If you’re an analyst/associate-level banker in Asia looking to get into DCM, having a solid understanding of the pieces that need to come together in order to win a DCM mandate will help you focus on targeting the right shops in your search. After all, no one wants to be a pitch-book monkey for three years with no execution experience. Here are four factors to consider when figuring out which bank is best at winning mandates and which bank you’d ideally like to work for:
The most obvious criteria. Issuers like working with firms who have the most experience in executing DCM deals, particularly experience that matches their credit type. If you’re a Thai bank, for example, you want to know you’re working with a DCM shop that has experience in successfully bringing other emerging-market financial institutions to market. So find what interests you – be it investment grade, high yield, financial institutions, or a particular industry – and make sure you target banks with experience in that field.
A deep balance sheet
This is an increasingly important factor and it is no wonder that shops like HSBC and Standard Chartered have managed to mark their territories in the DCM league tables. Issuers will often reward relationship banks who have a historical record of committing capital to them through bilateral or syndicated loans.
Large banks with strong retail and commercial banking arms (thus a large deposit pool to tap into for liquidity) will often have the edge over pure investment banks, who have less capital available or no lending services to commit. A deep balance sheet also provides the ability to commit to a hard-underwrite and take a portion of the deal to reduce execution risk; issuers love this.
Look at who is sitting at the top, and make a judgement as to whether he or she has the relationships. Ideally, you want to work for people who have been rooted in the industry and geography for some time. Take VTB Capital’s Roger Suyama, for example, who you know will have all the ins into Indonesia’s top players, given his long-standing history in Indonesia’s banking world.
Hiring someone from London with no Asian experience to run Asia Pacific DCM may be a red flag, even though he or she may have the execution expertise. If a shop – whether it is UBS, Bank of America Merrill Lynch or ANZ – has constant movement at senior levels, this may be a warning sign that the relationship piece is potentially missing. And in Asia, a relationship is half way to a mandate.
Appetite for DCM in fast-growing markets
Take a step back and have a look at how the world is changing. Europe and US will be slow in the near to medium term; even most spots in Asia will see slowing growth, with the exception of a few countries. The general consensus is that China and Indonesia will remain active in DCM as their debt markets continue to develop. So look for an employer who has the vision to expand into these markets and has the credit appetite to support DCM activities there.
In summary, winning a DCM mandate involves certain elements that need to come together: the bank’s track record, balance sheet muscle, relationship with clients, and overall appetite for credit in markets where the next sustainable wave of DCM mandates will emerge. Looking past the pay cheque and bragging rights of working at certain shops and instead focusing on ensuring that these fundamentals are in place at your prospective firm will ensure you are on the right long-tern career path.
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