REGIONAL REPORT: SOFTWARE HELPS COUNTRY REPORT:

CENTRAL & EASTERN COMPANIES TRIM COST CYPRUS SETS SIGHTS

EUROPE PAGE 14 OF COMPLIANCE PAGE 20 ON EURO ENTRY PAGE 22
2005 WORLD’S BEST EMERGING MARKET BANKS

MAY 2005

PAGE 8

READY FOR THE

BIG THAW
Investing in Russia is only for the brave. But
when the country’s frosty investment climate
warms up, it will, yet again, be the place to be.
 CONTENTS MAY 2005 | VOL.19 NO.5

COVER STORY COVER STORY

REGULARS
BY MARK LEHANE
8 Russia: Only For The Brave
The stakes are high, and so are the 2 Dear Reader
risks. So why are multinationals A letter from the editor.
still buying into the Russia story?
4 Newsmakers
FEATURES US treasury secretary John Snow says the
time has come for China to float the yuan;
14 Regional Report: Central ENTRY STRATEGY
BY JONATHAN and Belgian finance minister Didier
and Eastern Europe GREGSON Reynders offers the country’s difficult-to-
Prospective future entrants to the collect tax receivables as an investment
EU have been watching with
product.
interest the progress of the 10
countries that joined the union a
year ago. 5 Milestones
Lehman Brothers beefs up its presence in
the burgeoning hedge-fund industry; and
20 Financial Software: SOFTWARE SOLUTIONS:
BY ADAM ROMBEL London asserts its position as the listing
Compliance location of choice for Russian and Kazakh
Companies are finding that
companies.
software can help them rein in the
high costs and disruption caused
by complying with new 17 Emerging Markets Roundup
regulations. The latest news from China, India, Russia
and Brazil.
22 Country Report: Cyprus COUNTRY REPORT:
CYPRUS 19 EM Investor
As its economy continues to grow, BY LAURENCE NEVILLE
Cyprus is hoping to take Key information for investors in emerging
advantage of its strategic position markets.
between Europe and the
burgeoning markets of the Middle 65 Focus: Corporate Debt
East and Africa.
As General Motors and Ford Motor flirt
with high-yield status, some investors find
24 The World’s Best Emerging AWARDS: WORLD’S
BEST EMERGING the returns attractive.
Market Banks, 2005 MARKET BANKS
Our 12th annual survey of the BY GORDON PLATT,
LAURENCE NEVILLE, 68 Foreign Exchange
world’s best emerging market PAULA L. GREEN AND Analysts say outlook could worsen for
banks honors those banks that SANTIAGO FITTIPALDI
dollar as current-account deficit becomes
consistently provide excellent
ingrained.
service and security in often-
tumultuous markets.
70 Global Equity/DRs
Companies issuing global depositary
60 Roundtable: Treasury and ROUNDTABLE:
TREASURY AND CASH receipts prepare for the EU’s new
Cash Management MANAGEMENT
prospectus rules.
We brought together some of the
industry’s leading players to discuss
recent developments in the cash 71 Mergers & Acquisitions
management industry. Joseph Once fierce competitors, private equity
Giarraputo moderated the firms are working together to pursue
discussion. bigger targets.

2 0 0 5 M AY 1
 DEAR READER
Putin’s Dangerous Game
W
REGIONAL REPORT:
CENTRAL & EASTERN
EUROPE PAGE 14
SOFTWARE HELPS COUNTRY REPORT:
COMPANIES TRIM COST CYPRUS SETS SIGHTS
OF COMPLIANCE PAGE 20 ON EURO ENTRY PAGE 22
hat a difference two years can make. As we find out in
2005 WORLD’S BEST EMERGING MARKET BANKS
our cover story this month (see page 8), the currently
MAY 2005
frosty investment climate in Russia is showing no signs
of warming up any time soon. President Putin’s Kremlin is
becoming, if anything, more interventionist, prompting foreign and
PAGE 8
domestic companies alike to review their plans for investing in
READY FOR THE Russia’s markets.
BIG THAW
All this is a far cry from spring two years ago, when this
Investing in Russia is only for the brave. But
when the country’s frosty investment climate
warms up, it will, yet again, be the place to be. magazine was confident that Russia had become—finally—a “safe”
place to do business. Back then, the country was eagerly
anticipating a flood of new foreign investment, prompted by a
conviction that Putin’s government had succeeded in creating a
fair, transparent business environment.
Then came the so-called Yukos affair, which marked the start of
the country’s slide down a long, slippery slope.What looked
initially like an isolated, politically inspired tussle now appears to be
part of a much bigger plan to bring much of Russia’s business
world back under, or at least close to, state control. Putin is said to
have assured investors that he has no plans to revisit privatizations
that took place more than three years ago, but for many nervous
investors that provides little comfort.
The Russian president may have perfectly good reasons for his
apparent crackdown on big business, but the impact of his hard-line
approach could hardly be clearer. During 2004, the year that
optimistic Russia-watchers had predicted would see the return to
Russia of large amounts of flight capital, official statistics show that
money was leaving the country at an average rate of more than $21
million per day.
That money—almost $8 billion in 2004—has to go somewhere.
In a world where emerging markets investors are often spoilt for
choice and where capital flows can be capricious, Russia’s leader is
playing a dangerous game.
Until next month,
Dan Keeler
dan@gfmag.com
2 M AY 2 0 0 5
MAY 2005 | VOL.19 NO.5
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NEWSMAKERS
US
SNOW SAYS THE TIME
HAS COME FOR CHINA
TO FLOAT YUAN
S treasury secretary John
U Snow appears to be
losing patience with
China’s foot-dragging on
moving to a flexible currency
system. For years now, China
has argued that its
undeveloped financial system
was too weak to sustain the
potential shock of a free-
floating currency, but Snow is
having none of it. Following a
meeting of Group of Seven
finance ministers in
Washington last month, Snow
told a press conference that
Beijing had made enough
progress in preparing for the
move and that now is the
time to act.
“China has taken numerous
steps over the last few years,
including preparing for
greater flexibility in its
John Snow: Laying down the law
4 M AY 2 0 0 5
G L O B A L
exchange rate, introducing
foreign exchange market
products and strengthening
banks and bank supervision,”
Snow said. “It’s time to take
the next step and move
toward more currency
flexibility,” he said.
Canadian finance minister
Ralph Goodale reinforced
Snow’s remarks by saying that
“China should understand
that there’s a freight train
coming” in the form of US
and EU trade restrictions.
Analysts doubt, however,
that China will revalue or
float its currency in response
to foreign pressure. Further
capital-account liberalization
is an essential precursor to a
revaluation of the yuan, says
Mike Newton, global head of
emerging market foreign
exchange strategy at HSBC in
New York. “We think that the
US administration wants to be
seen to be pressuring China
for domestic reasons but does
not want to create political
tensions that might
undermine cooperation over
security issues or progress on
intellectual property rights,”
Newton says.
“Furthermore, with China
and Japan trading barbs over
issues that stem from a time
when China was under
occupation, the idea that the
PRC will think this is a good
moment to give in to foreign
pressure on the currency is
ludicrous,” he says.
—Gordon Platt
GF F I N A N C E
AROUND THE WORLD
BELGIUM
GOVERNMENT TO SECURITIZE
UNCOLLECTED TAX DEBT
Belgium has discov-
ered a new asset
class for securitiza-
tion: the govern-
ment’s uncollected
tax debt. Finance
minister Didier Reyn-
ders says it is feasi-
ble for Belgium to
offer the country’s
difficult-to-collect
tax receivables as an
investment product
on the financial mar-
kets on a regular ba-
sis to help meet its
fiscal goals.
The government
has hired NautaDu-
Didier Reynders: Aiming to trim deficit tilh, a Netherlands-
based international
law firm, to assist with the first securitization of its out-
standing unpaid taxes. JPMorgan Chase was appointed as fi-
nancial adviser on the trial project, with the placement of
securities scheduled for later this year.
Reynders says the first securitization will raise about
$340 million and will require that an additional $52 million
be invested to improve the government’s ability to collect
the debt. In addition to taking on the risk of not being able
to collect the taxes due, the investor must be willing to in-
vest in strengthening the tax authority.
This will be the first time that securitization of tax debts
has been tried in Belgium. Portugal used a similar procedure
to collect about 15% of its outstanding unpaid tax revenues
in 2003. The Portuguese program followed an earlier securi-
tization of social security claims by Italy.
The Belgian government plans to use the net proceeds
from the securitizations of unpaid taxes, and from a cam-
paign to stamp out tax fraud, to enable it to ease the tax
burden on working people. The government aims to main-
tain a balanced budget this year as required by the Stabili-
ty and Growth Pact. Belgium is slowly reducing its debt
ratio, which currently stands at a still-high 96% of gross
domestic product.
The government’s long-range budget program seeks to re-
duce the fiscal deficit and secure future financing for the so-
cial security and welfare systems in the face of an aging
population.
—GP
 G L O B A L GF F I N A N C E
MILESTONES TAKING NOTE

