues. The bank has also sought to stay one step ahead of regulatory changes, for example, tying together more closely its capital markets and advisory capabilities for financial institutions.

“We are adapting our infrastructure to new legislation. On derivative trading, we saw the implications of Basel III a long way off and have been mindful of what will be possible in the new regulatory environment. The aim now is efficiency of fixed and variable costs, to do more with less and reduce the cost of operations, but we are not repositioning the model or changing our fundamental strategy, which is to be the leading European investment bank,” says Mr Dunbar.

Most innovative investment bank from central and eastern Europe

Winner: Renaissance Capital
Shortlisted: Sberbank Troika Dialog, VTB Capital
Size does not always go hand in hand with innovation, but Renaissance Capital has always managed to strike a neat balance. The Russian bank boasts numerous industry and regional firsts – from being the first Commonwealth of Independent States investment bank to gain London Stock Exchange membership, to launching the first foreign initial public offering (IPO) on the Istanbul Stock Exchange, to taking Russian firms to the New York Stock Exchange and Hong Kong – but also maintains a leading regional position.

In tough times, however, it takes innovation just to get business done, and when it comes to central and eastern Europe (CEE), RenCap has done that better than any other investment bank in the region over the past 12 months.

Last year saw optimistic predictions of as many as 50 international IPOs for Russian firms. However by the end of the year, just nine had been realised. And, for the year to August 2012, this figure was just two.

Conditions have been far from easy in RenCap’s home market of Russia as well, with numerous IPOs pulled due to less-than-buoyant market conditions. Nevertheless, the bank maintained a 100% success rate in all of its Russian IPOs from 2011 to June 2012, with eight successful deals versus no pulled or withdrawn IPOs. The next best ratio was five successful to one pulled.

RenCap was the only bank to manage both of Russia’s two successful IPOs of 2012, and also lead managed six out of nine Russian IPOs from the beginning of 2011 to June 2012. Its equity capital markets franchise also extends to leading Russian equity research, as well as a sales team consisting of 43 employees focused on Russia and 65 dedicated to the emerging markets, more than any other bank
Moreover, it holds the number one position in mergers and acquisitions league tables for the CEE region, closing 29 deals from 2011 to June 2012, versus the nearest rival’s 23.

This leading position is maintained by a number of innovative initiatives, such as fostering close relationships with a wide range of investors, including global generalist and emerging markets-focused funds and private equity investors. It also boasts some of the closest relations with emerging markets and CEE-focused investors of any investment bank, leading to an impressive track record in the area. The same applies to its distribution within the Middle East and Asia, as well as an impressive array of private wealth individuals.

Over the past 12 months, RenCap has been involved in deals including the landmark $4.6bn merger of the Moscow Interbank Currency Exchange, or Micex, and RTS, which on the Russian bank’s suggestion was organised as a so-called ‘dual track’, which led to the bank’s co-leadership of the IPO process. In addition, it provided full support to state-owned telecoms operator Svyazinvest Group in a reorganisation of its assets – one of the largest deals in Russian and CEE M&A history – helping to confirm reorganisation terms, arrive at a valuation and negotiate with the largest institutional investors.

Most innovative investment bank from Asia-Pacific

Charon Wardini Mokhzani, CEO, CIMB Investment Bank

Charon Wardini Mokhzani, CEO, CIMB Investment Bank

Winner: CIMB
Shortlisted: MCB Bank, Maybank
CIMB has carved itself a reputation as an indigenous investment bank in south-east Asia, and now it has ambitious plans for the wider Asia region.

Over the past year, CIMB Investment Bank has been notable for its acquisition of the Royal Bank of Scotland’s Asia-Pacific investment banking and cash equities business, which was announced in April 2012. The RM849.4m ($275.8m) deal sets the scene for CIMB to become the largest Asian investment banking franchise outside of Japan.

“It is a bold move for us and makes us a true Asia-Pacific bank,” says Charon Wardini Mokhzani, CEO of CIMB Investment Bank. “The economic importance of Asia-Pacific continues to grow and we believe that this expansion enables us to take full advantage of the intra-Asia-Pacific trade and investment flows.”

The acquisition will broaden the bank’s reach across north Asia, south Asia, Australia and its home region of the Association of South-east Asian Nations, where CIMB is a universal bank.

CIMB’s plans for regional expansion are ambitious, and when the acquisition of RBS’s Asian business was announced group CEO Nazir Razak acknowledged the possible risks of the transaction and noted the management challenges the acquisition would bring. At the time, Mr Razak said: “I have said before that this won’t be ‘the Asian century’ without Asian companies rising to the occasion.”

Now the biggest challenge for the investment bank, according to Mr Mokhzani, is to make the integration of the RBS units work. “We have a proven track record in the successful integration of our other acquisitions and we believe that it will be the same with this one. The Hong Kong/China leg of the acquisition has already completed and the teams now work as one. The indications are that it will be the same with the other countries, as everybody sees the compelling logic of being part of an Asian-based Asia-Pacific investment bank,” he says.

In the past year, CIMB Investment Bank has also worked on a number of significant transactions, the largest of which was the $3.1bn initial public offering (IPO) of palm oil company Felda Global Venture. At the time it was the second largest IPO for 2012, ranking behind only Facebook.

However, unlike Facebook’s IPO, the Felda listing had strong demand from domestic and international investors and traded strongly following the offering in June. The IPO was particularly successful as it went ahead in an environment where there were a number of postponed IPOs and a general sense of gloom in the market.

Another significant transaction for CIMB was the $2.1bn dual listing in Malaysia and Singapore of IHH Healthcare, which at the time was the third largest IPO of 2012.

Most innovative investment bank from North America

Tyler Dickson, global head of capital markets origination, Citi

Tyler Dickson, global head of capital markets origination, Citi

Winner: Citi
Shortlisted: Bank of America-Merrill Lynch
As has been the case elsewhere in the world, investment banking revenues in North America have fallen sharply this year. Amid a stuttering US economic recovery, few companies have been willing to spend significant sums acquiring rivals, while volatile equity markets have prompted many owners of private firms to wait before taking them public.

The US’s capital markets have generally been buoyant compared to those in most of the rest of the world, however. Volumes in the debt markets have particularly pleased bankers. Between January and the first week of August, a record $408bn of investment grade corporate bonds were issued.

Citi, which ranked second in the corporate bond league tables over that period with a 12% market share, has been among the banks that have exploited this trend the most effectively. Using its long-standing relationship with many of the biggest companies in the US, as well as its innovative strategies, it has been able to execute numerous noteworthy deals over the past year.

And it has also used its global clout to enable foreign companies to sell Yankee bonds. “Numerous US companies saw a once-in-a-lifetime opportunity to drive coupons lower and push terms aggressively to raise capital this year at a record low cost and position themselves for a slow-growth economic environment,” says Tyler Dickson, global head of capital markets origination at Citi. “Given the challenges in the eurozone, European corporates found it valuable to get US dollar funding in the global debt markets. In addition, numerous emerging market issuers looked beyond their local markets and accessed the global debt market, raising US dollars.”

Among Citi’s most significant deals was a $2.25bn preferred share transaction for GE Capital in June. The perpetual non-call 10 instrument was GE Capital’s first preferred stock offering and was 2.5 times oversubscribed. This allowed the company to increase its Tier 1 capital ratio by 45 basis points. Others included a restructuring of Hartford Financial Services’ debt, consisting of the issuance of new unsecured bonds and subordinated debentures, a repurchase of existing notes, and gaining consent from bondholders to terminate a replacement capital covenant, which had restricted the firm’s financial flexibility.

