Breakingviews - Ant squashes some Asian investment bankers

A man walks past a branch of Citibank in Beijing, China, April 18, 2016.

HONG KONG (Reuters Breakingviews) - Bankers this year are at the mercy of the mighty Ant. The Chinese fintech company’s initial public offering will have an outsized influence on their performance. And it’s more than bragging rights at stake.

The Alibaba-backed outfit on Tuesday unveiled long-awaited plans to go public. Last valued privately at some $150 billion, Ant is aiming to raise at least $20 billion. It could yet turn out to be the world’s largest IPO ever, surpassing the $29.4 billion Saudi Aramco raised last year.

Citigroup gets a big lift as an unexpected sponsor alongside JPMorgan, Morgan Stanley and China International Capital Corp (CICC) for Ant’s sale in Hong Kong. CICC and China Securities Co. will handle the Shanghai slug.

Most notably sidelined are Credit Suisse and Goldman Sachs. Both helped e-commerce giant Alibaba with its giant market debut in 2014, as did Morgan Stanley and JPMorgan. Goldman has been working more with Alibaba rivals such as Tencent, and the two Chinese tech titans have increasingly sought allegiance from their advisers.

Credit Suisse’s absence may be more troubling. The Swiss bank co-led Alibaba’s secondary listing in Hong Kong last November, and it had a role on an Alibaba Health deal this month. The institution’s lack of a lead role feeds the idea it has fallen out of favour with a top fee-payer. Its top Asian tech banker is also decamping to work for Chinese handset maker Xiaomi.

The roster of consiglieri will grow. For now, though, if Ant flogs $10 billion in Hong Kong, it would vault the four sponsors to the top spots in the market, according to Dealogic. JPMorgan is poised to jump to fourth from ninth. Citi’s second-place position, behind Morgan Stanley, would be its highest in at least a decade and could help it parlay other relationships rooted like Ant, in services such as cash management, into advisory roles.

The 1.8% average fee for Hong Kong’s biggest IPOs implies at least a $180 million shared payday. Shanghai rates are typically lower, at 1.4%. Ant could drive an even harder bargain, considering Alibaba paid just 1.2% in New York six years ago. Banks scrapping for credit and a share of the spoils could get squashed by Ant.


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