UNITED STATES

LEHMAN BEEFS UP PRESENCE

IN HEDGE FUND INDUSTRY
Why are investment banks
buying into hedge funds? To
paraphrase bank robber
Willie Sutton, “Because that’s
where the money is.”
Lehman Brothers last month
paid an undisclosed sum for a
20% stake in Ospraie, a
hedge fund that manages
about $2 billion and invests
in basic industries and
commodities.
Lehman is no stranger to
the hedge fund business. It
already held 20% of GLG
Partners, a British hedge fund
in which it was seeking to
increase its stake. In January
Lehman announced plans to
launch a series of hedge fund
indexes based on the
HedgeFund.net database
owned by Channel Capital. A
leading bond-index provider,
Lehman says the addition of
hedge fund benchmarks will
provide investors with new
performance measures for
this quickly growing market
segment.
With its Ospraie holding,
Lehman will have access to
new investment opportunities
started by the hedge fund.
For its part, Ospraie will gain
better access to Lehman’s
prime-brokerage business,
which lends money to hedge
funds to leverage their
investments.
With pension funds and
other institutional investors
pouring money into hedge funds to get into and out of
funds, the industry is being positions quickly.
stretched and needs help in Lehman, which has long
meeting the fast-growing been known for its fixed-
demand. The investment income capabilities, also will
bankers, meanwhile, need to gain the opportunity to
find outlets for their talented continue its expansion into
traders, who might otherwise equity trading. —GP
jump ship and start funds of
their own.
In order to attract the
business of hedge funds,
which now manage $1
trillion in assets, Wall Street
firms have invested heavily in
the technology needed to
interact efficiently with a
wide range of markets. They
need the volume to support
their clearing and technology
Richard Fuld, Lehman’s CEO
services that enable hedge

CIS
RUSSIAN AND KAZAKH COMPANIES HEED LONDON’S CALL
London-bound: The city’s appeal is growing
Russian and other CIS-based companies overwhelmingly select the
London Stock Exchange as the favorite foreign destination for rais-
ing equity capital, according to a study by Ernst & Young. The LSE
and its growth market, known as the Alternative Investment Market,
or AIM, accounted for two-thirds of all equity placements and 41% of
the cash raised by CIS companies in the three years ended last De-
cember, the study says.
Companies are attracted by good demand for initial public offer-
ings in London, as well as lower compliance costs than in the US, says
Mark Jarvis, managing partner for client service and accounts at
Ernst & Young, a global audit and consulting firm that employs 1,880
people in its 13 offices in the CIS countries. And, of course, London is
much closer geographically than New York or Toronto, he says.
“It is clear that the LSE will remain the key exchange for CIS com-
panies in the next few years,” Jarvis says. “For 2005 this is already
an easy guess, considering that [Russia-based mobile-phone con-
glomerate] Sistema received over $1.3 billion in its LSE placement
this year,” he says.
According to the LSE, its members traded $64 billion of Russian
stocks in 2004, a 76% increase from 2003. “A typical London place-
ment for the region is a company registered in the UK, holding stakes
in two or three CIS oil or metals-mining projects and co-managed by
reputable Western directors,” says Vladimir Merkushev, research di-
rector for the CIS at Ernst & Young.
While energy and mining will remain important, the study says
consumer and financial companies will increasingly list CIS-regis-
tered companies in the next few years. Banks last year replaced
energy companies as the major borrowers on the eurobond mar-
ket in the CIS. —GP

2 0 0 5 M AY 5
 T H E B A N K
S P O N S O R E
The Bank of New York’s EEMEA
Conference Draws Record Attendance
Not far from the ancient Via Maris, a route used for thousands
of years by traders and travelers, EEMEA issuers met to discuss
trade of a more modern sort.
ith the Red Sea to the south and the
W Mount Sinai mountain range to the
north, Sharm el-Sheikh, at the southern tip of
the Sinai peninsula in Egypt, was the setting for
The Bank of New York’s seventh annual
international debt and equity conference for
Emerging Europe, Middle East and Africa
(EEMEA) issuers.This year’s conference drew a
record 165 attendees from 22 countries, among
them 20 current American and global depositar y
receipt (DR) issuers
and more than two
dozen international
debt issuers.
What they heard
from the Bank of
New York’s Anthony
Moro, vice president
and head of DR
marketing,had to
make them happy.
EEMEA has 347
DR issues from
more than 275 companies in 25 countries.These
companies have a total market capitalization of
$1.8 trillion, and their DR market capitalization
is over $58 billion. Moro reported that 2004 was
a great year for DR issuers:The Bank of New
York’s Emerging Market ADR index increased
by 18.1%,double the return on the S&P 500
index.The 2004 return on the MSCI Emerging
Europe and Middle East Index was even
stronger at 35.8%.
The two-day Conference was structured to help
the region’s leading companies focus on improving
their investor relations efforts and corporate
governance procedures while making themselves
more attractive to international investors.
The Conference’s format allowed participants
the opportunity to learn from each other and a
select group of advisors in an informal but
6 MA Y 2 0 0 5
O F N E W Y O R K
D S T A T E M E N T
intensive setting. “The EEMEA region is
geographically large and diverse and issuers from
Poland,for instance, do not often have the
opportunity to speak to and learn from issuers in
South Africa”said Moro.
Corporate Governance and Regulation
The US Sarbanes-Oxley Act of 2002 has had
significant ramifications for DR issuers and their
advisers, and there seemed to be no question
among attendees at
the conference that
satisfying the Act’s
requirements has
cost foreign issuers
in the US
considerable time
and money—most
of it due to
compliance with
Section 404 of the
Act. Section 404
was designed to
ensure that a company’s internal control
processes are up to standard.
However, many issuers who commented on
the subject thought the benefits of listing in the
US were, for various reasons, worth the costs of
complying with Section 404. According to
Thomas Martin, a director at
PricewaterhouseCoopers in South Africa,“Better
internal controls lead to better information,
which can lead to quicker and better decision
making.” David Haddon general counsel and
secretary of South Africa’s Randgold Resources,
said.“ The vast majority of the gold bulls are in
North America, and that means Randgold must
be listed there.” Nik Jhangiani, CFO of Athens-
based Coca-Cola HBC, said,“We needed to
drive our visibility within the beverage sector, as
we just were not being appropriately valued, and
 T H E B A N K O F N E W Y O R K
S P O N S O R E D S T A T E M E N T

all of our peer the latest round of oil-price increases.And the

group was listed in outlook is for more of the same.The Bank of
the US.This has to NewYork’s Simon Derrick,head of the bank’s
date been extremely currency research group, said,“Over the course
successful. In of the next decade, if India and China continue
addition, our listing their growth, you
enabled us to access could expect
the US debt capital energy prices to
markets at more remain relatively
attractive funding high and large
rates.” sums of capital to
However, many Camille Abousleiman of continue to flow
potential US Dewey Ballantine into the Middle
issuers are still East.”
wary, and their advisers are telling them their The DIFX says
caution is well founded.Camille Abousleiman, a it will provide an
London partner at Dewey Ballantine, said, Nik Jhangiani of CCHBC exchange built to
“Because of the personal liabilities of the CEO international
and the CFO under Sarbanes Oxley, we would standards where
recommend US listings for foreign companies this pool can be accessed directly.
only in limited circumstances,where such Issuers at the conference were enthusiastic yet
foreign companies have implemented the somewhat prudent about the new exchange.
necessary internal control systems and Randgold’s Haddon said,“I think that DIFX's
procedures and where there is a compelling plan is exciting, as it will hopefully provide
market reason to be listed in the United States.” companies with access to another substantial
But PWC’s Martin source of investment capital.” Jhangiani of
said it would be CCHBC said,“While we believe that the
short-sighted to DIFX's plan to launch an international exchange
avoid the US to is extremely positive, we would probably not
dodge Sarbanes- consider a listing today as we are currently listed
Oxley because in Athens,London,
“within three to New York and
five years there Sydney. However,
could be a we could always
corporate reconsider.” And,
governance said Ibrahim Adel,
mandate in Europe investor relations
Ibrahim Abdel of MTC
that was similar in manager of
many ways to Kuwait’s MTC
Sarbanes Oxley—but hopefully takes into Group,“I find the
consideration the experience of the US Act.” DIFX story to be
Simon Derrick of The very intriguing
A huge pool of capital and a Bank of New York and potentially
new exchange to tap it. compelling. I
Fadi Ghosaini, managing director and head of would recommend that MTC take a very close
business development for the new Dubai look at a listing there, but I have to see the final
International Financial Exchange (DIFX), documentation regarding the project. I am
presented many participants with their first look impressed by many of the projects undertaken in
at the new exchange. For years,money has been Dubai.They are gaining a reputation as a
flowing to the Gulf States to pay for destination that delivers on promises,and that is
hydrocarbons.The flow has become a gusher in very important.”