Despite low equity issuance, Citi has been at the forefront of activity in the market. It was a joint bookrunner on insurer AIG’s $5.8bn follow-on in May as the US Treasury sought to sell down further its stake in the formerly beleaguered institution. It was also a bookrunner on a rare initial public offering (IPO) for a private equity house when Carlyle sold 10% of its shares for $671m in May.

Citi is well-positioned to be in the running for more IPO mandates expected in the next year or so, particularly those of private equity-owned companies bought out in the past few years of the pre-crisis era.

Most innovative investment bank from Latin America

Winner: Itaú BBA
Shortlisted: BTG Pactual, Bradesco BBI
Investors’ greater interest in Latin America has brought with it business opportunities for local companies and fiercer competition for banks from the region. In such a market, Itaú BBA has not only continued to expand its already substantial regional network, it has also developed innovative deals for its clients and retained an overwhelming lead in capital markets products in Latin America.

Chief executive Candido Botelho Bracher says: “It is with great pleasure that we receive the award as Most Innovative Investment Bank from Latin America. At Itaú BBA, we are aware of the complexity of the market we operate in, and of our customers’ growing demand for solutions that meet the challenges of their day-to-day business life. This is why we encourage our professionals to cultivate a work environment that doesn’t give in to complacency.”

During the 12 months to June this year, Itaú BBA acted as bookrunner on more than $5.8bn-worth of equity offerings, including both chunky issuances, such as telecoms company TIM’s $913m follow-on, the largest secondary offering in Brazil in this period, and smaller but highly significant deals, such as Unicasa’s initial public offering, the first corporate from the customised furniture sector to list in Latin America, and the smallest issuer to raise equity in Brazil. It is the latter, in fact, that is of greater interest, as it introduced a new sector in the local stock exchange, BM&F Bovespa, and also, most importantly, brought the market a firm with a relatively limited turnover.

“Despite challenging market conditions, Unicasa’s listing was a success,” says Fernando Fontes Iunes, head of Itaú BBA’s investment banking department. “It inaugurated a new sector within the Bovespa. It’s a small issuer and showed that smaller companies that have good [businesses] can access capital markets in the region.”

Having a large group balance sheet at its disposal helps when assisting financing or raising capital for clients. But Itaú BBA also retained a competitive edge in mergers and acquisitions and advised on a number of high-profile transactions. Of note is the merger of drugstore chains Droga Raia and Drogasil, which created a market leader in Brazil and may encourage further consolidation in the sector.

This was the first merger of companies that are both listed on the Novo Mercado, Bovespa’s section dedicated to firms that meet higher corporate governance standards. And it was a highly successful deal. “It has been a very active, fruitful period for mergers and acquisitions activity in the region,” says Mr Fontes Iunes. “Droga Raia and Drogasil was the first merger between two listed Novo Mercado companies. It created the sector’s leader, which prompted other companies to follow suit. The combined entity’s market value more than doubled within the following six to eight months.”

Most innovative investment bank from the Middle East

Yahya Alyahya, chief executive, Gulf International Bank

Yahya Alyahya, chief executive, Gulf International Bank

Winner: Gulf International Bank
Shortlisted: QInvest, Saudi Fransi Bank
While headquartered in Bahrain, the Gulf International Bank (GIB) enjoys a pan-regional presence which, combined with its cross-product distribution, has equipped it with market-leading regional placement capabilities, as well as global investor reach.

During mid-2011 to mid-2012, GIB executed investment banking transactions across a range of product categories.

Within the Islamic finance category, GIB’s debt capital market team has access to an in-house sharia-compliant banking unit that advises clients and the team itself with regards to structuring sukuk and obtaining requisite sharia approvals. This has enabled GIB to bring innovative sukuk structures to market – including the following two transactions.

First, GIB acted as sole bookrunner and joint lead manager for Almana’s $215m Eurobond transaction issued via a Cayman Islands-based special purpose vehicle. This transaction was the first sharia-compliant early redemption process by a Qatari corporate.

Second, GIB Capital acted as one of two joint lead managers and joint bookrunners on Aji Cayman’s inaugural sukuk issuance in the Saudi riyal domestic market. This was the first time that such a credit-wrapped structure has been employed in the Saudi capital markets.

“Innovation is one of the key values at GIB and is enshrined in the guiding vision of the bank,” says Yahya Alyahya, chief executive of GIB. “This issue represented an innovative off-balance-sheet sukuk based on the sale of receivables. The transaction was structured to incorporate a credit enhancement in the form of a purchase undertaking issued by GIB and Riyad Bank.”

In the restructuring space, GIB’s most recent transaction was a $160m syndicated murabaha facility for Al-Kifah Holding Company, which was oversubscribed by $53m. The transaction involved re-profiling existing loans, as well as raising fresh financing.

GIB also acted as financial adviser on the $130.5m initial public offering (IPO) of Hail Cement Company – the largest offering in the Saudi market and the second largest in the Middle East and north Africa region in 2011.

In terms of where the key investment banking opportunities lie for GIB going forward, the bank sees sukuk and IPOs as being central. It is currently working on applications for four IPOs and two rights offerings.  

“We have witnessed a two-fold growth in sukuk issuances this year, and we expect this to continue in the next few years with demand potentially reaching $900bn by 2017, given the need to refinance existing debt and funding of growth plans,” says Mr Alyahya.

“We are also confident that many issuers who have been holding off their IPOs due to market conditions will come to the market in the next 12 months given the liquidity easing. GIB’s equity capital markets team is involved in several transactions which will be coming to the market in 2013.”

Most innovative investment bank from Africa

Jacko Maree, chief executive, Standard Bank

Jacko Maree, chief executive, Standard Bank

Winner: Standard Bank
Shortlisted: EFG Hermes, Rand Merchant Bank
Investment banking activity in Africa, like elsewhere, has been under strain thanks to a combination of global economic jitters and tougher regulations being applied to banks.

Jacko Maree, chief executive of Standard Bank, Africa’s largest bank and the winner of this year’s award for the continent, acknowledges this pressure. “It’s much harder to make money from traditional investment banking, such as advisory and capital markets, than it was a few years ago,” he says.

As such, Standard Bank has increasingly made efforts to bring its investment and corporate banking operations closer. Plenty of emphasis has been placed on activities such as trade finance and custodial business. “That’s growing fast across the continent and doing well,” says Mr Maree.

Nonetheless, Standard Bank’s far-reaching presence in Africa — where it has operations in 18 countries, far more than any other South African lender — has served it well when it comes to purer types of investment banking. And given the requirement for funding of major projects across the continent, this should continue to stand it in good stead. “There is such a need for infrastructure in Africa and sectors such as natural resources – which we specialise in – are very much on the radar at the moment,” says Mr Maree.

Standard Bank has shown its ability on plenty of occasions over the last year to exploit this need. It has led several of Africa’s biggest and most complex loans, project finance transactions, equity deals and bond issuances. It has also been an advisor on key mergers and acquisitions.

Among its most notable syndicated loans was a $60m and 410m cedis ($217m) facility for telecoms group MTN Ghana. The deal was the biggest in local currency ever to have come from the west African country. Standard Bank was also one of three underwriters on Kenya’s $600m syndicated loan earlier this year, which is likely to be followed by a Eurobond of a similar size that Standard Bank will be among the frontrunners to lead.

Standard Bank was the main issuing house on two major Nigerian equity transactions earlier this year, that of N28bn ($180m) for conglomerate Flour Mills and of N6bn for Consolidated Breweries.

