Chinese banks miss out on the party as Asian M&As pass $1 trillion mark

Tue Dec 1, 2015 6:00am EST
 
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By Elzio Barreto

HONG KONG (Reuters) - A surge in Chinese cross-border technology and telecoms deals has helped mergers and acquisitions in Asia Pacific cross $1 trillion for the first time but mainland banks are missing out on the payoffs as they badly trail global rivals in advisory work.

While low fees have helped Chinese banks to win market share from U.S. and European counterparts in stock offerings and loans, they figure nowhere among the 10 biggest M&A advisers by value of deals, Thomson Reuters data up to the end of November showed.

China's biggest investment bank, CITIC Securities 600030.SS, ranked 11th, advising on $68.7 billion worth of deals. The number of Chinese banks among the top 20 M&A advisers in the region fell to seven from eight and their market share slumped to 13.8 percent from 33.7 percent last year.

The Chinese banks' struggles to emerge as leading advisers on big ticket acquisitions have curtailed their fee income growth at a time when the lending business is under pressure due to a slowing domestic economy.

"When Chinese companies go global, they will tend to call on banks and advisers who have global reach so there's still a strong role for the international banks and advisers," said Aga Guzewska-Radzka, consultant at Accenture Strategy in Hong Kong.

A push by Chinese state-owned enterprises and private companies to buy assets abroad and the massive restructuring of the region's biggest conglomerates are driving the deal-making boom. The trend is expected to continue, bankers say.

Top deals in 2015 include the $33.7 billion combination of assets of China's three main telecom operators as well as the $15.4 billion purchase of British mobile phone company O2 by Li Ka-shing's Hutchison Whampoa. (See graphic for snapshot of Asia-Pacific deals).

Chinese firms tend to advise on domestic deals, where they have relationships on both sides of transactions, but that's less likely in cross-border acquisitions. They also have fared better than international rivals in financing M&A deals, where they have won business with cheaper funding because of their sizeable balance sheets, but that's not the case for merger advice.   Continued...

 
A security guard stands at the door of a China Citic Bank in Beijing, China, in this April 29, 2015 file photo.  REUTERS/Jason Lee/Files