Sizzling growth in S'pore's corporate banking sector

GROWTH of Singapore's corporate banking sector is in top gear, buoyed by roaring equity markets as the Republic becomes more entrenched as a key global financial centre.

The sector has also been boosted over the past six months by a bumper crop of convertible offerings, such as bonds that can later be converted to shares, and private equity buyouts.

This has, in turn, propelled investment bankers' fees up by a dizzying 60 per cent from last year to US$284 million (S$437 million).

The boom has sparked a fresh round of poaching wars for talent, as banks aggressively bulk up their teams in anticipation of an even more buoyant second half.

In the first half, Singapore's equity capital market grew by almost half to hit a record US$5 billion from last year, according to Thomson Financial data.

There were 31 share issues here - 10 initial public offerings (IPOs) by Singapore companies, seven convertible bond offerings and 14 other share issues such as placements of new shares.

This was the largest six-month volume since the first half of 2001, when volumes hit close to US$27 billion before tumbling when Sars and the global electronics downturn struck the region.

This flurry of activity made Singapore the most active market in South-east Asia, capturing 43.3 per cent of the region's proceeds of US$11.5 billion from 82 issues.

Meanwhile, South-east Asia enjoyed the most rapid expansion in the Asia-Pacific, outstripping even the booming North Asian markets, thanks to its whopping 83.4 per cent growth in proceeds.

The 10 Singapore firms that went public in the past six months raised US$1.1billion - a record year-on-year increase of 17 per cent.

Another record-setter was convertible bond offerings in Singapore, which attracted proceeds of US$2.1 billion from seven issues.

Meanwhile, Singapore also expanded its share of IPO proceeds in the Asia-Pacific this year, with a 17 per cent jump in the value of new listings to US$1.9 billion.

Among the issues was China-based Yangzijiang Shipbuilding's US$711 million IPO in March - this year's largest listing. Its bookrunner and joint lead manager was UBS.

The Swiss bank 'has a very active pipeline of deals and expects the second half to match, if not exceed, the growth of the first half', said Mr Patrick Lee, UBS' head of investment banking in Singapore and Malaysia.

'What is driving deal flow this year is Singapore's emergence as a strong global financial centre,' he observed.

'Singapore is now a listing destination not only for local real estate investment trusts and IPOs, but also for international companies looking to list assets here.'

Meanwhile, the Republic was the sixth most sought-after target in the Asia-Pacific for mergers and acquisitions (M&As), behind Hong Kong and Malaysia.

It drew 245 deals worth US$11 billion, driven by transactions in the industrial sector, such as Dubai Drydocks World's US$876.8 million takeover of Pan-United Marine last month.

Total M&A activity here in the past six months rose 8.1 per cent to US$24.6 billion.

Still, private equity continued to star, hitting a record US$4.3 billion in six months - more than 170 per cent of the volume for the whole of last year. The 13 deals this year include the $1 billion buyout of MMI Holdings by United States giant KKR.

Indeed, the second half of the year looks to be an even more buoyant time, with some industry players speculating that Temasek Holdings may sell at least one of its three power generation companies (gencos) by year-end.

Temasek has said it will sell all three gencos over the next 12 to 18 months.

Credit Suisse, which advised KKR on the MMI buyout and is a joint adviser to Temasek on its genco sales, is one of four investment banks that have a positive outlook on Singapore for the rest of the year.

Mr Edwin Low, Credit Suisse's managing director and head of Singapore investment banking, said the bank has 'an overflowing deal pipeline'.

'Provided strong markets persist, I expect the second half to be another banner period for the investment banking industry in Singapore,' he added.

This 'even more buoyant outlook...is throwing the equity capital market houses into overdrive - bankers are working 60, 70 hours a week to get deals out, and aggressively hiring with six-digit sign-on bonuses this year,' said an American investment banker.

Some high-profile moves include Merrill Lynch's recent recruitment of Deutsche Bank's Singapore banking head, Mr Keith Magnus, to lead its investment banking team for Singapore and Hong Kong.

Indeed, 'there has been strong demand for talent in Singapore', said UBS' Mr Tan, noting that the bank has 'doubled the size of the investment banking team over the last two years'.

'In the last six months, our team in Singapore - which is UBS' South-east Asian hub for investment banking - has been growing at 20 per cent, and we expect this growth to continue in the coming months.'

Another investment banker said that 'hiring top talent is going to be an even tougher challenge in Singapore' as some of his team members were being enticed to work in other hubs such as Dubai.