The strength of Standard Bank’s bond business, meanwhile, has been demonstrated by its ability to lead such diverse deals as Namibia’s $500m debut Eurobond from last October and a 300m meticais ($10m) short-term note for Mozambican fuel company Petromac in November.

And it has been an advisor on two of South Africa’s biggest cross-border merger and acquisition transactions of recent times – Jinchuan of China’s R9bn ($1.1bn) takeover of Johannesburg-listed miner Metorex and China Investment Corporation’s R2bn acquisition of a 25% stake in Shanduka, an investment company.

Most innovative bank for asset and liability management

Winner: Deutsche Bank
Shortlisted: Citi, Société Générale
Corporate & Investment Bank
During the awards period, Deutsche Bank crafted a number of responses to problems that have long been known, but had previously eluded an effective market solution. One of those is the vulnerability of pension funds to the increased credit spread volatility since 2008, because pension liabilities are discounted for actuarial purposes using credit spreads.

Logically, funds should invest in credit to hedge this risk, but they are reluctant to take on the default risk that goes with credit assets. To solve this, Deutsche Bank created a Credit Insolvency Neutral Index (CINI), allowing funds to hedge the mark-to-market impact of credit spread movements without taking on default risk.

“We aim to bring transparency and flexibility to our solutions,” says Andrew Reid, head of pensions origination at Deutsche Bank. “Clients can see how CINI is derived, its trading and rolling costs, and they can choose whether or not to keep buying credit protection on the index names. So this is very much a supported strategy where we help clients adapt their portfolio allocations to market conditions.”

A further hard-to-hedge pension fund risk is pensioner longevity. In the space of three months, Deutsche Bank arranged two deals that represented a huge increase in capacity for the longevity market – a £3bn ($4.87bn), 40-year risk transfer for the Rolls Royce corporate pension fund, and a vast E12bn for Dutch insurer Aegon, the largest single longevity transaction ever executed. To bring institutional investors on board, Deutsche used a transparent population-based index structure and a 20-year maturity.

“On the one hand, investors wanted a product that was easily understandable with a manageable maturity – for example, there is little 20-year paper in Asia. On the other hand, our client wanted to release capital without disclosing its whole book of risks. To meet both these needs, it made sense to use a population-based index and an innovative commutation mechanism,” says Clare Hennings, head of structured insurance solutions at the bank.

Finding a market outlet for exotic risks has become increasingly important both for clients and for the banks themselves. Insurers face tougher stress-testing of their regulatory capital under Solvency II, while banks will face high capital costs under Basel III if they retain complex, long-dated swap deals.

“A well-managed response to Basel III means creating more of a partnership approach with clients, helping them to understand the bank’s own risk position and how we can structure a hedge for optimum pricing. We have also met with many fund managers who are keen to earn a premium for taking the diversified risks on our books that would otherwise be hard to access,” says Andrew Berman, co-head of European insurance and pensions sales at Deutsche Bank.

Most innovative investment bank for bonds

Jim Glascott, head of debt capital markets, Barclays

Jim Glascott, head of debt capital markets, Barclays

Winner: Barclays
Shortlisted: BNP Paribas, HSBC
Barclays’ rise as an investment bank over the past decade and more has largely been down to the prowess of its bonds business. In recent years, it has firmly consolidated itself as one of the leading fixed-income houses globally, with the acquisition of Lehman Brothers’ North American assets in 2008 continuing to pay dividends today. In the 12 months from June 2011, it was the only bank among the top three bookrunners in each of the dollar, euro and sterling markets — the world’s major ones for bonds.

Amply testifying to the ability of Barclays to execute difficult deals, its market share has often risen during the most precarious periods for financial markets. This was the case in October 2011, one of the most volatile months of the year, when its market share for European corporate bond issuance neared 50%.

The bank has been especially innovative in corporate bond markets across the globe. It has been the dominant bookrunner on European hybrid notes in recent times, jointly leading transactions for the likes of German utilities EnBW (E750m) in October 2011 and RWE (£750m [E924.9m]) in March. It pioneered synthetic exchange offerings when it arranged deals for EWE, a German utility, and Iberdrola, a Spanish energy firm. And it has played a leading role bringing retail bonds to the market, including Energias de Portugal’s E200m note in December, which saw demand from more than 12,000 investors in what was the country’s first pure retail deal in 12 years.

Barclays has also frequently helped Asian and European companies issue so-called Yankee transactions in the US, including that of $7bn for brewer SABMiller in January and Heineken’s debut dollar deal of $750m in March. Likewise, its strength in Europe has enabled it to price plenty of euro and sterling bonds for US companies. “We’re indifferent as to whether a borrower does a euro, sterling or dollar deal as we are committed to providing the best funding solution for the client,” says Jim Glascott, head of debt capital markets at Barclays. “US investors are getting a lot of inflows. And net supply, when you take into account redemptions, has been light this year. So investors are very anxious to put money to work. And they like different names, including Yankee issuers.”

Even in the trickier financial institutions group (FIG) bond market – in which investors are far warier than in the corporate market – Barclays has excelled. It was ranked as the leading bookrunner globally for FIG deals in the first half of this year.

Mr Glascott sees little let up in activity in the major bond markets any time soon. “There’s strong demand from investors in the dollar, sterling and euro markets,” he says. “Across the board globally it’s likely we’ll continue to see large volumes of issuance and increased risk appetite for the remainder of the year.”

Most innovative investment bank for climate change and sustainability

Winner: Bank of America-Merrill Lynch
Shortlisted: Nedbank, Standard Bank
Thanks to discoveries of shale oil and gas in North America and developments in fracking techniques, the world may not run out of carbon fossil fuels as quickly as had been thought. This helps the problem of energy supply, but it does not do much when it comes to ensuring that energy production and consumption is cleaner.

The Banker’s Climate Change and Sustainability award aims to recognise investment banks that uniquely commit to this goal. Bank of America-Merrill Lynch’s global reach and full spectrum of products in this field has secured the bank, once again, this award.

The focus on environment and sustainability is felt across a wide range of deals, from the more traditional initial public offerings, mergers and acquisitions and energy finance transactions, to more bespoke and unique projects. Examples of innovative structures and sizable deals are copious. Of particular note is the $1bn residential solar power project for privatised military housing across the US, which will power as many as 120,000 homes and will diversify consumption of the Department of Defence, the country’s single largest energy buyer.

“Project SolarStrong is transforming the marketplace for solar energy,” says Catherine P Bessant, global technology and operations executive and chairwoman of Bank of America Environmental Council. “When complete, the plan to construct and operate more than $1bn of residential solar power projects for privatised military housing is expected to create up to 300 megawatts of solar generation capacity in the US, provide power to as many as 120,000 military houses, avoid more than 200,000 metric tonnes of carbon dioxide annually, and will create thousands of jobs for military veterans and family members.”

The scale of the deal is so unprecedented that it is the world’s largest in the residential space, and it was financed without the need for a government guarantee – an often essential prerequisite for long-term distributed solar power generation deals.

On a smaller scale but of equal impact is the carbon credit-based financing project for CleanStar Mozambique, which funds an integrated clean cooking fuel and stove venture in the country. The project may seem simple but the challenges it overcame were not. It had to deal with issues related to rural agricultural development and deforestation.

By leveraging on a system of certified emissions reductions, the project incentivised the replacement of charcoal stoves with ethanol stoves, safeguarding households from dangerous and potentially lethal charcoal smoke, saving thousands of acres of forests every year, and laying the basis for the development of a sustainable agro-forestry system.

As for the future, Bank of America-Merrill Lynch’s commitment to this space has recently been renewed with a new 10-year programme in which $50bn-worth of business must come from products that help address climate change, reduce demands on natural resources, and develop lower-carbon economic solutions.