20 05 MAY 7

RUSSIA
ONLY FOR
THE BRAVE
The stakes are high, and so are the risks. So why are
multinationals still buying into the Russia story?
T
he weather outside was sunny;
the mood inside anything but.
More than 1,000 businessmen,
politicos and financiers had gathered in
early April in the shadow of London’s
Westminster Abbey for their annual get-
together on the state of the Russian
economy. In recent years, the talk at the
Russia Economic Forum increasingly
has centered on the opportunities for
making money out of Russia’s booming
markets. This year, it was worries about
a return to centralization that were top
of the agenda.
Little wonder:The Yukos affair is near-
ing its end, with major shareholder
Mikhail Khodorkovsky likely to face a
long stretch in prison and his company
effectively renationalized.A recent decree
made it clear that only majority Russian-
owned companies would be allowed to
bid for key oil fields.
April brought more bad news for
would-be investors in Russia. The gov-
ernment’s anti-cartel body blocked a bid
by Siemens of Germany for a 73.5%
stake in turbine-maker Siloviye
Mashiny. The agency said the move
would give Siemens too tight a grip
over the turbine market; others pointed
8 M AY 2 0 0 5
COVER STORY
BY MARK LEHANE
to the decree passed a week before by
the Duma state parliament, which de-
clared a foreign takeover a threat to the
country’s national security.
Siemens shrugged off its disappoint-
ment, but there was little hiding the dis-
may among the delegates at the Lon-
don Forum when news filtered through
that Anglo-Russian joint venture TNK-
BP had been hit with a claim for $1 bil-
lion in back taxes.
For some time now it has been clear
that the Kremlin’s approach to Russian
economic life was a balancing act be-
tween conservatives and liberals; last
month’s event seemed clearly to indicate
that conservatives were in the ascendant.
Putin’s maverick economic adviser
Andrei Illarionov described the new or-
thodoxy as “an interventionist model,”
characterized by “extremely incompe-
tent intervention in economic life by
state officials.”
That new mood has taken its toll, in
the form of a falling investment rate and
capital outflows. In 2004 some $7.8 bil-
lion left the country, according to official
statistics. Industries that should be boom-
ing are suffering from underinvestment,
say analysts. Most worrying are clear signs
of falling production in key oil fields as
equipment begins to wear out.
The tax bill slapped on TNK-BP is
particularly worrying: The joint venture
was widely viewed as a template for for-
eign participation in the Russian econo-
my and was explicitly rubber stamped by
the Kremlin. Robert Dudley, TNK-BP’s
CEO, said his company’s experience
would be “a test of whether Russia could
integrate with the world economy.”
As Global Finance went to press, BP
CEO John Browne was flying to
Moscow to talk to President Vladimir
Putin.That’s not the only bridge-build-
ing Putin has been doing with the busi-
ness world. In March he met leading
businessmen, reportedly telling them
the government would not revisit pri-
vatizations that happened more than
three years ago. That put in the clear
most of the Yeltsin-era loans-for-shares
deals that created Russia’s present-day
oligarch class.
Economics minister German Gref
points to the privatization of telco
Svyazinvest as evidence that his liberal
reform program still has legs. Even the
rather messy merger between state gas
monopoly Gazprom and Rosneft can be
 G L O B A L GF F I N A N C E
COVER STORY RUSSIA

Frosty reception:
President Putin’s move
toward more centralization
is unsettling investors

2 0 0 5 M AY 9
 G L O B A L GF F I N A N C E
COVER STORY RUSSIA

viewed in a positive light. Because the

Russian state ends up as (just) the major-
ity shareholder in the newly merged en-
tity, it is expected to lift restrictions on
foreign ownership of Gazprom stock.
That will boost the company’s stand-
ing in major emerging market indexes,
likely prompting a flood of overseas
buying. And there is still money to be
made in Russia. The country’s econo-
my is still growing at a fair clip: GDP
expanded by 7.1% last year, and despite
some worries over inflation ticking up,
the macro climate remains sunny.
That—and a booming world market
for most commodities—is translating
into profits for an increasing number of
brave overseas buyers. Mid-April, Lon-
don-based gold miner Peter Hambro

STARS OF THE NEW RUSSIA

It’s no secret that the business climate in Russia
has gotten a lot chillier in the past year. The recent
decree that only companies with 51% or more of
Russian ownership can bid for new hydrocarbon
blocks is just the latest sign of a return to a more
statist approach sweeping the Kremlin. But for
those prepared to navigate those stormy waters,
the rewards can be rich indeed. Natural resources
are the most visible force powering Russia’s surg-
ing GDP growth; a fast-growing middle class is
sparking a consumer boom, too. In this year’s
Stars of the New Russia Awards, Global Finance
magazine honors those banks and companies that
are proving most adept at riding this wave.

BEST BANKS
BEST DOMESTIC BANK
MDM BANK
Last year’s decline in confidence played
into the hands of the state-owned behe-
moths, but MDM’s limited exposure to
retail deposits and its relatively high rating
have allowed it to plow on with its strat-
egy of developing a high-class, customer-
oriented private bank.
BEST OVERSEAS BANK
RZB/RAIFFEISENBANK
Overseas banks are still gearing up their
presence in Moscow, with some, in effect,
returning for a second time. Others, how-
ever, have demonstrated that a measured
but determined approach to key growth
areas such as lending to medium-size
companies can deliver results. Chief
among them is RZB/Raiffeisenbank.
BEST INVESTMENT BANK
UBS BRUNSWICK
They are still hitting home runs at this
premier institution, now fully bought up
by UBS. Coupled with strong links into
the Russian economy, the international
underwriting and distribution heft of
UBS makes this the one to beat for cross-
border investment banking services.
BEST COMMERCIAL BANK
VNESHTORGBANK (VTB)
The state-owned sector has traditionally
lagged private-sector institutions in de-
veloping effective new business models,
and in the past that has been reflected in
Global Finance’s awards. But the mini-
banking crisis of 2004 underlined this
bank’s resilience, allowing it to grab
much new business, away from its tradi-
tional area of foreign trade.
BEST CONSUMER
FINANCE HOUSE
RUSSIAN STANDARD
The management style may be quirky—
the bank had its origins in a vodka brand—
but this Moscow-based outfit is setting the
benchmark in Russia’s hard-charging
home-loan consumer finance market.
BEST FOREX BANK
ALFA BANK
Alfa continues to set standards in this
highly competitive arena.

1 0 M AY 2 0 0 5
 G L O B A L GF F I N A N C E
COVER STORY RUSSIA

Mining said 2004-2005 earnings were

up by half, largely on the back of in-
creased production at its Pokrovskiy,
Siberia, mine.
But if natural resources continue to
be the chief motor for the country’s
economy, consumers are increasingly
taking the burden onto their own
shoulders. A growing middle class has
spawned a mini-boom in the retail sec-
tor and associated financial services.The
advance of Swedish retailer IKEA and
Germany’s chain of Metro supermarkets
is well documented; analysts argue that
consumer businesses are not viewed as
strategic by the conservatives in the
Kremlin. While retail operators have to
negotiate local politics, they are less vul-
nerable to attacks from the center.
THE REMARKABLE COMEBACK OF THE STATE BANKING SECTOR
rivate banks are smart, nimble, well managed; state-owned banks are slow, cumbersome and find it
P hard to make money. That conventional wisdom is being overturned in Russia, in the short term at
least. After years of private banks making the running, public-sector institutions have made a strong
comeback, putting on assets at a fast clip. State-owned Vneshtorgbank increased its asset base by over
50% last year, for example. And Sberbank, the public-sector savings monolith, continues to soak up
almost two-thirds of Russian deposits.
That’s partly a reaction to last year’s run on private-sector banks, of course. As confidence seeps back
into the private sector, the competitive situation may change. Most analysts argue, however, that as in
other sectors of Russian economic life, the government is now attempting to build up national champions
as a counterweight to the private sector.
Other growth sectors include cine- Sistema successfully floated its shares on
mas, gaming and telecom. Certainly, the London Stock Exchange. Overseas
stock market investors still seem willing investors are prepared to weather politi-
to take a bet on Russia’s prospects. In cal risk, it seems, when potential returns
February cell phone holding company are rich enough. ■

action for Russian companies has been

BEST TRADE
FINANCE BANK
VNESHTORGBANK (VTB)
This state-owned bank has built on its
legacy as the official foreign trade bank
by forging strong links with multilat-
eral institutions as well as foreign
banks.
BEST SYNDICATED
LOAN ARRANGER
RZB/RAIFFEISENBANK
There are banks higher in the league
tables, but RZB/Raiffeisenbank un-
derlined its longstanding commitment
to Russian companies when, in 2004,
it arranged a $600 million loan for
telecom company MTS. The loan was
the first unsecured loan arranged for a
Russian company outside the com-
modity sector.
BEST ENERGY
& COMMODITIES
FINANCE HOUSE
SG
Unsurprisingly, much of the financing
concentrated in the natural resources
sector. SG’s traditional expertise in this
area continues to make it the leader.
BEST DOMESTIC DEBT
UNDERWRITER
RENAISSANCE CAPITAL
In this ultra-competitive market,
where market share can assume undue
importance, Renaissance has stood out
by partnering some quality names to
the bond market.
BEST DOMESTIC DEBT
RESEARCH
TROIKA DIALOG
Information is all in this credit-inten-
sive sector; Troika’s team delivers it.
BEST SECONDARY DEBT
HOUSE
TRUST INVESTMENT BANK
The bank’s commitment to the prima-
ry market is mirrored in a comprehen-
sive trading effort in a sector where
liquidity can be patchy at best.
BEST EUROBOND
ARRANGER
DEUTSCHE BANK
Competition is always tough in this
arena, but Deutsche has fought off ri-
vals for the top slot, despite attracting
some flak for a controversial 2004
parceling of Russian sovereign debt
owed to the German government via
the Aries vehicle.
BEST EQUITIES
RESEARCH
BRUNSWICK UBS
Investors regularly cite the quality of
output from the highly rated team—a
key underpinning of the house’s in-
vestment banking offering. Key rivals
such as United Financial Group mean
it needs to stay on its toes, however.
BEST BOOKRUNNER
PRIMARY EQUITIES
UBS BRUNSWICK
Highlights include a joint global-coor-
dinator role in the December 2004 of-
fering of 15% of Deutsche Telekom’s

