HONG KONG HSBC Holdings Plc (HSBA.L) leapfrogged investment banking rivals including Goldman Sachs to land in the top five for Asian M&A advisory for the first time, boosted by its ability to provide funding for clients and a string of deals in India and Hong Kong.
The bank moved up the ranks in a dismal deal climate as market volatility across the globe depressed corporate acquisitions. Overall, M&A volumes in the region fell nearly 9 percent to $216 billion.
HSBC rose to No.3 in Asia Pacific, excluding Japan, from No.9 a year ago, according to preliminary data from Thomson Reuters. It is the best ranking the bank has secured in the region in data going back more than 50 years.
Morgan Stanley (MS.N) was ranked No. 1 in the Asia-Pacific ex-Japan league table, working on deals worth $33.1 billion, while UBS AG UBSN.VX was No. 2, advising on $25.9 billion worth of deals, and HSBC had $21.9 billion, the data showed. Goldman Sachs Group Inc (GS.N) was fourth.
HSBC, which has been steadily building out its investment banking platform in Asia since the global financial crisis, has been able to take market share from some of the traditional Wall Street banks, helped in part by the large commercial bank that backs the franchise, according to HSBC bankers and their competitors.
First half M&A data, however, was skewed by the drop in volume, and deal flow usually picks up in the fourth quarter, when HSBC's place in the top tier of the Asia tables will face a challenge from the more standard names.
Investment banks have traditionally preferred to be on the side of the seller in an M&A transaction, since that would guarantee that their client will participate and therefore pay a fee in any deal that closes. Banks advising buyers risk their client losing out to a rival bidder, resulting in the reduction or loss of their fee.
HSBC, however, operates on a different model, preferring to chase buyside mandates because of the opportunity its broader commercial banking platform provides to offer ancillary products to clients in an acquisition, such as loans and derivatives.
"While we have done some sellside mandates, that work is very intensive and you only tend to get the advisory fee, whereas with a buyside mandate you can provide the full package of hedging, financing and capital markets takeout," said George Davidson, head of M&A for Asia-Pacific at HSBC.
HSBC hired Davidson, who has worked in M&A for 30 years, from Goldman Sachs in June 2005 as part of a renewed drive to improve its investment banking performance.
HSBC is not alone in pursuing this model in investment banking, with universal banks such as Citigroup (C.N) , JP Morgan (JPM.N) and Bank of America Merrill Lynch (BAC.N) also keen to exploit lending relationships to sell banking clients a package of products when they do deals. But after years lagging its peers in the advisory business in Asia, HSBC's latest M&A strategy has now paid off in the league table results.
(Editing by Michael Flaherty and Edmund Klamann)