Most innovative investment bank for commodities

Winner: Deutsche Bank
Shortlisted: Société Générale Corporate & Investment Bank
Deutsche Bank’s rise as a commodities house has been rapid. The bank has only recently become a top-tier institution in the industry, having embarked on a major expansion of its commodities business between 2007 and 2010. Along the way it has gone about integrating BHF’s listed derivatives business, which it inherited as part of its acquisition of Sal Oppenheim in late 2009.

Deutsche’s commodities business now has a client base numbering more than 1000 institutions in some 30 countries. It has stood out from rivals frequently for its ability and willingness to provide pricing on its products throughout volatile periods, sometimes carrying out more than $200m of trades a day.
But Deutsche’s main strength lies in its ability to create new structures or products for its clients. Over the past year and a half its innovation has been on show on plenty of occasions.

In mid-2011, Deutsche carried out the first volumetric production payment (VPP)-style financing in Europe. These deals, by which an issuer raises non-recourse financing against its known energy reserves, are fairly common in the US. But in Europe, where energy producers’ rights to underground reserves are less unambiguous than in the US, they had not been seen as feasible. That was until Deutsche signed a $60m transaction with Providence Resources, an Irish oil and gas explorer that was looking for financing to develop an oil field in West Sussex, UK.

The six-an- a-half-year VPP deal not only matched the expected maturity of the oil field, it also was bigger than what the company would have been able to obtain from the reserve base lending market. Deutsche thinks it will establish a template for other European independent oil companies to follow.

Another notable innovation from Deutsche was its development of so-called ‘chooser’ hedges. These were a response to the high cost of vanilla options and futures for commodities consumers or producers wanting to hedge against future price changes.

Choosers are linked to a foreign exchange (FX) rate: if a certain exchange rate moves beyond an agreed level, the hedge is not exercised. The currencies are chosen to suit the company’s needs so that if the FX rate moves beyond the agreed level, it will gain from the lost hedge either via higher export earnings or lower import costs.

Over the past year, Deutsche also started to provide 10-year power hedges to several European companies. Most banks had previously shied from buying electricity more than five years in advance thanks to a shortage of liquidity in the market. Deutsche used its close relationship with European industrial companies to get around this.

Most innovative investment bank for equities and initial public offerings

Winner: UBS
Shortlisted: Bank of America-Merrill Lynch, Goldman Sachs
The past 12 months have not been easy for equity capital markets (ECM) bankers, with volatile stock markets jumping sharply or tanking whenever good or bad news emanates about the eurozone crisis.

Reflecting this, ECM volumes have fallen significantly. There was $296bn-worth of deals globally in the first half of 2012, according to Dealogic. This was down 31% from the first six months of 2011. The situation in Europe has, somewhat inevitably, been even worse. There, year-on-year volumes fell 50% between January and June to just $57bn. And demonstrating the difficulty of listing new companies, initial public offerings (IPOs) in Europe, the Middle East and Africa (EMEA) totalled just $5.3bn, less than a quarter of the amount in Asia-Pacific.

As such, banks have had to focus more than ever on the structure and timing of their clients’ deals to get them done. UBS has managed this better than most in the past year, ensuring that it has been able to execute transactions even in particularly volatile periods. “The level of ECM volumes over the past 12 months tells you it has been a very difficult market,” says Darrell Uden, UBS’s co-head of ECM for EMEA. “But there have been pockets of opportunity. The challenge has been about working out what the quality deals are that the market is likely to support and then getting the timing right.”

UBS has shown the boldness to underwrite mega-deals. It was one of the bookrunners on the E7.5bn rights issue for Italy’s UniCredit, which was announced in November 2011 and completed in late January. Over that period, European markets were especially nervous about southern European sovereigns and banks. But the decision paid off, with 99.8% of the shares being placed.

Other notable UBS deals were the IPOs for Dutch cable firm Ziggo (E925m) and Swiss consultancy DKSH (SFr903m, or E742.3m), each completed in March. On both, the bank approached investors early, embarking on pre-IPO marketing exercises. “We employed early investor marketing,” says Mr Uden. “By the time each IPO became public, we had a high degree of confidence that they would be successfully executed.”

This strategy helped allay the concerns of investors, many of which have increasingly felt that normal IPO processes do not give them enough time to meet an issuer’s management or make a decision once the deal goes live.

“It is something that we’ve employed on a fairly regular basis,” says Mr Uden. “It’s probably more than ever before the market standard and needs to be done in such a way that you are engaging with the buy-side to the extent that they feel properly educated.

“We’ve always set out to achieve a clear balance of interests between the sell-side and buy-side. That’s perhaps something that the market felt had been missing.”

Most innovative investment bank for equity derivatives

Hubert Le Liepvre, global head of cross-asset engineering, SGCIB

Hubert Le Liepvre, global head of cross-asset engineering, SGCIB

Winner: Société Générale
Corporate & Investment Banking
Shortlisted: Citi, Credit Suisse
The equity derivatives business is changing fast, but Société Générale Corporate & Investment Banking (SGCIB) remains at the cutting edge. It has stayed there by offering clients what they need, and David Escoffier, the bank’s head of global equity flow, is in no doubt about what comes highest on that list.

“The main difficulty clients are bringing to us right now is liquidity. Cash equity volumes have fallen systematically in recent years, and heavily. That increases the risk of large portfolio managers moving or becoming the market whenever they trade,” he says.

SGCIB’s answer was the launch of the AlphaY trading pool in 2012. Bank-run dark pools – where the bank’s own flows are crossed with client orders – are nothing new. But two years of development enabled SGCIB to integrate a vast range of flows from across the bank, including equity derivatives, the hedging of equity financing activities, and the trades underlying its market-making on about 20,000 certificates and warrants.

“By making this premium liquidity accessible to clients across all our flows, not just cash equities, AlphaY is a game-changer. Some of the largest funds already rate this venue among the top three, even though it has only been in existence for a few months,” says Mr Escoffier.

Efficiency is the other major concerns for funds. With its enhanced collar equity trading strategy, SGCIB has once again taken an existing concept one stage further. Instead of buying put options and selling call options with the same maturity, the bank calculated that selling shorter-dated calls reduced the drag on potential upside, and designed an index to enable clients to pursue this strategy systematically.

“Pension funds that lost capital during the crisis want more upside while remaining hedged, and this offered them something simple that trustees who had used traditional collars could easily understand,” says Hichem Souli, head of European pricing across the bank’s cross-asset solutions team.

The other consequence of constrained times has been reduced headcount at fund managers, which can only increase their use of intelligent indices rather than labour-intensive stock-picking. In May 2012, SGCIB offered its Quality Income concept, honed by its equity research team over a decade, as an investible index. Stocks are selected on the basis that boring is best for steady returns in uncertain markets, with a focus on companies with the cash flow to sustain good dividends.

“In the current environment, investors want yield enhancement, but without taking an excessive long equity position. We can differentiate ourselves by offering a source of performance that was not available in a index format until now,” says Hubert Le Liepvre, global head of cross-asset engineering at SGCIB.

Most innovative bank for equity-linked

Winner: Morgan Stanley
Shortlisted: Credit Suisse, Bank of America-Merrill Lynch
There seems to be no such thing as straightforward issuance in the convertible and exchangeable bond markets, and Morgan Stanley showed particular skill in problem-solving and breaking new ground. The bank was the sole structurer for a deal in September 2011 that allowed specialist energy investor First

Reserve to exchange its holding of $1.1bn in Glencore convertibles into straight equity, while monetising the embedded option value of the convertible. The transaction was the first of its kind in Europe.

