Asiamoney Best Bank Awards 2017: Hong Kong
Best domestic bank: Hang Seng Bank
It’s hard not to like Hang Seng Bank, not least because their branches in stations across Hong Kong’s underground rail network make convenient places to meet.
Handy branches don’t make a good bank, but chief executive Rose Lee’s prudent steady-as-you-go management in a tough year does. After a year when operating profits fell 2% to HK$19 billion ($2.4 billion), Hang Seng endured negligible impact on its capital adequacy (20.8%, down just over a percentage point on 2015), the bank’s return on equity (12.1% versus 12.6% a year earlier) and its return on average total assets (1.2% versus 1.3% in 2015, excluding the Industrial Bank disposal gain that year). Its cost-to-income ratio is a staggeringly low 33%.
Despite narrower spreads on customer lending, Hang Seng managed to improve its interest margin by 2%. The bank’s insistence on asset quality and managing risk was evident in Hang Seng’s bad-loan book, measured at a paltry 0.46% of its total book. At the same time, it is growing revenues and profits in its commercial and wholesale banking business lines and is increasingly an important player in Hong Kong’s small and medium-sized enterprise sector.
In Hong Kong, Hang Seng Bank is a byword for community. With its 10,000 employees, it banks half of the territory’s bankable population, a substantial standalone operation in its own right, albeit one with the resources of mighty HSBC, which owns 62%, behind it. As we say, there’s a lot to like.
Best corporate and investment bank: HSBC
HSBC likes to say it provides unparalleled one-stop services for its corporate clients, from deal origination and execution, through lending and syndication to sales and even research coverage. And it will do the entire train of transaction green, if you like.
That’s what HSBC did for Hong Kong’s premier public transport group, the MTR Corporation in 2016. It was tasked with selling $600 million in green bonds to raise funds for investment in low-carbon transport and real estate: the issue went out 2.3 times oversubscribed, with keen interest from 94 of HSBC’s biggest clients. Apart from the MTR play, HSBC raised $650 million for Hong Kong trading giant Li and Fung and $1.2 billion for property group New World.
HSBC raised a staggering $14 billion-plus for its clients in Hong Kong’s equity and capital markets last year. It’s the leading debt house in Hong Kong, the leading dollar-yen-euro bookrunner for Greater China and Hong Kong issuers, and it’s first in the Hong Kong dollar bond market too.
In M&A, it was the sole adviser for Beijing-owned China Overseas Land’s $4.8 billion purchase of Citic’s property portfolio and advised the New World Group in a $2.6 billion in-group privatization. Another big deal was HSBC as joint coordinator and bookrunner for Postal Savings Bank of China’s $7.6 billion IPO.
Best digital bank: Citi
Hong Kong is one of the world’s most wired markets; its internet users are more demanding than most. So Citi starts its digital offering from a good, if obvious, place. It wants its digital customer experience to be: ‘simple, intuitive, and seamless from beginning to end.’
It must be doing something right because more than half of Citi’s clients in the territory now use its beefed-up digital platforms, with mobile showing the fastest growth, rising 37% last year. Asia chief executive Francisco Aristeguieta is determined to make Citi the best digital bank in the region – Hong Kong is often a test-bed for initiatives carried out elsewhere at a bank where the digital future goes to the heart of everything it does, especially in consumer, premier and credit card businesses.
Head of customer franchise, Priscilla Ng, claims a series of firsts for Citi’s tech-demanding users in Hong Kong: the first financial services group to deploy voice biometrics ID authentication; the only bank to offer Thomson Reuters company data on its mobile platforms, allowing users access to stock research ratings and peer comparisons; the first to provide real-time financial analysis via Facebook Live; pioneering live-chat instant response in customer service and deal execution, and post-event reply to enhance remarkable experience.
Citi is also offering pre-approved loans to its cardholders directly through mobile apps. It has also tried to iron out a big bugbear of phone-bankers: identity verification. It claims that callers will have their IDs digitally confirmed within 15 seconds of calling in. Citi also rolled out its Remarkable Credit Experience in 2016, an enhanced digital lending application. Citi says its RCE app has led to a 13% increase in query to conversion and a 30% lift in approvals.
Best international bank: Bank of China International
In Hong Kong banking, ‘international’ pretty much means China. And ‘Chinese bank’ pretty much means Beijing’s note-issuing giant Bank of China. And with Beijing’s $1 trillion One Belt, One Road initiative in the pipeline, clients know that they are buying BOCI’s extensive connections in China. That was seen in 2016 when BOCI brought Bank of Tianjin to the Hong Kong market.
