Barclays Plc, undeterred by a drop in equity offerings in Southeast Asia last year, is expanding its investment bank in the region even as local rivals like CIMB Group Holdings Ltd. step up competition for deals.
The U.K.’s second-largest lender plans to add senior bankers in Singapore, Indonesia and Malaysia as part of a plan to double advisory revenue from Southeast Asia in two to three years, said Sandeep Pahwa, Barclays’s head of investment banking for the region.
“Southeast Asia is really coming into its own and becoming more meaningful,” Pahwa said in an April 23 interview.
Pahwa said he’ll seek to replicate the bank’s success in Australia, where it jumped to third among mergers advisers last year, from 17th in 2010. While the value of stock and convertible bond offerings in Southeast Asia slumped by half in the first quarter, and mergers were down 20 percent, Pahwa said regulatory changes, state asset sales and acquisitions by cash-rich companies are likely to drive a rebound in dealmaking.
Companies raised $3 billion selling shares and convertible bonds in Southeast Asia in the first quarter, down from $6.1 billion in the same period in 2011, data compiled by Bloomberg show. The value of mergers and acquisitions dropped 20 percent to $20.8 billion from a year earlier.
Barclays has expanded its mergers advisory, debt and equity underwriting teams in Southeast Asia. Pahwa said he plans to increase his team of 40 people in the region by 10 percent to 15 percent, hiring senior coverage bankers who focus on different countries.
The bank, led by Chief Executive Officer Robert Diamond, yesterday reported better-than-expected first-quarter profit as investment banking revenue surged 91 percent from the fourth quarter. Income at the unit rose to 3.5 billion pounds ($5.7 billion) in the quarter, helped by an increase in revenue from fixed income, currencies and commodities trading.
Barclays started offering a full suite of investment banking services in the Asia-Pacific region in 2010 after hiring Matthew Ginsburg from Morgan Stanley to run the business. The global investment banking division, which employs 24,000 people, generated about half of Barclays’s pretax income last year.
Formula One and Malaysia’s Integrated Healthcare Holdings Sdn. are planning multi-billion dollar initial public offerings in Southeast Asia this year, according to people with knowledge of the matter. DBS Group Holdings Ltd. this month announced it is buying control of PT Bank Danamon Indonesia for about $4.9 billion, while Thailand’s PTT Exploration & Production Pcl offered to buy Cove Energy Plc for $1.8 billion in February.
“We definitely see an uptick in activity,” said Pahwa.
London-based Barclays in the past year advised on deals including PT Tower Bersama Infrastructure’s purchase of cellular towers from PT Indosat and Singapore’s ACR Capital Holdings Pte.’s sale of a stake to Marubeni Corp.
Investment-banking fees in Southeast Asia fell 9 percent to $1.8 billion last year, according to New York-based researcher Freeman & Co. That still outperformed the 20 percent drop for the rest of the Asia-Pacific region, Freeman data show.
Pahwa joined Barclays in November 2010 from Deutsche Bank AG, where he was vice chairman and head of global banking for Southeast Asia. Before that, he was with HSBC Holdings Plc in London and New York as global head of media and entertainment. Barclays hired Rafael Carrillo from Citigroup Inc. to run its Southeast Asia financial institutions group last year.
“Our product build is complete and very robust,” Pahwa said. “We are well positioned, and prepared to do any deal that’s important to our key clients.”