“It was a significantly in-the-money convertible, so the share price impact on the bond was more than 70%. We were able to structure the deal so that First Reserve could buy back the stock through a delta equity swap with convertible arbitrage investors, so the client avoided paying the bid-offer spread to move from the convertible into the stock,” says Pierre-Alexis Renaudin, head of equity-linked for Europe, Middle East and Africa at Morgan Stanley.

A long-standing joint venture with Rand Merchant Bank also paid off for Morgan Stanley in South Africa, where Shoprite launched an accelerated equity bookbuild for R3.5bn ($427m) and a concurrent R4.5bn convertible. The company wanted to issue in rand to match its revenue base, and this was the largest ever convertible offering in the currency, posing challenges to execution.

“There was a local market for small convertible issues, and a large global market for local currency convertibles. Local investors could only buy something locally listed in rand and they needed education on the structure, while foreign investors could buy but it took a lot of work on matters such as settlement to make that possible. We marketed to both groups to create pricing tension, and doing a concurrent equity issue that was oversubscribed enabled us to strengthen the convertible book with equity orders,” says Mr Renaudin.

Further cross-border pioneering allowed German airline Lufthansa to issue a euro-denominated bond in March 2012 convertible into the Nasdaq-listed dollar-denominated stock of JetBlue. After concluding that a Reg S issue would infringe US stock regulations, Morgan Stanley advised the client to adopt a 144A format.

“It was the best training you can imagine for us to look at the regulations across two jurisdictions and find what we concluded was the only possible deal. We knew most of the demand for such a credit would be in Europe, and the issuer also had some requirement for the currency to be in euros. That is unusual for a 144A bond, but even so we managed to create international demand by getting some more sophisticated US investors comfortable with hedging the currency, which they are not used to doing,” says Mr Renaudin.

Most innovative investment bank for financial institutions group capital markets

Winner: Nomura
Shortlisted: Citi, UBS
Nomura has had a tough time convincing its rivals that it can become a top-tier global investment bank. Since its acquisition of Lehman Brothers’ European and Asian arms in 2008, its ambitions have frequently been written off. Matters were not helped in late August when it announced a $1bn cost-cutting plan, with Europe expected to be among the regions hardest hit.

But Nomura’s financial institutions group (FIG) has undoubtedly been one of its strengths, and is one business that is not expected to suffer much from the cuts. While it is not yet a FIG powerhouse in the mould of JPMorgan or UBS, the Japanese bank has proved its ability over the past year to execute some of Europe’s most notable and innovative capital raisings for financial institutions.

Part of its success is down to it increasingly applying a holistic approach to FIG operations. This culminated in it forming the FIG Vertical – an integration of its debt and equity capital markets, advisory, merger and acquisition and insurance teams under a single leadership – earlier this year. “Early on, we established that capital and liquidity would be at the forefront of the agenda of banks across Europe,” says Philippe Dufournier, Nomura’s head of global finance. “We try to have all our FIG-oriented resources push in one direction to deliver maximum value to a targeted set of clients.”

That this strategy can pay off was demonstrated when Nomura was chosen as the lead underwriter for five consecutive liability management exercises (LMEs) or equity raisings for Portugal’s Banco Espírito Santo between October 2011 and May this year. The complex LME deal in October – a E375m debt-for-equity exchange – was structured to enable the issuer to maximise core Tier 1 generation, while at the same time allowing the primary shareholder to maintain its majority stake.

Nomura has also been at the forefront of a shift towards an expansion of the underlying assets used in LME transactions. This became necessary because an increase in such deals over the past three years in Europe had in some cases left its banks without the hybrid securities to do further deals. Nomura has helped to ensure that asset-backed securities (ABS) can be used instead. In December 2011, it led a E1.15bn LME transaction for Bank of Ireland that involved the buy back of some UK and Irish residential mortgage-backed securities.

Similar deals have followed this year in the wake of Bank of Ireland’s trend-setting offering. “Over the past 12 months, we have seen ABS emerge as a targeted asset class by banks wishing to build capital through LMEs,” says Mr Dufournier.

He believes Nomura will continue building its FIG presence across the globe over the coming years. “Unlike many of our competitors, we don’t have to deal with either legacy assets or capital and funding stresses,” he says. “As a result, we find ourselves often more forthcoming than others in terms of making our balance sheet available to clients.”

Most innovative investment bank for foreign exchange

Winner: HSBC
Shortlisted: BNP Paribas, Citi
The competitive and commoditised nature of foreign exchange (FX) trading means standing out is not always easy, and doing so requires not only a mastery of the basics of low prices, efficient risk management and trading systems, but also an innovative selection of products and services across the spectrum of currencies, something HSBC has excelled in over the past 12 months.

“We have a globally well integrated FX platform, where we are a major market maker across G-10 and emerging markets, with a very big presence in the emerging market space in particular,” says Selene Chong, global head of FX and precious metals structuring. “For us, it’s very important that we leverage this expertise and combine it with a global product platform, so we are able to offer the most innovative and relevant solutions to our clients, taking into account changes in the markets, local regulations and individual requirements.”

The emergence of the offshore renminbi market has been without doubt the most significant event in the FX industry since the establishment of the euro, and HSBC has been at the forefront of its development from the beginning, with industry firsts in spot and options transactions. It is now exporting its renminbi skill across Asia and the rest of the globe. In Taiwan, for example, where offshore renminbi business commenced in 2011, HSBC has now executed about $500m-worth of hedging structures and more than $200m notional of renminbi investment products. Elsewhere, it provided British pound-renminbi hedges in the UK, renminbi FX option trades with a corporate client in Germany, and renminbi-denominated FX structured notes with private banks in Switzerland.

“The development of the RMB market has been an important task for us this year,” says Daniela Asikian, head of FX structuring for Europe with HSBC. “Last year it was all about building the foundations of the market. With that job behind us, it was time now to develop in terms of volumes, solutions and reach, bringing this market to our clients across different locations.”

HSBC has also concentrated on preparing itself and its customers for changes in market infrastructure, which is likely to include significant increases in electronic execution. It is a founding member of FX Globalclear and has contributed to the development of the FXO clearing product at LCH.

At the same time, it has been investing in technology to accommodate new workflows through the central counterparty and matching system, and is onboarding clearing clients while building connectivity with aspiring swap execution facilities or multilateral trading facilities in order to access liquidity from future execution platforms.

Increases in electronic execution will increasingly disintermediate traders from the pricing process, so the bank has developed a real-time risk viewer which enables traders to monitor and risk-manage exposure. It also launched a tool to generate option prices based on several inputs, helping deal with the inevitable increase in frequency.

Other innovations include the longest real-time trading hours in Hong Kong, as well as mobile banking dual currency deposit trading in the territory. New dynamic FX indices were also introduced, allowing clients to select and create individual baskets depending on their needs. 

Most innovative investment bank for inflation products

Winner: HSBC
Shortlisted: BNP Paribas, RBS
About five years ago, HSBC took the strategic decision to build on its existing strength in fixed-income to move into the inflation-linked market. The fruits of that decision are evident today, with HSBC leading deals that open or extend the inflation asset class in new markets. The bank was sole structuring adviser and bookrunner for Thailand’s debut inflation-linked bond, and a joint lead manager for Hong Kong’s first retail-distributed linker and the first inflation-indexed project finance bond from Mexico.

“Our expertise in inflation products, our leadership in the sovereign sector as adviser and underwriter, and our strong focus on local currencies, especially in Asia, all contributed to our success over the past year,” says Philippe Laroche, head of inflation-linked origination for HSBC.