2 0 0 5 M AY 1 1

COVER STORY
stake in MTS. Deal volume remains
low, however, with many Russian IPO
prospects preferring to take cash from
the country’s booming bond markets.
BEST SECONDARY
EQUITY HOUSE
ATON CAPITAL
This house’s commitment to provid-
ing liquidity garnered it over one in
10 trades on the RTS and MICEX
systems in 2004.
BEST EQUITY-LINKED
HOUSE
BRUNSWICK UBS
The house that arguably made this
BEST COMPANIES
BEVERAGES
BALTIKA: This St. Petersburg-based
company shows you don’t have to be a
foreign company or a global brand to
excel in an increasingly brand-led in-
dustry, pushing sales to record levels in
2004.
CONSUMER PRODUCTS
WIMM BILL DAN: The competition
may be hotting up, but Russia’s largest
food company remains the darling of
stock buyers, as well as would-be foreign
wooers such as France’s Danone.
ENGINEERING
AVTOVAZ: Once a stalwart of the So-
viet industrial system, Russia’s largest
carmaker has teamed up with General
Motors and tapped the European Bank
for Reconstruction and Development to
overhaul its production lines.
INFORMATION TECHNOLOGY
IBS: In an increasingly tech-savvy
1 2 M AY 2 0 0 5
G L O B A L GF F I N A N C E
market, Brunswick UBS continues to
perform exceptionally well in a sector
that makes up for some of the disap-
pointments in the equity pr imary
market dealflow.
BEST M&A ARRANGER
CITIGROUP
Takeovers in Russia are rare as yet, and
corporate links carry a great deal of
weight, but for objective advice,
clients come to this one-stop financial
superpower.
BEST ASSET MANAGER
TROIKA DIALOG ASSET
MANAGEMENT
country, Information Business Systems
remains ahead of the pack.
MEDIA
RBC TV: With much of Russian TV
neutered, the launch of this business-
heavy co-venture between Ros Business
Consulting and CNBC provides a
breath of fresh air.
NON-FERROUS METALS
NORILSK NICKEL: It’s no secret
that China is the x-factor in powering
global demand for commodities, and
with 20% of the world’s nickel deposits
Russia’s largest miner/metals combine
holds the trump cards.
OIL AND GAS
BNP-TK: The investment climate for
foreign companies has gotten chillier in
the past year, and a recent decree that
only majority Russian-owned compa-
nies could bid on new hydrocarbon
blocs hasn’t helped the 50:50 BNP-TK
joint venture. But the company has the
management and technical smarts to
RUSSIA
Pensions privatization has combined
with growing middle-class wealth to
spark a boom in mutual fund sales.
Short track records make choosing
winners tricky, but the experienced
team at TDAM has hit on a winning
strategy, mopping up some 20% of all
open-ended mutual fund assets in the
country.
EDITOR’S SPECIAL
AWARD FOR
TRANSPARENCY
MDM BANK
This bank has marked itself out from
the crowd by setting the standard in
not only being transparent, but mak-
ing clear it will be transparent.
turn itself into Russia’s most efficient oil
company over the next few years.
TELECOM
MOSCOW TELESYSTEMS (MTS):
Vimpelcom remains a close r ival in
terms of subscribers, but MTS has suc-
cessfully avoided the distractions of pol-
itics as it wrestles with a fast-maturing
market. A successful IPO for parent Sis-
tema added to the glow.
TRANSPORT
SEVERSTALTRANS: As Russia’s
economy booms, so does the demand
for ways to move goods and raw materi-
als. That has given this market-leading
integrated railway freight operator a lead
start in a market where demand contin-
ues to outstrip supply.
UTILITIES
MOSENERGO: Investors have been
piling into Moscow-based Mosenergo,
seeing it as the energy company best
placed to benefit from the restructuring
of the Russian power sector—now fi-
nally under way.

CENTRAL & EASTERN EUROPE
Entry Strategy
Prospective future entrants to the EU have been watching
with interest the progress of the 10 countries that joined
the union a year ago.
A
year has passed since the Eu-
ropean Union’s enlargement
of May 2004 when 10 new
member countries, eight of them for-
mer Soviet bloc nations of Central and
Eastern Europe, formally joined the
world’s largest single economic area.
How they have fared within an en-
larged EU is providing valuable lessons
for the countries next in line for full
accession, starting with Bulgaria and
Romania.
The transformation they experi-
enced did not happen overnight, al-
though as soon as they joined, they
gained access to EU structural and re-
gional funds.The benefits of free access
to EU markets were already in place
beforehand.The largest impact on trade
patterns, according to Walter Demel,
economist at the Austria-based Raif-
feissen Bank, has been a sharp increase
in the exchange of goods and services
between the new entrants now that re-
maining barriers have been dismantled.
“The Czech Republic’s trade with oth-
er accession states leapt by more than
30% last year, whereas previously it had
been growing at less than 10% annual-
ly,” Demel says. “Poland and Hungary
experienced a similar surge in trade
with their neighbors in ‘New Europe’.”
Most macro-economic or structural
change had already taken place prior to
accession, however. Each country set
out on the process of EU harmoniza-
tion from its own starting point. Each
1 4 M AY 2 0 0 5
REGIONAL REPORT
BY JONATHAN GREGSON
had its own mountain to climb. And ties for those prepared to accept a high-
since all of the 10 accession states’ er risk/reward profile. “Since we did
economies have been steadily integrat- our first deal in the Czech Republic in
ing over the past 15 years or so, further 1996, we have seen substantial shifts in
changes occurring over the past 12 attitude, legislation—especially the har-
months have been largely the result of monization of telecom laws to EU stan-
continuing momentum. dards—and corporate governance is-
“Going through the accession process sues,” he says. Doing business has
meant that the coun-
tries involved had al-
ready made the effort,”
says Nicolas Doisy,
economist at the Euro-
pean Bank for Recon-
struction and Develop-
ment (EBRD). “After
that, there’s no reason
to expect formal entry
into the EU to have
that strong an impact.”
Yet formal accession
has made inward in-
vestors more confi-
dent. Tim Green, part-
ner at private equity
group GMT Commu-
nications, which spe-
cializes in telecom
buyouts in the region,
with some 25% of
deals done in Central
Europe, defines these
markets as “still quite
small and relatively im-
mature.” That means
they also present good
investment opportuni-

REGIONAL REPORT
generally become easier, with less con-
cern over legal ownership and intellec-
tual property rights, all of which makes
the markets more attractive to inward
investment.
“There has also been a substantial
change in the quality of local manage-
ment compared to 10 years ago,” says
Green. “Over the past two years they
have begun to look seriously at the fi-
nancing possibilities of rapidly devel-
oping capital markets.” For instance,
GMT Communications’ refinancing of
Invitel, Hungary’s second-largest fixed-
line operator, included launching a
large tranche of high-yield bonds.
“It involved considerable
structural issues,”
says Green,
G L O B A L GF F I N A N C E
“as this was only the second time a
high-yield bond had been successfully
launched in Hungary.”
Assessing the Benefits
So a year after formal accession to the
EU, are the citizens of ‘New Europe’ ex-
periencing real and tangible benefits?
Certainly their economies have been
growing much faster than those of Ger-
many or France, which constitute the
core of ‘Old Europe’. The new entrants
have enjoyed year-on-year GDP growth
of around 4%, with central and eastern
European countries achieving nearly 5%
on average in 2004. That is more than
twice the growth rates achieved by eu-
rozone countries. Moreover, that has
been built on strong exports, with Pol-
ish and Czech exports up by nearly a
quarter last year in euro terms.
But New Europe still has a long
way to go to catch up with its west-
er n neighbors in ter ms of real
wages and overall wealth levels.
Real labor unit costs are often as
little as one third of those in
Old Europe, which accounts
for the eastward shift of auto-
motive and other labor-in-
tensive industries. Howev-
e r, c o n s u m e r i s m i s
growing more rapidly
than the overall econo-
my in most countries,
the commercial
banks are racing
each other to ex-
tend consumer
credit, and—al-
ways an impor-
tant contribu-
tor to the
feel-good ef-
fect—real estate values
have been picking up. “If you
look at Warsaw, Budapest or Prague,
there’s a real boom going on in both
commercial and residential property
values,” says Gyuri Karady, partner in
the private equity firm Baring Corilius,
CENTRAL & EASTERN EUROPE
which specializes in Central and East-
ern Europe. But the trickle-down ef-
fect to rural regions and smaller towns
has yet to occur.
“The sectors that have benefited the
most are those that service the new
consumer economy,” says Karady.“Look
at how the big supermarket chains have
come in, the sectors where the multina-
tionals are investing and the growth of
spend in marketing. Advertising has in-
creased hugely in volume, printing
companies are buoyant as the page-
count in newspapers and magazines
goes up, and Poland has seen a boom in
radio stations,” he notes.
Although the agricultural sectors in
the 10 recently joined countries do not
enjoy the full benefits of the Common
Agricultural Policy (CAP), Doisy points
out that they do have access to cohesion
and structural funds and money trans-
fers linked to the CAP. “Farmers’ in-
comes have increased substantially over
the past year,” he says, although whether
New Europe’s agricultural producers
will share the full benefits of the CAP
remains to be seen.
Currency Harmonization
The biggest issue outstanding is
when and under what ter ms these
countries will adopt the euro as their
currency. Front-runners on this are the
smaller Baltic states, with the currencies
of Estonia and Lithuania already pegged
to the euro. Slovenia also entered the
Exchange Rate Mechanism II (ERM
II) last June, and Latvia is planning to
join in the near future. Apart from hav-
ing to satisfy the Maastricht criteria on
budget deficits, inflation and overall
debt levels, these countries have to
prove that their currencies can maintain
sufficient stability within ERM II bands
for two years before being allowed to
join the eurozone.
“The reason this process started with
the smaller states is because of the very
prudent way they have managed their
economies,” says Doisy. Slovakia could
2 0 0 5 M AY 1 5

