World’s Best Investment Banks 2021: Debt
The world’s top lenders registered a surge in new issuance in 2020, moving to meet investor demand for green and sustainable bonds.
A pandemic of lockdowns, travel restrictions and the ensuing economic downturn made 2020 a challenging year across the business spectrum; and Debt Capital Markets (DCM) were not exempt.
However, the top DCM investment banks, particularly Global Finance’s 2021 Best Investment Banks in this category, have settled.
“We knew the liquidity position in the global bond markets was healthy and with the support of the [US] The Federal Reserve’s sharp rate cut,” says Salman Ansari, managing director and head of capital markets for the Middle East and North Africa (MENA), Europe and the Americas at Standard Chartered, “so we’ve been working with our clients to… to find the most appropriate strategy to leverage this funding.”
Standard Chartered has earned the title of top debt bank in the world and top debt bank in the Middle East by working on some of the year’s largest debt issues, including Qatar’s $10 billion bond issue in April and others for the United Arab Emirates Emirates (UAE). ) and Saudi Arabia. Standard Chartered led Refinitiv’s ranking of underwriters for MENA bonds in 2020 with $21.4 billion in related revenue and an 18% market share.
In June, the company also acted as Senior Mandated Lead Arranger for the acquisition financing facility for the region’s largest single energy infrastructure investment and one of the largest in the world over the past year: a proposed Abu Dhabi National Oil Company (ADNOC) gas pipeline project. to bring US$10.1 billion in investments to the UAE.
After a uniquely difficult 2020, global debt banks could now face a similar year, according to Ansari. This year will see “an even more volatile backdrop in interest rates as investors grapple with the likelihood of rising inflation in the short to medium term,” he says.
“The crisis caused by Covid has weighed heavily on emerging markets as global investors look for safe haven assets until the spread of the virus is contained,” said Brad Maxwell, managing executive of investment banking at Nedbank, this year’s Best Debt Bank in Africa. Nedbank’s corporate and investment banking unit has made a particular effort to work closely with clients “to get them through a turbulent year,” he adds. Nedbank is the fourth largest bank in South Africa and the first bank in South Africa to issue a renewable energy bond.
Nedbank is the first South African issuer to join Nasdaq’s Sustainable Bond Network. The bank was also working to strengthen its environmental, social and governance (ESG) standards, says Maxwell, noting that it was already the first bank on the continent to adopt the Equator Principles, a risk management framework that is used to assess environmental and social risks in general projects. Nedbank was Africa’s first carbon neutral bank and has been included in the Dow Jones Sustainability Index for 16 years.
Bank of China (BOC), Global Finance’s Best Debt Bank in Asia Pacific, ranked 15th among bookrunners last year with $178.7 billion in revenue and 2,345 transactions worldwide: according to Refinitiv, the Top among Chinese banks. Many of its deals were for Chinese state-owned companies, including State Grid Corporation of China, an electric utility for which BOC acted as global joint coordinator on a $3.3 billion jumbo bond deal.
BOC has traditionally been the strongest of the big four Chinese banks in terms of international debt financing. The company has reportedly recently sought to increase staff in its offshore debt business and develop more resources in processing, market-making and credit research. BOC is also a perennial favorite in the panda market, bringing foreign issuers into the domestic renminbi-denominated bond market; last year it again led all banks in this category.
When Russia first entered global bond markets in 2020, the two government bond Eurobond issuances were co-arranged by Sberbank, Global Finance’s Best Debt Bank in Central and Eastern Europe in 2021.
The two euro-denominated bonds hit the market in November with bids in excess of 2.7 billion euros ($3.2 billion): a warm welcome considering Russian eurobonds often have liquidity problems and the US government has banned American banks from buying them outright, although they could do so on secondary markets.
The Russian government has also recently issued ruble-denominated bonds on the domestic market to fill its budget gap; and also in this sector Sberbank is a leader. According to Dealogic, it was the world’s second largest bookrunner by ruble-denominated DCM volume in 2020, with 77 deals and a 15% market share, up from third place in 2019. In January this year, it was the organizer of the first issuance of a social Eurobond by a Russian issuer: Sovcombank’s $300 million placement.
The green bond market has recently developed in Russia as well.
“The Bank of Russia, the Moscow Stock Exchange, VEB.RF and other bodies have developed a taxonomy of green projects and infrastructure for the green financing market, including green bonds,” says Eduard Jabarov, co-head of global DCM at Sberbank “Further actions to support the market are needed to stimulate demand from local investors and give issuers a significant boost to place ESG bonds.” These include preferential taxation of ESG bond income and facilitating accounting rules and requirements for Banks and investment companies, he says.
Universal bank Nordea is a powerhouse in the Nordic region and beyond, earning it the title of best debt bank in Western Europe. The Helsinki-based institution was the No. 1 bookrunner by volume in Swedish krona-denominated DCM in 2020, according to Dealogic; and second in the corresponding Norwegian market. Dealogic reports that it ranked first in both All-Nordic Investment-Grade DCM volume by bookrunner and All-Nordic High-Yield DCM volume.
Nordea continued to be a player in the green bonds and sustainability space last year, ranking 25th among global bookrunners in the green bonds category according to Refinitiv. In August, she arranged the first sustainability-linked leveraged buyout loan in Scandinavia; and it has committed as a company to “a net-zero emissions target by 2050 at the latest.”
Bradesco BBI, the top debt bank in Latin America, was responsible for more than $22 billion in local and international DCM transactions last year, mostly on behalf of Brazilian companies. In the Latin American regional market, Dealogic ranked the bank third among bookrunners by DCM volume in 2020, with $2.1 billion spread across 28 deals, representing an 11.7% market share.
Bradesco BBI was also an active player in Brazil’s record green and sustainable bond issuance in 2020. As of September, Brazil had already surpassed the year-ago total of green bond issuance as ESG concerns gained prominence among investors. At DCM roadshows, according to Philip Searson, Managing Director and Head of Fixed Income at Bradesco, “firms have been asked far more often about negative socio-environmental externalities and how they are moving to make positive impacts,” and the Covid crisis has its concerns even strengthened.
JP Morgan, the largest bank in the US and 2021 Best Debt Bank in North America, once again dominated DCM by multiple measures. According to Refinitiv, it was the world’s leading bookrunner in DCM with revenue of $685.5 billion from 2,568 deals and a 6.7% market share.
The US debt market is immense; and in 2020, it grew 37% year over year to $4.3 trillion in volume, eclipsing Europe, the Middle East, and Asia, according to Dealogic. Europe is the second largest region at $2.5 trillion. JP Morgan was the top bookrunner in the US DCM market with $2.2 billion in revenue and a 12.4% market share; and it also led US DCM by volume with $500.3 billion on 1,946 transactions and a 11.7% market share. The bank was also a leader in other categories, including US investment grade, US high yield corporate, US mortgage-backed and asset-backed securities.
Where will the market take the DCM leaders of 2021? Continued fiscal stimulus could push interest rates further higher around the world, says Olga Gorokhovskaya, managing director and co-head of DCM at Sberbank CIB. It could pose a “major challenge for government bond markets,” she warns, and hurt issuers’ desire to seek new funding. On the other hand, with “a strong economic recovery on the horizon, risk appetite should remain healthy, which would support primary DCM markets.”