In Hong Kong, with retail investors already concerned about inflation and keen for investments that would protect them, there was a ready-made market and the bonds were oversubscribed. But in Thailand, to fulfil the government’s desire for a signal of its commitment to low inflation, there was also the requirement to establish the investor base for a new asset class.

“International funds were keen to get exposure to Asian inflation in a liquid format, but it required extensive domestic investor education to win acceptance for the very low yield in return for inflation protection. That outreach was successful, and we were able to place the whole programme in one deal,” says Stephen Williams, head of Asia-Pacific debt capital markets at HSBC.

Already in Latin America, which has a longer track record for inflation-linked debt, HSBC is opening up an inflation swaps market. In Asia, this will be a second stage once the cash market is well established, and Mr Williams says HSBC intends to remain at the forefront of developments.

“In the back of our minds is the knowledge that many Asian governments are looking at enormous infrastructure investment needs. In Europe, many such projects have an inflation link that has developed a very vibrant swaps market to allow borrowers to hedge out their risks and investors to take on those risks. Ultimately, if Asia is to come close to the type of infrastructure financing that it requires, it will need to have all possible products available. Creating a cash inflation curve is a first step, and the Thai government was a very ready partner in this,” says Mr Williams.

In developed markets, the bank placed a sterling-denominated, UK inflation-linked bond issued by airports operator BAA with a European pension fund, which then engaged in a swap to euros and eurozone inflation. This was the first time BAA had undertaken such an approach, which represented a lower cost for the issuer than swapping its own payment streams.

Most innovative investment bank for infrastructure and project finance

Winner: Citi
Shortlisted: HSBC, RBS
At a time of limited appetite for project finance deals, Citi has successfully managed to bring a phenomenal portfolio of transactions to both the bank and bond markets. And it has done so across the world, ranging from the development of ultra-deepwater drillships for Queiroz Galvao Oleo and Gas in Brazil, to involvement in Dubai’s Salik Toll Collection System and Digicel’s covenant package amendment in Papua New Guinea.

Of particular note is the $1.74bn Desert Sunlight project in the US, the largest renewable energy debt financing ever brought to the market. Citi engineered a structure by which a high return on equity was secured for the sponsor while also achieving the wanted leverage level. Pure project risk was packaged in bonds and offered to fixed-income investors, the segment that had the deepest pockets of liquidity at the time. Alongside straightforward loans, the bank market was offered an innovative asset-backed commercial paper conduit, which was put together though a process traditionally used for export agency financing. Citi also engineered a solution to redistribute the guarantee by the US Department of Energy in a way that met both government policy rules and market requirements.

“We took a project finance model, we took a securitisation model, we took an export agency finance process and we brought it all together to create an optimal outcome for the client,” says Nasser Malik, Citi’s global head of project and infrastructure finance.

By breaking new ground in solar energy financing, with a project of this size, Desert Sunlight has opened the door to future deals in this space. Only a few months later, Citi itself structured the largest solar project finance bond to date, the Topaz Solar Farms $850m debt offering, executed in the strict 144A and Reg S markets. Mr Malik says that one of the reasons why the deal was a success was because investors understood solar energy risk better after Desert Sunlight.

Looking ahead, it will be crucial to keep on innovating and attracting new sets of investors to project finance deals. “[There are] two core themes: bringing other disciplines to bear rather than purely looking at things that are traditional project finance solutions; and looking at capital markets along side the bank market,” says Mr Malik.

Emerging markets that have established project finance policies and are developing their local investor base are a natural attraction to investment banks. And US-based Citi only needs to look south of its border. “Mexico is interesting because of the deepening of the institutional fund sector,” says Mr Malik. “It’s not quite at the level of Chile, which is a very deep market, but it’s going in that direction. So, where do we take the business going forward? We will work together with constituents globally to unlock further capital potential and replace banks that have exited from this space.”

Most innovative bank for Islamic finance

Badlisyah Abdul Ghani, executive director and chief executive, CIMB Islamic

Badlisyah Abdul Ghani, executive director and chief executive, CIMB Islamic

Winner: CIMB Islamic
Shortlisted: HSBC, Deutsche Bank
CIMB Islamic stands out as the clear winner for this year’s Most Innovative Bank in Islamic Finance award. In particular, it has had an impressive year in helping bring innovative sukuk to market.

The bank acted as the sharia adviser for the Khazanah Nasional Berhad $78m sukuk, which set records as both the world’s first Chinese yuan (CNY) sukuk issuance and the first CNY offering by an Association of South-east Asian Nations quasi-sovereign issuer.

CIMB Islamic also lead-managed the largest dual-tranche global sovereign sukuk ever issued – the Malaysian government’s issue of a $1.2bn sukuk due 2016 and an $800m sukuk due 2021. This also set a precedent as the first global sovereign US dollar sukuk structured under the sharia principle of wakala – similar to a power of attorney whereby a person appoints a representative to undertake transactions on his or her behalf.  

In early 2012, CIMB Islamic, via one of its investment partners, became the first Malaysian asset manager to establish Undertakings for Collective Investment in Transferable Securities funds in Ireland.  

The bank has also shown innovation in its efforts in developing Islamic treasury products. For example, its recent addition to the swap family is the resettable cross-currency profit rate swap. This enables CIMB Islamic to offer swaps to accommodate for lower-rated counterparties. It is also working on developing new swaps in order to improve efficiency and pricings for its customers.

In the Islamic structured products space, the bank also introduced six new flow structures to its offerings. The most recent of these was in June 2012 when it launched the three-month Bearish Euro NID-I that provides a 4% per annum profit paid at maturity if the euro weakens against the US dollar.  

“We continuously push boundaries and explore new ways of doing things even when people say it is impossible,” says Badlisyah Abdul Ghani, executive director and chief executive of CIMB Islamic.

“We believe there is always a viable and profitable solution for everything and anything under sharia, unless it is specifically and expressly prohibited. If there is none at present, it means we have not yet worked it out. The Khazanah sukuk is one of the deals that I reflect upon most fondly as it broke new ground – in terms of investors’ acceptance and effective transactional executability in a non-traditional Islamic finance jurisdiction.”

In terms of where CIMB Islamic sees the key Islamic investment banking opportunities lying over the next 12 months, Mr Ghani says: “The traditional sukuk activities will continue to present key opportunities. At the same time, we see Islamic equity capital market activities such as initial public offerings, warrants, structured products, real estate investment trusts, stock broking and so on as low-lying fruits that we want to reach more.”

Most innovative investment bank for loans

Eric Capp, head  of high-yield loan and bond capital markets, RBS

Eric Capp, head of high-yield loan and bond capital markets, RBS

Winner: RBS
Shortlisted: Credit Suisse, HSBC
A tougher regulatory environment in the run up to the Basel III framework being implemented and the eurozone’s woes have in many cases made it more expensive for banks to provide companies with loans. One result has been an increase in the number of debut corporate bonds in the US and Europe.

But several of the world’s biggest syndicated loan houses have come up with innovative and rare structures to enable their clients to carry on getting access to bank financing. Royal Bank of Scotland has been foremost among those over the past 12 months, during which it has led deals across the globe for borrowers of all types.

By moulding transactions to lenders’ needs, it has managed to ensure the success of key deals despite the volatile backdrop. “We had a very good market at the beginning of the year, which then traded off quite considerably as we got in to the spring and the summer before rebounding in the fall,” says Eric Capp, head of high-yield loan and bond capital markets at RBS. “Despite that, our view was that well-structured deals for high-quality companies would go well and we executed a variety of new issues as well as amend and extend transactions throughout the period.”