REGIONAL REPORT
follow next year, with the larger coun-
tries—Poland, the Czech Republic and
Hungary—most likely waiting until at
least 2007 to join ERM II.
The main problem for the larger
economies is bringing down government
spending.Their governments spend more
money than they bring in, even though
they have relatively high tax levels.They
face having to cut current expenditure
on deeply entrenched and often highly
popular social programs, and that in turn
could cause political problems, especially
in Poland and Slovakia where elections
are coming up.
Doisy believes these countries’ large
fiscal deficits are structural in nature
rather than caused by economic fluctu-
THE SUCCESS OF LAST YEAR’S
EU ENLARGEMENT SHOULD ACT
AS A POWERFUL STIMULUS TO
THOSE WAITING IN THE WINGS
The prospect of joining the EU is probably powerful enough
to encourage governments to implement the necessary reforms
ations.To overcome such deficits takes a
degree of political will that has not al-
ways been evident. Until governments
of the Central Europe’s ‘big three’
economies get serious about tackling
their fiscal deficits, he says, it is hard to
see how they can progress toward join-
ing the single currency. Since these
countries already have a relatively high
tax take as a percentage of GDP, that
means cutting down on spending.
Slovakia provides a good example of
how to whittle down fiscal deficits. It
introduced a flat 19% tax rate for both
corporates and individual incomes. In
most cases this represented a significant
reduction, and, with less tax avoidance
and more businesses exiting the ‘black
economy’, instead of falling, govern-
ment revenues actually increased. “Slo-
vakia also decided not to spend all of
the EU structural funds it was entitled
1 6 M AY 2 0 0 5
G L O B A L GF F I N A N C E
to,” says Doisy. “That helped to keep
down its fiscal deficit.”
Financing state-funded pensions
might prove a more intractable prob-
lem, but here the Council of Econom-
ic and Financial Ministers in Brussels
(Ecofin) has allowed new entrants to
exclude pension-related spending from
their fiscal accounts. Nonetheless, the
process of integrating toward the ‘eu-
ronorm’ is far from over, even for coun-
tries that are now within the EU.
Prospective Entrants Wait in Line
The relative success of last year’s EU
enlargement should act as a powerful
stimulus to those countries still waiting
in the wings. Next in line are Bulgaria
and Romania, having successfully final-
ized their membership negotiations last
year. Provided they keep their reform
process on track, they are scheduled to
join the EU in 2007.
The prospect of joining the EU is
probably powerful enough to encour-
age governments to implement the
necessary reforms, and now that Roma-
nia and Bulgaria have a joining date,
foreign investors feel it is safe to go in.
Already FDI has picked up, which
opens the way for further productivity
gains through technology and skills
transfers. However, Green argues,“They
still have further to come in terms of
economic stability, access to capital and,
above all, quality of management, where
they are still a lot further behind.”
Croatia’s progress has been delayed by
political rather than economic consider-
ations, especially since the EU’s recent
CENTRAL & EASTERN EUROPE
decision to postpone the start of mem-
bership negotiations until it is convinced
that the Croatian government is cooper-
ating fully with The Hague tribunal on
bringing those suspected of war crimes
to justice. However, while it has shown
itself ready to wield the stick when it
comes to the war-torn states of the for-
mer Yugoslavia, Brussels is equally adept
at dangling the carrot of eventual EU
membership to coax the western Balkan
countries along the path of political and
economic reform. Macedonia, for in-
stance, filed its formal membership ap-
plication last year, and Albania hopes to
take its first step through finalizing the
Stabilization and Association Agreement
later this year.
That leaves Turkey, which formally be-
gan its own journey toward EU mem-
bership last December after Brussels fi-
nally decided that Turkey satisfied the
mainly political Copenhagen Criteria of
being a fully functioning democracy
with an acceptable human rights record.
A longstanding member of NATO,
Turkey’s inclusion within a broader Eu-
ropean Union has been supported by the
United States on strategic grounds and
because, as a predominantly Muslim
democracy, it could form a vital bridge
to the Middle East region.
Turkey still has a long road to travel
to bring its macro-economic and fiscal
policies more into line with the EU’s
norm and in implementing legal and
institutional reforms allowing for a
freer, more transparent business envi-
ronment. However, no country that has
entered into EU accession talks has
ever been refused entry. The experi-
ence of previous waves of accession
states will provide some useful lessons
along the way. “Are the new member
states of Central and Eastern Europe
yet seeing the reward for their efforts?”
asks Raiffeisen’s economist Demel.
“I’m inclined to say yes, though the fi-
nal verdict will only be made in 10 or
20 years’ time when their citizens have
reached comparable income and
wealth levels.” ■
 G L O B A L GF F I N A N C E
EMERGING MARKETS

EM ROUNDUP
CHINA

BANKS STRUGGLE BUT STOCK

MARKET RECEIVES A BOOST
n April anti-Japanese sector, possibly delaying plans China—indicate that internal

I
protests in Beijing,
Shanghai and Guangzhou
further strained the
perennially tense China-
Japan relationship after Japan
approved textbooks that critics
claim play down Japan’s
wartime brutality.Tensions
further intensified when the
Japanese government awarded
drilling rights for disputed
waters in the South China Sea.
Chinese protesters are calling
for a three-month boycott of
Japanese goods. China overtook
the US as Japan’s largest trading
partner last year, and an
effective boycott could damage
Japan’s economic recovery.
Problems continue to surface
in China’s troubled banking
of China’s top two state banks
to go public later this year.
China Construction Bank’s
chairman, Zhang Enzhao,
stepped down in late March
and was subsequently detained
by police. His resignation and
detention may be related to a
US civil case alleging that
Zhang received bribes in excess
of $1 million. Early last year,
CCB and Bank of China each
received $22.5 billion capital
injections and embarked on a
series of reforms in preparation
for public stock offerings. But
several scandals—including the
discovery earlier this year that
800 million yuan ($97 million)
had disappeared from a Bank of
China branch in northeastern
controls at China’s state-owned
banks remain weak.
After hitting a six-year low
in March, China’s stock market
jumped in mid-April on news
that the government may
reduce its stakes in several of
the country’s largest companies.
Government and affiliated
bodies hold most shares in
China’s domestic stock market,
creating an environment prone
to manipulation by those in
management positions and
government offices. Minority
shareholders in such companies
have little, if any, influence over
business operations.
Chinese companies’ enth-
usiasm for overseas acquisitions
appears to be cooling after
Detained: China Construction
Bank’s Zhang Enzhao
peaking with Lenovo’s $1.75
billion purchase of IBM’s
personal computer business late
last year. In mid-April,
Shanghai Automotive Industry
Corporation (SAIC), one of
China’s top three automotive
producers, pulled out of talks
over a possible joint venture or
acquisition deal with troubled
British carmaker MG Rover.
—Thomas Clouse

INDIA
AVIATION SECTOR TAKES OFF
India’s reforms continue apace with the government’s decision to pri-
vatize aviation fuel supply to airports, ending a monopoly by state-
owned refiners. The government will buy all the fuel dumps and
hydrants from the state-owned refiners at book value and allow oil
companies equitable access to the infrastructure. The move should
cut fuel prices and increase revenues for the airport authorities.
Ministry officials hope the reforms will eventually prompt much-
needed investment in aviation infrastructure. There will be huge spin-
off benefits, too, for airline companies that are now approaching
Indian and global equity markets for capital. Indian Airlines, the
state-owned domestic airline, which is the largest domestic operator
in India, has an-
Indian Airlines: Ready for takeoff
nounced an IPO.
Though the final
size of the IPO has still to be decided, it could be the biggest ever
from India, at nearly $2 billion. The government has been inspired by
the fantastic response to private sector airline Jet Airways’ IPO ear-
lier this year. Jet’s $450 million IPO received nearly $6.5 billion
worth of bids, mostly from foreign investors. The other state-owned
airline, Air India, is waiting in the wings to announce its IPO, and pri-
vate sector minnow Air Deccan has already announced a small IPO
slated for early next year.
It’s not only India’s airline industry that is set to benefit from for-
eign investment, though. POSCO of South Korea, the world’s fifth-
largest steel manufacturer, is looking at investing nearly $3.5 billion to
build a steel plant in India’s iron ore and coal rich northeastern state
of Orissa. The plant, which is expected to have a capacity of 10 million
metric tons, will be one the largest in the country. —Aaron Chaze

