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12 | ifr special report | September 2009 SWITZERLAND


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international bonds and number16 for euro-denominated issues. But Koder said the bond tables fail to reflect the work UBS has done in liability management, where it has been busy on deals like the big Lloyds Banking Group debt swap early this year. That deal saw the bank exchange over 40 existing upper tier two securities for new, better-quality debt. UBS has also been involved in liability management transac- tions for RBS, Rabobank and the Ukraine’s Alfa Bank, among others: “We have done a lot of work in that space and our market share is enormous,” said Koder. “We are number one in liability management for financial institutions, with 18% of the market – we’ve worked on 16 deals with a total of £16bn of volume. It’s been quite a profitable area for us, and I wish the league table providers would include fees for that in some of their tables. It would meaning- fully change our position.” On the ECM side, banks have helped drive the activity as they seek to shore up their capital position with equity. Although mammoth deals like HSBC’s record- breaking £12.5bn rights issue may now be off the agenda, Koder argued further capital raising will be unavoidable.


Re-cutting the cord There is also the thorny question of when and how governments will exit the huge positions they have built up over the past year: “There are about 30 banks across Europe which have received government money. In aggregate, it must add up to €60 or €70bn and the size of the shareholdings as a percentage of market capitalisation ranges from 10% to 100%. The advisory work around how to exit is something we’re very excited about,” he said. The expectation at UBS is that a mix of strategies will be used, embracing equity, exchangeables, hybrids and other forms of core capital. This will play to UBS’ strengths, Koder said, it having integrated debt and equity teams into a single GCM division last year.


Of course, Credit Suisse is looking at the same opportunity. It has already landed roles in some of the year’s biggest financial ECM transactions, such as the HSBC issue and the June sale of a US$5.5bn stake in Barclays on behalf of International Petroleum Investment Company. Nick Williams, head of European equity capital markets with the bank in London, identified the latter as a deal of which the bank is particularly proud: “If you want one transaction that’s representative of the momentum we have in the business, Ipic is it: at over US$5.5bn, it was the largest ever accelerated book build executed by just one bank. And it was hard underwritten, which isn't something that any bank does lightly.” Williams said that the bank launched the Barclays deal after the close of the US markets and had US$9.5bn of demand by the following morning. But if investors are that hungry for bank risk, doesn’t it take the sheen off an apparently ballsy under- writing decision? Not according to Williams. It was the fact that Credit Suisse’s cash equity business regularly trades up to 30% of the daily volume in Barclays stock that enabled the ECM team to tell Ipic confidently that it could sell the stake: “Being the number one trader in UK banks and seeing most of the flow can give you a big competitive advantage. So, when Ipic asked us the question, we were able to say, yes, we can sell all of your stock. That resonates with clients and can give you the order to do business.”


Its reputation as a reliable underwriter also played a role in installing Credit Suisse as one of two bookrunners for Swedbank’s US$2bn rights issue, announced in mid- August, said Williams. Swedbank also retained the services of BofA-Merrill Lynch from its previous issue, but the arrival of Credit Suisse ousted JP Morgan from the other bookrunner spot.


Room for improvement


On the DCM side – as with UBS – there is less to shout about. Credit Suisse has his- torically been a big player in arranging


unsecured funding for the banking sector – a business that was choked off by the crisis and is only just starting to be viable again, said Chris Tuffey, co-head of European credit capital markets with the bank in London. The deal teams would have liked to be busier, despite having a good chunk of the market in some business segments, he conceded; he identified government- guaranteed financial issuance and large cap investment-grade corporates as areas of focus.


That doesn’t mean the cupboard is bare:


investment-grade deals for Adecco and Man stand as testament to what the bank can do. As a recruitment consultant, Adecco is in a sector that’s notoriously sensitive to economic cycles, but Credit Suisse got the deal away successfully, un- derpinning a big rally in the customer’s stock price. German truck-maker Man is also in a hard-hit sector: “We’re proud of both of these – not because of the size, but because of the good job we did of selling the stories and getting best execution,” said Tuffey.


In the financials space, Credit Suisse led a series of three trades for Rabobank, including the first unsecured deal of the year. There have also been big deals in the sovereigns, supras and agencies space – with the standout being France’s new 30 year OAT – and Credit Suisse has been behind eye-catching transactions in emerging markets, for Gazprom, and in high-yield, for Italian Telecoms firm, Wind. Now, the bank wants to push on. When speaking to IFR for this same report last year, Credit Suisse side-stepped the question of league tables, insisting instead that it simply wanted to focus on good quality, profitable business. That has changed somewhat: “The competition has become more concentrated and we intend to gain market share. We are a preferred counterparty in derivatives and distribu- tion – and we have set our sights on becoming an all round top player,” said Tuffey. “Our goal is to be top five player in DCM overall.”





Credit Suisse has had its reputation enhanced over the last couple of years, while its compatriot has become a poster child for excessive risk-taking and weak management.


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