Hitting the jackpot
There were few winners in 2022 as ECM issuance collapsed in Europe. Yet HSBC’s established presence across the Middle East meant the bank was suddenly at the top of the pile as activity in the region exploded. HSBC is IFR’s EMEA Equity House of the Year.
Covid had been expected to upend the rankings in EMEA equity capital markets in 2020, as corporates turned to their lenders to raise cash quickly. Yet the US banks that dominate the region barely gave up ground, and the boom in IPOs in 2021 again put the Americans in control.
The much-anticipated realignment finally came in 2022 as European activity slowed to a snail’s pace and the Middle East came of age with jumbo deals.
HSBC’s long presence in the region gave it a head start on its rivals and the bank capitalised on it to the extent that it was the number one bank for IPOs by volume in EMEA (up nine places) as well as for rights issues (up 13 places).
Across all ECM activity in EMEA, HSBC was the third most active bank by proceeds, behind Goldman Sachs and Citigroup, with a market share increase of 2.7 percentage points to 5.8%.
That’s based on bookrunner roles. HSBC was a global coordinator on eight of the top 20 deals in EMEA, the highest and equal with Citigroup.
After years of effort to build an ECM business commensurate with the bank’s lending book, HSBC was regularly running the most important deals in EMEA.
“This for us has been a massive breakout year in terms of the almost 100% increase in market share,” said Andrew Robinson, head of EMEA ECM. “The flow has been consistent for us despite the market generally slowing down.”
The Dh22.3bn (US$6.1bn) IPO of Dubai Electricity and Water Authority in April became only the third US$6bn-plus IPO in EMEA since 2010 when it completed. HSBC had five analysts pre-marketing the deal, more than the other global coordinators combined, and it received more of the top 25 non-UAE orders than the other banks. Demand for the privatisation reached nearly US$86bn and 30% went to international investors.
“Often we contribute more demand than the local banks do in the UAE, and the US banks in the US,” said Christopher Laing, who runs emerging markets ECM at HSBC, noting that despite being only a bookrunner for Americana Restaurants' US$1.8bn IPO, HSBC generated substantially more demand than some of the global coordinators. “The ability to sell a story, educate the market and to distribute that is unmatched.”
When Saudi Arabia’s Public investment Fund opted to sell 10% of Saudi Tadawul in November it chose HSBC and Morgan Stanley to run the deal, dropping all the banks that had led the exchange operator’s IPO the previous December.
Abu Dhabi National Oil Company has now completed four IPOs of subsidiaries, including Borouge in 2022, its joint venture with Austria's Borealis, and HSBC and First Abu Dhabi Bank are the only banks to have been global coordinator on all of them. They are also leading the imminent float of Adnoc Gas.
The Middle East was the dominant theme of 2022 but not the only place where HSBC was active.
Air France-KLM is another repeat mandate, with HSBC on the top line of a €2.26bn rights issue in June and a €300m hybrid convertible in November.
The €2bn rights issue for Saipem was a more chastening experience as the underwriters, including HSBC, ended up owning 29.3% of the Italian oil services business.
The equity-linked contribution was relatively modest due to an even more subdued year than straight equity. HSBC was second most active with six deals. It was also the only bank to be a global coordinator or co-glo-co on all four bonds from French issuers, impressive considering the number of French banks chasing that business.
A novel two-step pre-sounding was conducted for the AF-KLM hybrid. Non-typical CB investors – including shareholders – were approached in the first phase to maximise participation of long-only investors followed by a conventional second round.
“This is not about being the most improved house or a one-trick pony,” said Ed Sankey, global head of ECM. “If we can deliver US$6bn of DEWA we can do €750m of a French midcap. The markets may be different but they have all the same requirements in terms of distribution.”
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