2 0 0 5 M AY 1 7

EMERGING MARKETS
RUSSIA
PUTIN TRIES FOR A
NEW, KINDER IMAGE
n late March President
I
Vladimir Putin extended
an olive branch to the
country’s oligarchs by
proposing legal reforms
that would in effect put
shady privatizations of the
1990s beyond the reach of
the law and that would also
streamline tax collection.The
announcement was hailed by
investors as the re-emergence
of the dimension of Vladimir
Putin that is a defender of
investment and promoter of
economic growth.
But within two weeks the
reality of Russia struck again, as
TNK-BP—easily the highest-
profile and largest foreign
investment in Russia—was hit
with a $1 billion tax bill.Two
days later Siemens was blocked
by the Federal Anti-Monopoly
Service from buying a majority
stake in Power Machines,
Russia’s biggest producer of
power turbines.
Uncertainty of a different
stripe had emerged previously,
when Anatoly Chubais—the
mastermind of Russia’s
Survivor: Russia’s privatization
supremo, Anatoly Chubais
1 8 M AY 2 0 0 5
G L O B A L
privatizations of the 1990s and
currently head of Unified
Energy Systems, the country’s
monopoly power distributor—
survived a roadside ambush.
The seemingly never-ending
trial of former Yukos head
Mikhail Khodorkovsky finally
wrapped up in early April.The
man who was until recently
Russia’s richest faces up to 10
years in prison.A US-based
investment fund in late March
announced that it is trying to
gather minority shareholder
support to sue the Russian
government for share losses
stemming from the destruction
of Yukos.
Despite the challenging
environment, foreign
investment into Russia
continues. In early April Coca-
Cola and its Greek bottling
unit announced that they
would buy Multon, Russia’s
second-largest juice maker that
analysts valued at roughly $650
million.Weeks later, British
retail giant Dixons signed a
deal that gives it the option of
buying Russian electronics
retailer Eldorado for $1.9
billion by 2011.
Kyrgyzstan was the latest
former Soviet state to upend its
power structure, as the
president of the small Central
Asian nation fled in the face of
protesters upset about recent
rigged elections. Unlike
Georgia and Ukraine, though,
there is no clear unifying
opposition leader in
Kyrgyzstan, and the road to
democracy promises to be
particularly bumpy.
—Kim Iskyan
GF F I N A N C E
BRAZIL
LULA STRUGGLES TO BALANCE
PROMISES WITH STABILITY
President Luis Inacio Lula da Silva’s ap-
proval rating has dropped by six points
since February of this year. Conducted by
the Sensus polling firm and released by
the National Transport Confederation late
last month, the national poll found that
personal approval for Lula has declined
from 66.1% to 60.1%.
Lula, who is up for re-election in 2006,
faces the dilemma of either alienating
poor voters as he pares back government
social spending or jeopardizing his hard-
won reputation with investors for fiscal
austerity if he boosts expenditures. Hun-
dreds of landless peasants stormed
Brazilian finance
Brazil’s finance ministry in Brasilia last minister Antonio Palocci
month to demand more land reform funds.
After 28 months in office, Lula has fallen behind job, land-reform
and poverty goals after his government hiked the budget surplus
and used high interest rates to cut inflation.
Meanwhile, Brazil’s government said it will not renew the
standby credit agreement with the International Monetary Fund
that expired at the end of March. Brazilian finance minister An-
tonio Palocci said the country’s economic fundamentals had im-
proved since September 2003, when the agreement was sealed,
and Brazil no longer needed the fund’s support.
Varig, the country’s flagship airline, has also improved its fis-
cal position in the past year. Brazil’s second-largest airline
slashed its net loss to $33.5 million, or 87 million reais, in 2004,
down from a loss of $700 million, or 1.8 billion reais, in 2003. And
in the fourth quarter of 2004, the airline shifted into a net prof-
it of nearly $85 million, according to Varig officials.
The economic improvements may not be enough for foreign
investors, who poured about $869 million in direct investment in-
to Brazil in February—about 15% less than during the same
month of 2004, according to the Central Bank Economic Studies
Department. For the first two months of the year, foreign invest-
ment in Brazil totaled $2.08 billion, and in the 12 months ended
in February of this year foreign investment tallied $18.2 billion.
In an effort to rein in inflation, this South American nation’s
central bank unexpectedly raised its benchmark lending rate for
an eighth straight month. The nine-member board headed by
central bank president Henrique Meirelles voted on April 20 to
push the overnight interbank rate a quarter percentage point up,
to 19.5%. Economists had expected bank officials would stop the
string of interest rate increases so as not to hinder the country’s
economic expansion of the past two years. But policymakers are
concerned about inflation, which is running at 7.5% for the 12
months ended in March—two percentage points higher than their
year-end target of 5.1%. —Paula L. Green
 G L O B A L GF F I N A N C E
EMERGING MARKETS

EM INVESTOR
NEWS DR NEWS
RISK APPETITE IN ASIA TO KEEP NEW-ISSUE
PIPELINE FLOWING
EUPHORIA ZONE
lobal economic rising world interest rate Companies from South Korea, India, China and Taiwan

G
growth typically environment will cut off the will make Asia the main source of capital raising using
decelerates at this flow of excess liquidity to depositary receipts in 2005, says Patrick Colle, global
point in the emerging markets,” he says. head of ADRs at JPMorgan. Asian issuers will account
production cycle, but Emerging markets perform for 60% to 65% of the volume of new issuance in DRs
there is no evidence of a worse than developed markets this year, with a number of high-technology issues
slowdown to date, says once the euphoria zone is from China expected to be floated, Colle says. JPMor-
Jonathan Wilmot, chief global entered, according to Wilmot, gan was mandated ADR bank on 50% of all initial pub-
lic offerings of ADRs from China in 2004.
strategist at Credit Suisse First and they generally are flat to
Many large Russian DR issues already have been
Boston. lower within three to six SWITZERLAND,
placed and moreGERMANY, UNITED
are likely, while STATES
Brazilian companies
Meanwhile, CSFB’s index of months later.Within six to 12 also may be active in the ADR capital markets, ac- Patrick Colle
global risk appetite has entered months the index of risk cording to Colle. “The new-issue pipeline is strong,” he
the euphoria zone for the first appetite could be back in the says. Meanwhile, factors are in place to continue the 20-year secular
time in the panic zone, he says. trend toward increased trading and investment, including a sustained
current cycle. Not only are emerging expansion of the global economy, reviving corporate profitability in
“Lots of markets more susceptible to many countries and the weak US dollar, he says.
growth now global monetary tightening The average US investor has 14% of his portfolio allocated to
would be bad than are developed markets, foreign securities, which is still fairly low, Colle says. “The foreign
for risky but they are also more allocation should be about 20% to 25%, which means there is still
a lot of upside potential,” he says. Many US funds need the ADR
assets,”Wilmot cyclical,Wilmot says.
vehicle to take exposure in foreign issues, while the growth of sep-
says, because it “Emerging markets are also
arately managed or wrap accounts investing in ADRs is adding to
means that the more at risk in this cycle market liquidity. “As liquidity grows, investors become more com-
coming because they are more directly fortable,” Colle says, making it likely that the trend toward in-
downturn will exposed to a big slowdown in creased trading will continue. —GP
Jonathan Wilmot
be sharper.“A China,” he says. —Gordon Platt

COMPANY TO WATCH: CVRD/BRAZIL company, will plow some of CVRD wants to enter into
its profits into expanding iron- joint ventures with foreign steel
MINER ON THE MOVE ore production significantly. companies, including China’s
oaring minerals prices makers in China and He says Brazil has the best and Baosteel, to build slab-for-

S
helped boost revenues
at Companhia Vale do
Rio Doce, or CVRD,
by 53%, to $8.5 billion
in 2004. Rio de Janeiro-based
CVRD, the world’s biggest
producer of iron ore, earned a
record $2.6 billion last year.
Amid rising demand from steel
elsewhere, CVRD is raising
prices for ferrous metals by
71.5% for contracts signed this
year, with exports expected to
double to $10 billion.
CEO Roger Agnelli, a
former banker who left
Bradesco in 2000 to
restructure the mining
largest reserves of the ore in
the world, enough to last for
hundreds of years. Agnelli also
wants to further diversify
CVRD, which already
produces bauxite, manganese
and other minerals, makes
aluminum and owns energy
and transport facilities.
export plants on Brazil’s
impoverished north coast. It is
trying to persuade the Brazilian
government to grant tax relief
that will convince the foreign
partners to go ahead with the
deals that could generate up to
$8 billion in foreign direct
investment. —GP

2 0 0 5 M AY 1 9

COMPLIANCE
Software Offers
Compliance Solutions
Companies are finding that software can help them rein
in the high costs and disruption caused by complying
with new regulations.
T
he government’s main instru-
ment to promote corporate re-
sponsibility and prevent future
Enron debacles, the Sarbanes-Oxley Act
of 2002 (often dubbed SOX), has been
much more costly and time consuming
than most companies expected. The
thorniest component of the SOX law has
been Section 404, which requires public
companies to establish, maintain and
document effective internal financial
controls and get those controls approved
by their outside auditors.
According to a recent Financial Exec-
utives International survey of 217 public
companies with revenues averaging $5
billion, implementation of SOX Section
404 cost firms an average of almost $4.4
million in 2004—that’s nearly 40% more
than companies had budgeted—
and 94% of the survey respondents
said the cost of compliance ex-
ceeded the benefits. Moreover,
hundreds of publicly traded com-
panies in recent weeks have de-
layed filing their annual reports
with the US Securities and Ex-
change Commission as the firms
struggle to prove the robustness of
their internal controls. Many firms
are turning to technology solu-
tions, compliance-automation
software in particular, to make it
less painful to comply with the law
in 2005 and beyond. AMR Re-
2 0 M AY 2 0 0 5
FINANCIAL SOFTWARE
BY ADAM ROMBEL
search predicts that US companies will
spend a total of $6.1 billion to manage
SOX-compliance efforts in 2005, of
which, $1.7 billion is allocated for tech-
nology. That’s more than a 40% increase
over tech spending on SOX in 2004.
Easing the Pain
So, what are companies that have to
comply with SOX seeking from technol-
ogy? “The number-one thing they want
is relief from the way they dealt with this
last year,” says Sebastian Holst, vice presi- started from scratch and unplanned, reac-
dent of marketing at Axentis, a six-year
old, Cleveland, Ohio-based firm that li-
censes the risk-compliance management
application Axentis Enterprise, which is
used by more than 80 companies with
average annual revenues of $11 billion.
Sanjay Srivastava of
Aceva Technologies
Sebastian Holst at
Axentis
“They’re saying, ‘Give us a way to avoid
the pain and uncertainty we muscled
through last year,’” Holst says.
The pain came in the form of long
hours for corporate financial officials, IT
staff members and auditors. Most public
companies approached SOX with manu-
al processes, using simple spread sheets
and calling upon an army of people to
document, test and re-test internal con-
trols. It was expensive and time consum-
ing because it is all unstructured work
tive work, says Sanjay Srivastava, chief op-
erating officer of San Mateo, California-
based Aceva Technologies, which makes
transaction-reconciliation software.
One company that went through the
cumbersome SOX-compliance process
last year was Loral Space & Com-
munications, a New York-based
satellite-communications compa-
ny that generated more than $500
million in revenue in 2004. Loral
used a manual process and passed
its own compliance audit at the
end of last year, well before the
April 15 deadline for US public
companies with a market capital-
ization of $75 million or more to
comply with Section 404 of SOX.
Having gone through that experi-
ence, the company is now moving
to a non-manual solution. Barry
Goldfeder, senior director, business

