Four years ago, Asia's investment banking landscape resembled a battlefield. Local and regional players were in retreat -- trimming their operations or closing shop. Even global investment banking behemoths opted to concentrate on Greater China, India, and Japan, abandoning most other markets. These days, though, the big global banks are back. And they are making money hand-over-fist as corporate mergers and acquisitions, initial public offerings, and bond issues boom in rallying markets and fast-growing economies from Seoul to Surabaya.
Asia's most powerful money machine is Merrill Lynch & Co. (MER ), which has seen a dramatic turnaround in the region since 2001. The Star financier behind this revival is Merrill's Singapore-based Asia-Pacific chairman, Raymundo A. Yu Jr. The 49-year-old Filipino Chinese, who started as a management trainee for Merrill in New York 24 years ago, has overseen a strategic overhaul there while at the same time slashing costs. From the start of 2002 to the end of 2003, Merrill let more than 20% of the company's 3,000-odd Asia-Pacific staffers go, boosted the bank's focus on private banking, and expanded its mergers-and-acquisition and corporate-finance businesses beyond Greater China. "We want a well-diversified portfolio of businesses that spans Asia rather than cherry-picking a few businesses in China," says Yu, who is the only Asian running the regional franchise of a global investment bank. "We are making a lot more money with fewer people, and we have grown our margins because we are very, very focused on the bottom line," he says.
The results are telling. Merrill's total Asian revenues -- including investment banking, asset management, and a private wealth-management business stretching from Japan to India to Australia -- grew by more than 30% last year. Asian pretax earnings rose more than elevenfold. Yu's private-client business now manages more than $30 billion in assets in Asia, and pretax margins for that unit are over 40% -- double what they were in 2001. As a group, says Yu, Merrill is more profitable in Asia today than ever before.
Merrill holds the top spot for equity deals, too. Research firm Dealogic says that in the first five months of this year, the company shot up the ranks to overtake its three key rivals in Asia -- Goldman Sachs (GS ), Morgan Stanley (MWD ), and Citigroup Smith Barney (C ). That's up from No. 3 last year. Although Goldman and Morgan are still first and second, respectively, in China deals, Merrill is the Asian leader because of the depth of its business in India, Southeast Asia, Korea, Japan, and Australia. "It's better to build a broad-based investment banking machine in Asia than one that does mostly China initial public offerings or Greater China-related M&As," says Yu.
The eldest son of a traditional Chinese family in the Philippines, Yu, whose hobby is collecting Chinese art and antiques, didn't plan to go into investment banking. He was supposed to take over the family coconut plantation. Yu earned a bachelor's degree in business administration from the Philippines' Ateneo de Davao University. He then headed to the American Graduate School of International Management (Thunderbird) in Glendale, Ariz., for his MBA. Just before graduation, Merrill recruiters visited the campus and interviewed him for a spot in the bank's international management-trainee program. He got the job.
Yu worked as a trainee in New York and London before moving to Asia as a marketing officer. He held a series of posts before being named head of the private-client group for the Asia Pacific region in 2000. In 2002, Yu was promoted to overseeing private-wealth management for the Pacific Rim, Europe, and the Middle East. Two years ago he took over as chairman of Merrill Lynch's Asia-Pacific unit.
In an industry where professionals hop from job to job, many of Merrill's Asia hands, including Yu, are lifers. And what about the coconut plantation? Once a year, Yu returns to the Philippines to discuss the business with his four brothers, two of whom now run it. But he's not ready to give up what looks to be an ever-growing career at Merrill.
By Assif Shameen