RBS has long been a leading player when it comes to investment grade loans. One of its most notable deals since the start of the year was that for telecoms group Telefónica. Despite it being thought of as among the strongest corporate credits in Europe, its Spanish nationality meant banks were warier than usual of lending to it in the early months of 2012. To counter this, RBS, as one of the bookrunners, helped maximise demand for Telefónica’s £3.5bn (E4.32bn) facility by allowing lenders to commit under English law (which would give them protection from any redenomination risk) or Spanish law (under which the loan would be eligible as collateral for European Central Bank funding). As such, the deal proved popular and the dual-law structure was copied on some loans than came in its wake.

“Telfónica set the structural benchmark,” says Pippa Crawford, head of western European loan markets at RBS. “The structure was a response to addressing the needs of two groups of banks – European banks seeking loans that could be pledged as collateral for ECB funding, and international banks looking to mitigate against the risk of euro redenomination.”

RBS has also been busy taking European companies to the US, where liquidity has remained deep and where investors have proved keen to buy assets from the other side of the Atlantic. Formula 1 used this option when it issued a $2.3bn leveraged loan in April. “This was a company that had predominantly been financed in Europe,” says Mr Capp. “This refinancing took it to a new investor base – US institutional term loan investors. That market has been deep and liquid for most of this year.”

Most innovative investment bank for mergers and acquisitions

Winner: Rothschild
Shortlisted: Citi, Credit Suisse
Few bankers have had it as tough as those working on mergers and acquisitions (M&A) in the past year. Takeover activity remains suppressed and volumes a far cry from those experienced in heady days before the market’s abrupt slowdown in 2009. In the US, announced M&A volumes in the first half of 2012 fell to $399bn, according to Dealogic, the lowest level since 2003. European volumes decreased year on year by 23%, while in Asia they slumped 16%.

Yet the most innovative and tenacious institutions were still able to get deals done for their clients. Rothschild was firmly among those, its pure advisory model enabling it to retain its position as the M&A bank of choice for mid- and large-cap companies across the world as well as several governments.

The bank was very active in its traditional stronghold of Europe, where in the year to the end of June 2012 it was ranked the busiest M&A adviser by completed deals.

Among its most notable mandates were those backing French utility GDF Suez’s E9.5bn takeover of 30% of International Power, and Polish telecoms group Polkomtel’s E4.5bn leveraged buyout by Spartan Capital, the largest LBO deal in Europe since 2008.

Rothschild also advised the government of Portugal on its disposal of a 21% stake in Energias de Portugal to China Three Gorges, a transaction which was vital to the country’s financial aid agreement with the troika of the EU, European Central Bank and the International Monetary Fund.

The bank continues to build its presence in Latin America, advising on several deals in the region recently. One of those was food retailer Controladora Comercial Mexicana’s $932m sale of a 50% holding in Costco de Mexico.

Rothschild stands out among its rivals for the key role it plays in almost all parts of its clients’ transactions. Earlier this year it advised the management of Iceland Foods and its co-investors on their £1.55bn ($2.52bn) buyout of the company. Rothschild helped the buyers obtain underwritten senior debt and a subordinated vendor loan to fund the deal. It also helped the management assemble a group of well-suited co-investors and advised on the interest rate and foreign exchange hedging for the deal.

Robert Leitäo, the head of UK investment banking at Rothschild, says global macroeconomic weakness will continue to weigh on investors’ willingness to go ahead with deals. “The uncertainty as to future growth has undermined the confidence managers need to perform acquisitions,” he says. “The M&A market will only rebuild when the macro position becomes clearer. Financing has also been an issue, with banks reducing their exposure to acquisition financing, and equity markets being too volatile.”

Nonetheless, whether global economic conditions improve much in the near term or not, Rothschild will undoubtedly be among the banks best able to execute transactions for those that are bold enough to pull the trigger.

Most innovative investment bank for prime brokerage

Winner: Deutsche Bank
Shortlisted: Bank of America-Merrill Lynch, Barclays
Along with much of the rest of the financial system, incoming regulation has continued to have a major impact on prime brokerage markets, and operators have had to dedicate significant time and effort to helping clients deal with the complex issues raised by these new legislatory demands.

One such implication is the increased amount of collateral which hedge funds are required to post in order to cover their trading positions, something which has become an increasingly pressing concern in recent years.

In response, Deutsche Bank introduced a system designed to consolidate information on client trading positions across a number of markets and regions, before identifying overlapping exposures. The resulting information is then used to optimise clients’ margin calculations and in turn minimise collateral requirements.

“As the industry continues to prepare for the implementation of Dodd-Frank, our status as a pioneer of cross-asset clearing has been a significant achievement,” says Jonathan Hitchon, co-head markets prime finance. “Our business allows clients to execute, finance and clear all interest rate, foreign exchange, commodities, credit and equity trades from a single platform. Limiting complexity for clients makes it simpler and operationally cheaper for them to execute trades.”

As a testament to its quality, four of the six largest proprietary trading outfits spun-off from Goldman Sachs and JPMorgan in the past 18 months as a result of regulatory changes have appointed Deutsche Bank as prime broker. “A good indicator of our success not only this year, but over the past several years, is our ability to continually win new business from sophisticated client segments with high expectations,” says Barry Bausano, co-head of markets prime finance and president of Deutsche Bank Securities. “For example, over the past 18 months we have seen an influx of business from hedge funds run by former proprietary traders who have spun out of our competitors.”

The firm also introduced a tool designed to reduce costs passed on to its clients by optimising the use of its own capital around the globe. Whereas traditionally, prime brokers finance assets and move them between locations in a three-stage process – whereby cash is raised and managed by the treasury unit, balance sheet controlled by finance and accounting, and inventory handled by trading – the bank now brings these areas together into a single system allowing all of its teams to see where assets are located around the world. As a result, they can track sources and uses of the bank’s inventory, cash and balance sheet, almost in real time, meaning that its ability to plan and finance asset purchases is far more efficient than ever before, passing on savings to clients.

Most innovative bank for risk management

Winner: HSBC
Shortlisted: BNP Paribas, RBS
One of the results of chief executive Stuart Gulliver’s vision for HSBC on taking charge in 2011 was the creation of two new units that brought together several business lines for a more coordinated approach to clients. The first was a corporate treasury solutions team, which was designed to more closely align  derivatives structuring with HSBC’s traditional debt capital markets (DCM) strength, across countries and products.

In the past year, HSBC managed the first bond in offshore Chinese renminbi (CNH) from a Latin American issuer – Mexican telecoms company America Movil – and helped the company with the associated currency hedge. In the swaps market, HSBC transacted its first five-year CNH/euro swap with a German corporate that had originally been looking at issuing bonds directly in CNH.

“It was a feather in the cap of our Chinese DCM team to launch the first Latam Dim Sum bond. But thanks to the corporate treasury solutions structure, [the team is] also rewarded for giving advice and not just selling products. So it was quick to tell the German company that it would be better to finance from it traditional capital providers in euros and swap into CNH. Since the Chinese approval process is much the same for swaps as for bonds, HSBC was the natural partner to navigate that,” says Russell Schofield-Bezer, European head of corporate treasury solutions at HSBC.

The second unit created as part of Mr Gulliver’s vision was a strategic solutions team combining pensions, insurance and financial institutions bankers to address a range of clients needing asset liability management products. Over the past year, HSBC has begun offering forwards on less liquid underlying inflation-linked government bonds. This enables pension and insurance investors with inflation-linked liabilities to access the yield-enhancement of forward bonds compared with swaps.  

