February 24, 2013 6:58 pm

Asian banks win record share of debt deals

The market share of Asian banks arranging corporate bonds for European and US companies has risen to an all-time high, in a sign of the growing power of eastern financial institutions on global capital markets.

Banks, mainly based in China and Japan, have more than doubled market share of corporate debt activity in the US and Europe over the past year with the total value of deals hitting an unprecedented $40bn in 2012, according to Dealogic data.

This comes as many of the largest western investment banks have shrunk debt operations to comply with tougher regulation, also reflecting a weak trading environment.

Banks to have benefited include China Development Bank and China Construction Bank, which have more than tripled their global market share in the past three years. Mizuho, a Japanese bank, Mitsubishi UFJ Financial Group and Bank of China have also grown significantly in stature.

Their most substantial inroads have been in European markets as local banks pull back from lending, allowing Asian groups to funnel robust balance sheets and greater lending power into capital market activity.

They have benefited from the growing tendency of companies, facing tough borrowing conditions, to reward lending banks by making them “passive” bookrunners on bond deals.

“Since the crisis, companies have been keen to keep as many lending relationship banks happy, so we have seen a rise in the number of bookrunners appointed,” said Morven Jones, head of public sector and corporate debt capital markets for Europe at Nomura.

The volume of corporate bonds arranged by Asian banks in Europe alone rose from $8bn in 2011 to a record $25bn last year, according to Dealogic, with the market share doubling from 2 per cent to 4 per cent.

In the US, the total deal volume for Asian banks rose from $10bn in 2011 to a record $15bn in 2012, a more modest rate of growth than in Europe, but this year has seen a much sharper increase to a 4 per cent market share.

The growing strength of the Asian banks has also been helped by the wealth in the region – China’s gross domestic product grew 7.8 per cent last year. This has helped the banks expand balance sheets and has given them access to a wealthier investor base.

“We get hired by companies because we know where the Asian money is,” said a global head of debt capital markets at an Asian bank with operations in Europe. “We have access to a rich investor base that the big western banks do not.”

Asian banks have access to large pots of private money through the private banks.

The top 20 private banks have nearly doubled assets under management to more than $1tn since 2007, according to Private Banker International.

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