Despite choppy market conditions, BOCI secured seven eclectic Chinese investors to anchor the issue. The Bank of Tianjin deal helped elevate BOCI to the number-one slot for Hong Kong IPOs in 2016. BOCI says it also did 75% of the FIG IPO deals in 2016, to be ranked top in that sector in overall amounts raised. And BOCI continued to elevate the renminbi as an international reserve currency, most notably with the Rmb3 billion ($440 million), three-year bond for China’s ministry of finance to list at London Stock Exchange, the first Chinese sovereign renminbi bond issued and listed outside China.
Led by its formidable Hong Kong-based chairwoman Madam Tong Li, Bank of China International is the Chinese bank that the traditional big banks in the special administrative region follow most closely. And with good reason.
Best private bank: DBS
At first glance, the connection between an Indonesian tax amnesty and Singapore bank DBS’s recent push into Asian private banking isn’t apparent. But think again. Singaporean banks have seen billions of dollars leave their care since Jakarta gave Indonesians an amnesty to get their finances in order. Indonesian officials have said 57% of funds repatriated home came from Singapore.
So DBS, under managing director Januar Tjandra, and rivals like OCBC have been forced to look for greener pastures elsewhere, like Hong Kong. In quick succession, DBS has bought Société Générale’s private-banking operation in Asia and then gobbled up ANZ’s as it exited Asia. In 2016, DBS transferred about $2 billion in assets under management to its Hong Kong office, while more than doubling headcount. The ANZ deal added another 100,000 private wealth clients.
When deal integration is done, DBS will have lifted assets in Hong Kong by around $5 billion in AuM, to total around HK$120 billion ($15 billion), but even before that, DBS’s private bank in Hong Kong was delivering double-digit growth in AuM year on year.
A play for ABN Amro’s Asia private-banking business may have since failed, but DBS’s commitment to the Hong Kong market – in small and medium-sized enterprises as well as wealth management – is quickly giving it a second core market beyond Singapore. It’s definitely a bank to follow closely, particularly given its smart – and aggressive – client acquisition strategy.
Best bank for SMEs: Hang Seng Bank
Starting in the 1930s, Hang Seng built its franchise banking the small Hong Kong traders and hawkers that other banks wouldn’t touch. The more things change, the more they get bigger.
With its deep community roots, Hang Seng has a long track record as a trusted financial partner for Hong Kong’s small and medium-sized enterprises. Commercial banking deepened customer relationships and leveraged its strong cross-border connectivity to achieve balanced growth in customer deposits and advances. In an uncertain operating environment for many businesses, Hang Seng’s industry sector expertise supported the needs of commercial clients and added value by providing flexible financial management solutions. To drive non-fund income, the bank stepped up efforts to strengthen its transaction banking product capabilities and enhance corporate wealth management penetration.
The growth of Hang Seng’s SME business has remained a strategic focus. Upgrades to its digital and physical service channels reinforced the competitiveness of the bank’s extensive distribution network, and enhancements to its integrated financial services proposition have further strengthened customer engagement, resulting in solid revenue growth.
In 2016, it achieved an 8% increase in income from its SME portfolio. A concerted effort to target mainland customers in Hong Kong saw SME deposits rise by 9%. Mainlanders accounted for 61% of new business in 2016, helping Hang Seng to a 30% increase in fees from insurance products and a 13% rise in fees from remittances and account-related services.
These initiatives enabled Hang Seng to maintain good business momentum and achieve a 2% increase in operating profit in its commercial bank, excluding loan impairment charges, to HK$5.9 billion ($757 million), with SME growth the main driver. Operating profit rose by 1% to HK$5.3 billion.
Best bank for CSR: HSBC
HSBC lifers like to argue that the ethos of corporate and social responsibility is part of their DNA in Hong Kong. That’s not necessarily because they are caring and sharing souls by nature, though they doubtless are. But it’s more because for decades, being ‘The bank’ in Hong Kong, the primary issuer of banknotes and the territory’s most important commercial institution, came with similar responsibilities of being de facto government.
And it shows. For 16 years, HSBC has been the territory’s main corporate donor to Hong Kong’s leading charity, the Community Chest. Beyond that,
HSBC ranked first out of more than 600 companies in a key sustainability index on community development, the environment and human rights, measured by Hong Kong’s Polytechnic University. And it raised HK$477 million ($61 million) in donations for 11 charities from the sales of its commemorative banknote celebrating 150 years as a note-issuer.
The largesse is evident across the border, where HSBC boasts the largest charitable spend among foreign banks operating in the mainland market.
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