Australia’s Covid Recovery Gives Banks a Head Start

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Euromoney, June 23 2020

Just like the global financial crisis, Australia is emerging from Covid-19 more strongly than the rest of the developed world. Investment banks here have never been busier, raising huge sums of equity from one of the world’s largest asset pools. When borders reopen they will be primed for outbound M&A. But why does almost nobody have a private banking business? In the first of a two-part series on Australian investment banking, we look at the work that came out of a global pandemic.

NB: This article was printed before the second wave of infections in Victoria.

You may have heard this before. Australia is emerging from a global crisis more swiftly and in better shape than almost anywhere else in the world, giving its banks and the corporates they advise a clear advantage in a barely recognizable ‘new normal’.

That sentence could equally have been written about the global financial crisis a decade ago or the Covid-19 pandemic right now.

While, at the time of writing, the US has suffered 120,000 Covid-19 deaths from 2.23 million cases and the UK 42,150 from 300,000, Australia has had 102 deaths from 7,000 cases. Local community transmission has pretty much stopped. And while Australia’s economy has unquestionably been badly hit, facing recession for the first time in three decades, with closed international borders and a fraying relationship with China, there is already a sense of recovery.

Alongside New Zealand, it is the only market where people are already talking about Covid in the past tense.

From the perspective of the many international investment banks that populate the Sydney and Melbourne city centre towers – and whose staff are gradually returning to them – Covid has created a lot of work. But it also required a willingness to adapt very quickly.

“Up until mid or even late February, 2020 was shaping up to be similar to last year,” says Anthony Sweetman, joint country head and head of global banking, UBS Australasia. “Strong levels of M&A driven by confidence and strong economic conditions, with a reasonable level of equity capital markets activity linked to that M&A and to other growth plans.

“That all changed very abruptly.”

It was the same for everyone else.

“Like every other investment bank, we tore up our pipeline in late February – and we had a fantastic pipeline,” says Tony Osmond, head of Citi’s banking, capital markets and advisory function for Australia and New Zealand.

Richard Gibb, chief executive of Credit Suisse Australia, also speaks of a pipeline at the start of the year that was “largely upended by Covid-19. We pivoted to where our clients had the greatest need.”

And fortunately, from the banks’ point of view, there was plenty of need. Many Australian corporates needed money and quickly. So quickly, in fact, that the world epicentre of equity capital raising in April was not New York or London but Sydney.

At least A$24 billion ($16.6 billion) of equity was raised there between the start of March and early June, and it happened this way because there was no other choice.

“A lot of these capital raisings were mission critical for the clients involved: literally in some cases – they would not have survived without them,” says Tim Joyce, co-head of Macquarie Capital for Australia and New Zealand. “It was by no means straightforward to raise that equity.”

Read the rest of this article here:

Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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