“By connecting our solutions and structuring teams across the globe, we are quickly able to identify solutions to a client problem delivered in one jurisdiction which, with a bit of tweaking, can be applicable more broadly. For example, by identifying relative value opportunities in government forward bonds versus swaps, we delivered a de-risking trade in a yield enhancing fashion,” says Simon Hotchin, HSBC’s head of the European strategic solutions group.

While the bank cannot know exactly where cross-selling ideas will germinate, Nobby Clark, a managing director in HSBC’s strategic solutions group who focuses on pension fund clients, is in no doubt that the group’s formation has improved the sharing of best practices.

“I have worked here for more than 20 years, and things have definitely moved to a new level recently. We have improved our collaboration internally and are exchanging a lot more information that is helpful for our clients generally, rather than being tied to a specific sales target,” he says.

Most innovative investment bank for structured investor products

Winner: Barclays
Shortlisted: HSBC, Société Générale Corporate & Investment Banking
A global reach and an eye for tapping into the themes that matter most to investors were the factors that swayed the judges in favour of Barclays in the structured investor products category.

An index designed to offer Australian investors access to a market-neutral commodities strategy that plays the shape of the futures curves was used to construct 13 of the 16 commodities structured products launched in the country over the past 18 months. The bank also launched the first product in Colombia to offer an algorithmic strategy that allocates across a basket of asset classes, and the first open-ended commodities tracker in Brazil.

“Our truly global footprint is testament to the commitment we have made to provide a fully comprehensive platform to cater to our clients’ needs. We remain focused on delivering a menu of innovative, direct solutions providing clients with efficient access to pricing and execution. Overall, our clients appreciate our consistent approach, they value the partnership in developing solutions and they know that this business is built to last,” says Richard Couzens, head of investor solutions product origination at Barclays.

With interest rates remaining low and market direction still uncertain, one key trend has been sophisticated investors’ continued demand for alternative solutions. Kevin Burke, head of investor solutions and funds and advisory distribution at Barclays, says client needs have stimulated the bank to develop a comprehensive suite of investment strategies. Specifically, there have been healthy inflows into the Barclays risk premia indices, which can deliver superior risk-adjusted returns in various market conditions within a well-balanced portfolio. This interest has mostly stemmed from North America and Japan, says Mr Burke, who emphasises that these products are most appropriate for ultra-high-net-worth or institutional investors – a distinction that the bank is very careful to make.

A more focused investment theme that attracted $425m for one European private bank in May 2012 was a note allowing access to yuan appreciation against the dollar, with full capital protection. Timing was all-important, as a sharp move in yuan forwards allowed a cheap entry point.

“In the first instance, we are accommodating how our clients are set up. The largest private banks have businesses that operate globally, so a product such as the Chinese yuan notes works well because it is a global theme that our clients can distribute across their networks worldwide. But we are also consciously looking at investor utility and the ability to be first to market, if we have solution that we can put in place to provide liquidity to something that is normally difficult to access,” says Mr Burke.

Most innovative investment bank for sovereign advisory

Winner: Rothschild
Shortlisted: HSBC, Lazard
While newspaper headlines have been filled with eurozone sovereign debt crisis and the restructuring of Greece’s government bonds, other exceptional sovereign advisory work was being carried out over the past year. Rothschild’s deal portfolio has been impressive because of the significance and variety of projects it has undertaken, which stretched across a number of countries and cultures.

It included numerous deals where proven financing techniques were coupled with innovative solutions and ranged from the largest ever restructuring of sharia-compliant instruments for a sovereign-owned borrower in the Middle East, to advising on a nuclear power deal in central and eastern Europe.

The restructuring of Dubai government-owned Nakheel’s external debt, trade creditor and customer claims – totaling a staggering $32bn – and new shareholder’s capital injection was the largest ever corporate real estate restructuring, and the largest new money contribution for a restructuring by a government or private institution outside the financial services sector. The deal was considered essential to the support of the local economy; it allowed funds to flow again to contractors and, ultimately, to the banking system. Rothschild led negotiations between Nakheel, the Dubai government and the lenders’ coordinating committee, and restructured $5.9bn-worth of sukuk though a liability management programme supported by the government.

In central and eastern Europe, Lithania’s nuclear power plant project used an innovative funding model which involved a co-investment from the technology provider and export credit financing. The project required agreement by a number of European governments, the European Commission and corporates, which were all brought successfully together by the bank. More importantly, the project aimed at reducing Lithania’s energy dependence on Russia and, with to the involvement of power systems firm Hitachi, the project’s contractor, sought to restart both the European and Japanese nuclear industries after the Fukushima’s nuclear meltdown.

Of note are also the much-needed expansion project for Jakarta’s primary port, Tanjung Priok, in Indonesia, where the concession agreement was structured without any government funding support; and the recapitalisation of Portugal’s banking system through a publicly funded $6.65bn capital injection into three lenders, which was achieved though government-subscribed core Tier 1 instruments, a product that preserved financial stability in the country and maintained its ability to attract private capital in the future.

HSBC and Lazard were also strong candidates for the accolade. Lazard’s solution for the Greek Private Sector Involvement exchange bonds, which were issued with warrants linked to gross domestic product’s performance, was highly imaginative.

Most innovative investment bank for structured finance

Winner: RBS
Shortlisted: Citi, HSBC
The asset-backed securities (ABS) market for financial institutions is still a long way from returning to full health, especially in Europe. RBS has made a significant contribution in the past year to improving the situation, in particular helping European issuers to access new markets.

The Saecure residential mortgage-backed securities (RMBS) issue for life insurance, pensions and asset management company Aegon in April 2012 was the first Dutch RMBS to access the US regulation 144A market, while Germany’s Volkwagen launched its first Japanese yen auto loan securitisation in January. But a comprehensive revival will need more than just tapping new markets, says Lee Rochford, RBS’s head of financial institutions structured finance.

“Cross-border deals can take a lot of investor preparation and need a close eye on the cost of cross-currency swaps, so it makes sense to deepen the domestic investor base as well,” he says.

And RBS has done just that, especially in its home UK market. A £933.5m ($1.51bn) RMBS for Coventry represented the building society’s public securitisation debut, and the largest publicly placed UK ABS post-crisis. This paved the way for two other large deals, one for Skipton Building Society and the other a debut for Virgin Money that attracted 27 different accounts.

At the same time, RBS opened a new market for Dutch-headquartered merchant trader Trafigura, with a 144A $430m deal in May 2012 backed by trade receivables. This was only the company’s second such deal, after a Reg S offering in 2007, and was the first to be placed mainly with US rather than European investors.

“Commodity houses had been well financed by the largest players in the eurozone, but with the new regulatory environment and ongoing liquidity squeeze in the eurozone, those banks are being much less aggressive, so this was very much a problem-solving exercise,” says Mr Rochford.

Compared with ABS, the corporate secured market is in good health, and RBS has continued to lead ground-breaking deals. Associated British Ports extended the corporate secured structure more common among regulated utilities such as water companies and airports into an unregulated sector.

Long-standing RBS client airport operator BAA became the first ever issuer of a corporate secured bond in the Swiss franc market. And leisure group Center Parcs brought a new sector to the whole business securitisation (WBS) structure, allowing the company to refinance a maturing commercial mortgage-backed security (CMBS).

“The key question was whether the market would have confidence in the issue despite the novelty. In practice, there was a large reverse order as investors welcomed a sensible structure. Given the number of CMBS programmes in place across Europe and the difficulties refinancing them, WBS technology can help solve a significant challenge,” says James Miller, head of secured debt markets at RBS.

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