controls, systems and processes, at Loral,
says the company is in the process of cer-
tifying its first-quarter 2005 financials us-
ing automation. Specifically, Loral is using
the Oracle Internal Controls Manager
(OICM) application, which Oracle says is
in use by about 300 companies.
Foreign companies and US-based
firms with a market capitalization below
$75 million were recently given a break.
On March 2 the SEC extended to July
15, 2006, the deadline for these compa-
nies to meet the Section 404 require-
ments of SOX.That doesn’t mean com-
panies should wait to get their acts
together, vendors say.“I think many [for-
eign companies] learned from their US
counterparts that this is not a 30-day en-
terprise. So they should start now in or-
der to be ready in time,” says Neil Selvin,
chief marketing officer with Approva, a
Vienna,Virginia-based firm that sells the
BizRights compliance-software plat-
form, which has several dozen corporate
customers, including General Motors
and Siemens.
Even those companies that don’t start
now will realize eventually the need for
technology to ease compliance. “Au-
tomation is inevitable. That’s the only
way you’ll be able to take control of all
your activities and make sure you’re
keeping up with the times,” says
Goldfeder.
Automated software can replace man-
ual efforts that might take hundreds of
hours with as few as a couple hours of
analysis, says Approva’s Selvin. For exam-
ple, a company might have a million pur-
chase transactions in a month, and its in-
ternal auditors might spot-check about
50 of them to look for mistakes, ineffi-
ciencies or fraud. Approva’s software
could monitor all 1 million of the trans-
actions. “It’s about finding the needle in
the haystack,” says Selvin.
To identify weaknesses in their inter-
nal-control procedures and processes,
companies need software with sophisti-
cated reporting options that help them
identify where weaknesses exist, such as
risks not addressed by controls or finan-
cial-statement assertions not addressed by
controls, says Katharina Reichert, special-
ist in application solution management
for mySAP ERP at German software gi-
ant SAP, which introduced its Manage-
ment of Internal Controls (MIC) prod-
uct in the third quarter of 2004. More
than 65 corporate customers are using
MIC, according to Reichert.
An example of a financial assertion that
could get a company in trouble is book-
ing as revenue sales orders that end up
not materializing. Software systems can
automatically check the orders against
purchase documents to find out before
the fact if it is bookable revenue. And
COMPLIANCE
when a company does identify a problem
in its financial controls, it should be easy
to configure the software system to bring
it under control, avoiding the problem in
the future.
Seamus Moran, director of accounting
compliance applications development at
Oracle and himself a former auditor, tells
a story of one corporate customer that
used OICM to identify about 400 in-
stances of violating SOX’s segregation-
of-duty requirement. For example, a
database administrator correcting an in-
voice could be a violation because the
accounting people should do it. When
the customer used OICM to check
processes and transactions against the list
of staffers authorized to perform those
functions, “they were automatically able
to clean up the problem,” Moran says.“It
made fixing it very easy.”
Broadening the Benefits
Vendors say that the benefits of
putting in place automated financial
controls extend far beyond Sarbanes-
Oxley compliance. Just by going
through the process, companies can
manage business processes better, be-
come more efficient, save money and
comply with many other laws, such as
the European counterparts to SOX. “I
end up thinking hard about my business
and what my common standards are,
and that always saves me money,” says
Oracle’s Moran.
Companies are clamoring for “a way
to make my compliance effort pay off
in some kind of competitive advantage
for my business,” says Approva’s Selvin.
Srivastava of Aceva Technologies echoes
that thought.Aceva’s transaction-recon-
ciliation application was first introduced
about five years ago to help companies
reduce the number of days of sales out-
standing, before the company started
transitioning the product into the
SOX-compliance marketplace. “People
get it for both. I don’t know of a single
customer that has bought it for just one
of these things,” Srivastava says. ■
2 0 0 5 M AY 2 1

CYPRUS
Building Bridges
As its economy continues to grow, Cyprus is hoping to take
advantage of its strategic position between Europe and
the burgeoning markets of the Middle East and Africa.
T
he year 2004 was one of mixed
emotions for the Mediter-
ranean island of Cyprus. The
country achieved its long-held dream
of joining the European Union. But a
settlement of the conflict between the
south of the island and the north, and
its Turkish protectors, was not achieved.
The south’s politicians and the broader
population refused to accept Kofi An-
nan’s UN plan to end the 1974 division
of Cyprus.
The failure to unite the divided is-
land was a disappointment to everyone.
“We’ve always wanted a solution to the
problem, but we needed something
more than the Annan plan offered,” says
Dennis Droushiotis, trade commission-
er for the country in New York. He
notes that political parties within the
Greek Cypriot National Council re-
cently put together a response to the
Annan plan to try to find a way for-
ward.
Meanwhile, the north of Cyprus,
though growing, remains substantially
poorer than the south and reliant on
handouts from Turkey, the only country
that recognizes it—and the source of its
30,000 troops. Recent court cases
bought by Greek Cypriots in the south
over property owned by them in the
north before 1974—and subsequently
sold to British holidaymakers—indicate
the scale of the task to be achieved for
reconciliation to occur.
Despite the failure to reconcile the
2 2 M AY 2 0 0 5
COUNTRY REPORT
BY LAURENCE NEVILLE
conflicts of the past, the south of
Cyprus is experiencing an economic
recovery. “Last year the economy grew
by about 3.5%, and this year we are ex-
pecting up to 4%,” says Sofronis Eteo-
cleous, head of economic research and
planning at Laiki Group, owner of
Cyprus Popular Bank. Meanwhile, in-
flation is low and fairly steady.“Last year
it dropped to 2.3% from 4.1%, but this
year we expect a slight acceleration be-
cause of oil prices.”
Diversifying the Economy
Tourism has long been the mainstay
of the Cypriot economy, and services
(of which most is tourism) account for
72% of GDP, according to Droushiotis.
“Tourism remains the engine in terms
of foreign currency,” he says. But the
failure of visitor numbers to recover to
pre-9/11 levels has focused attention on
other areas of the economy. “We don’t
have our eggs in one basket,” says
Droushiotis. “There are over 50,000
corporations in Cyprus.”
Despite an increase in the corporate
tax rate from 4.25% to 10%, which was
a condition of entry to the EU, Cyprus
remains an attractive location for tax
planning. It still has one of the lowest
corporate tax rates in Europe and has
tax treaties with 34 countries, with a
further 31 under negotiation. Business boom: Cyprus is taking
According to Remko van Roekel, advantage of its strategic location to
Cyprus analyst at Citco Corporate & promote its transshipment facilities
Trust, the new tax regime is actually

COUNTRY REPORT
more favorable to companies in terms
of exemptions. “There hasn’t been
much lost, in all honesty,” he explains,
“and now it’s got the seal of approval
from the OECD and the EU.” Further-
more, he notes that the changes that
Cyprus made before accession have
cleaned up the economy. “There were
concerns about some of the Russian
money coming into Cyprus,” he adds.
“It wasn’t great for the image of the
country.”
Other services hope to benefit from
Cyprus’ location as a bridge between
Europe and the growing economies of
the Middle East and North Africa. The
country has had free trade zones—
where companies bring in shipments
intended for neighboring markets and
divide them up into country deliver-
ies—since 1977, and use of them is in-
creasing by such companies as IBM and
Estée Lauder. Last year Cyprus generat-
ed $400 million in re-exports.
Meanwhile, the government is also
trying to encourage technology-based
companies, especially in IT services. It
has set up four $250,000 venture capital
funds to develop companies and also
signed agreements with EU countries
and the State University of New York
and Harvard University Research Insti-
G L O B A L GF F I N A N C E
tute on Public Health to bring a greater
knowledge base to its economy.
The geographical positioning of the
country is also working in Cyprus’ favor
in the technology market, says Droush-
iotis. He notes that US firm Amdocs re-
cently hired 45 IT professionals from
India to work on software in Cyprus
because communications with the US
are better in Cyprus than in India, and
the working environment is more stable
and developed.
Despite the country’s enthusiasm for
joining the EU, the benefits of mem-
bership are perhaps less immediate for
Cyprus than for the other nine coun-
tries that joined in May 2004.As the lo-
cal press repeatedly noted, the country
was the richest of the 10 new states. In-
deed, it is expected that within a few
years, Cyprus will become a net con-
tributor to the EU budget.
In the short term, however, Cyprus
will benefit from agricultural modern-
ization programs in areas such as dairy
and wine production, the latter present-
ing potentially huge growth opportuni-
ties for the sun-drenched country. In
addition, being a member of the EU
gives Cyprus much more clout when it
comes to determining quotas and trad-
ing with the US.
CYPRUS
Preparing to Join the Euro
Having achieved EU membership, the
next goal is joining the euro. Cyprus has
been eager to show it is serious about
currency matters for some time. It abol-
ished foreign exchange controls before
accession and pushed up interest rates to
protect the Cyprus pound. Now the em-
phasis is on ensuring that the Cypriot
economy meets the necessary conditions
to join the euro.
Chief among these is lowering the
country’s deficit, which was 6.3% in
2003 and 4.2% last year.The target is to
hit the eurozone entry level of 3% by
2006. “The government has had a tax
amnesty from September 2004 to Feb-
ruary this year, and that will affect rev-
enues for both this and next year and
should allow the government to hit its
target,” says Eteocleous. “In addition,
the government has resolved not to in-
crease civil servant wages for 2004 and
2005 and has been successful in that.”
However, it has met resistance in trying
to extend the pensionable age of civil
servants from 60 to 63.
As van Roekel notes, the government
is prepared to do almost anything to ful-
fill the criteria for eurozone entry.
“They would put up VAT [sales tax], but
I think they would draw the line at in-
creasing corporate tax,” he says. Indeed,
despite expecting a slight pick-up in in-
flation rates, the central bank recently
reduced interest rates from 5.5% to
5.25%. “The aim was to send a message
regarding convergence,” says Eteocleous.
“Our inflation is basically generated
outside the island, so there’s no danger
from this move.And Cyprus really wants
to be ready for the euro.” ■
2 0 0 5 M AY 2 3
 ANNUAL SURVEY
BEST EMERGING MARKET BANKS

THE BEST
EMERGING
MARKET
BANKS 2005
In the 12th annual Global Finance survey of the world’s
best emerging market banks, we honor those banks that
consistently provide excellent service and security in
often-tumultuous markets.

I
n the dynamic world of emerging
market banking, the past year has
been an exciting one. Change is tak-
ing place at unprecedented speed, with
established regional titans tightening
their grip on their chosen markets and
many smaller banks, with canny use of
new technology or through audacious
dealmaking, carving out ever-growing
regional niches.
Many formerly local banks are reach-
ing across borders with acquisitions and
alliances that are transforming them
rapidly into regional powerhouses. Al-
most across the board, revenues are up
and profits are up. The banks that really
shine in this year’s survey are adopting
new technology, leapfrogging their
competitors and providing their cus-
tomers with state-of-the-art facilities
and services. Increasingly, corporations
and consumers in emerging markets
around the world are able easily to ac-
cess the same levels of service that were
only recently reserved for bank clients
in developed markets.
As always, the winners of this year’s
emerging market banks awards are not
necessarily the biggest or the most visi-
ble, but they are those that can best help
their clients make the most of the vast
opportunities available in the world’s di-
verse—and sometimes confusing—
emerging markets.
With input from industry analysts,
corporate executives and banking con-
sultants, Global Finance identified the
banks that adhere to high standards of
corporate governance and possess the
imagination to succeed in a challenging
environment.
Our criteria included growth in as-
sets, profitability, strategic relationships,
customer service, competitive pricing
and innovative products. ■
Contributors: Gordon Platt, Laurence
Neville, Paula L. Green and
Santiago Fittipaldi

2 4 M AY 2 0 0 5
 G L O B A L GF F I N A N C E
ANNUAL SURVEY BEST EMERGING MARKET BANKS
 G L O B A L GF F I N A N C E
ANNUAL SURVEY EMERGING MARKET BANKS: ME&A

G MARKET B
GIN A
ER

NK
EM

S2
BEST

005
MIDDLE EAST AND AFRICA

Best Bank in Region: National Bank of Kuwait

N
ational Bank of Kuwait is one of the largest and
most profitable banks in the Middle East and is
continuing to expand throughout the region and
beyond.The bank is taking full advantage of the improved
economic environment in the Gulf area as the result of
high oil prices. It also is diversifying its revenue sources and
continually upgrading its complete range of products in
response to the needs of its customers.The largest bank in
Kuwait and the highest-rated Arab bank, NBK is a leading
provider of investment banking and trade finance services
in the Middle East.
NBK enlarged its regional network last year with the
opening of a branch in Amman, Jordan, and a 10th branch
in Lebanon. It also acquired a share in International Bank
of Qatar, formerly Grindlays Qatar Bank, and will manage
the bank under contract. NBK opened a branch in
Bahrain in 2003, upgrading its offshore unit. Globally, it
has branches or subsidiaries in New York, London, Paris,
Geneva and Singapore, as well as representative offices in
Thailand and Vietnam. It is planning to expand into Saudi
Arabia, Iraq and China.
NBK posted record profits in 2004, up 24% from a year
earlier, giving it a return on equity of 29.9%.
■ Ibrahim Dabdoub, CEO
www.nbk.com

BAHRAIN subsidiar y in London, GIB has African countries outside South

Gulf International Bank
Gulf International Bank, a leading
investment bank in the Middle East,
has expanded into such areas as ship-
ping finance, secondary market asset
trading and Islamic finance. GIB is
the leading project finance bank in
the region and was a lead arranger of
the $9.3 billion facility for the
Qatargas II liquefied natural gas pro-
ject, the largest energy project fi-
nancing deal worldwide in 2004.
The bank is owned by the six mem-
ber states of the Gulf Cooperation
Council. JPMorgan Overseas Capi-
tal holds a minority interest. GIB’s
earnings rose 42% in 2004, to a
record $150 million. In addition to a
branches in New York, Riyadh and
Jeddah. It has representative offices
in Beirut and Abu Dhabi.
■ Khaled M. Al-Fayez, CEO
www.gibonline.com
BOTSWANA
Stanbic Bank Botswana
Stanbic Bank Botswana, a subsidiary
of Standard Bank of South Africa,
has operated in Botswana since
1991.The bank is active in trade and
project finance and is aiming to
broaden its small, upscale retail
banking business, which comprises
seven branches. In November 2003
it acquired the local private banking
operations of South Africa-based In-
vestec. Stanbic Bank operates in 17
Africa. Standard Bank has offices in
21 additional countries worldwide.
■ Dennis Kennedy, managing
director
www.stanbic.com
EGYPT
Commercial International Bank
Commercial International Bank,
Egypt’s largest private bank, posted
a 23% increase in earnings last year,
with broad-based gains in retail,
corporate and investment banking.
CIB is working with the Interna-
tional Finance Corporation, the
private lending arm of the World
Bank, to increase lending to small
and medium-size enterprises. The
bank has installed a new consumer-

2 6 M AY 2 0 0 5

ANNUAL SURVEY
Hisham Ezz
Al-Arab,
chairman
and
managing
director,
Commercial
International
Bank
credit management system to help
diversify its product offerings. The
bank’s non-performing loan cover-
age ratio reached 137% last year.
CIB offers corporate and trade fi-
nance, as well as consumer lending,
asset management, securities broker-
age and insurance.
■ Hisham Ezz Al-Arab, chairman
and managing director
www.cibeg.com
ETHIOPIA
Dashen Bank
Addis Ababa-based Dashen Bank
maintains Ethiopia’s largest banking
network, with 33 branches, two of
which opened in 2004. Established
in 1995, Dashen Bank was the coun-
try’s first bank to offer Visa and Mas-
terCard accounts. The bank, named
after Ethiopia’s tallest mountain, up-
graded its financial software last year,
and it has a reputation for providing
efficient banking services.
■ Lulseged Teferi, president
www.dashenbanksc.com
GAMBIA
Trust Bank
Banjul-based Trust Bank offers retail
and investment banking services in
Gambia, a small western African na-
tion that straddles the Gambia River.
Trust Bank recently signed a master
guarantee agreement with the US
Export-Import Bank to provide ex-
port finance facilities to local com-
2 8 M AY 2 0 0 5
G L O B A L GF F I N A N C E
panies.The bank offers international
money transfer and foreign exchange
services, as well as Internet banking.
■ Pa Macoumba Njie, managing
director
www.trustbank.gm
Pa
Macoumba
Njie,
managing
director,
Trust Bank
GHANA
Standard Chartered Bank Ghana
Standard Chartered Bank Ghana de-
livers innovative products with ad-
vanced technology and reliable ser-
vice. It was the first financial
institution to offer mobile phone
banking in Ghana. As a subsidiary of
London-based international bank
Standard Chartered, the Ghana bank
offers a full range of corporate and
retail banking services, including for-
eign exchange, structured trade and
corporate finance. The parent insti-
tution has operations in 14 African
nations and is a leading emerging
markets bank worldwide.
■ Ebenezer N. Essoka, managing
director
www.standardchartered.com/gh
GUINEA
International Commercial Bank
International Commercial Bank is a
member of ICB Banking, a group
controlled by former Malaysian fi-
nance minister Tun Daim Zainud-
din. The group is applying sound
banking practices in emerging mar-
ket countries, including six in Africa.
The Guinea-based bank has man-
EMERGING MARKET BANKS: ME&A
aged to trim its non-performing
loans while keeping profits growing.
ICB Banking’s other African banks
are in Gambia, Ghana, Mozambique,
Sierra Leone and Tanzania.
■ Sashidharan Nair, CEO
www.icbank-guinea.com
JORDAN
Jordan Kuwait Bank
Abdel Karim
Kabariti,
chairman
and CEO,
Jordan
Kuwait Bank
Jordan Kuwait Bank is doing a
booming lending business while re-
ducing its non-performing loan ratio
to a record low, thanks in part to Jor-
dan’s flour ishing economy. The
bank, founded in 1976, offers a full
range of commercial banking activi-
ties and operates an extensive branch
network in Jordan. It also provides a
range of electronic delivery chan-
nels, including Internet banking and
mobile phone access to accounts.
The bank’s net income rose more
than 30% in 2004, to $25 million.
■ Abdel Karim Kabariti, chairman
and CEO
www.jordan-kuwait-bank.com
KENYA
Barclays Bank of Kenya
UK-based Barclays has operated in
Kenya for more than 88 years and is
the market leader in retail banking. It
also is expanding its corporate busi-
ness and is seeking funding from the
International Finance Corporation
to increase dollar-denominated loans
to medium-size companies. Barclays

ANNUAL SURVEY
Bank of Kenya is incorporated in
Kenya, with Barclays Bank owning
68.5% of the issued shares and the
remainder listed on the Nairobi
Stock Exchange.The bank has more
than 34,000 shareholders, including
individuals and institutions. With
more than 50 branches, it is the
largest of Barclays Bank’s 10 African
banking operations.
■ Adan Mohamed, managing
director
www.barclays.com/africa/kenya
KUWAIT
National Bank of Kuwait
Ibrahim
Dabdoub,
CEO,
National
Bank of
Kuwait
National Bank of Kuwait’s earnings
rose 24% last year, to a record $515
million, maintaining an upward
trend annually since the bank was
founded in 1952. Domestically, NBK
is more than twice as big as its near-
est competitor, whether measured in
terms of assets, capital or profits.The
bank's ratio of non-performing loans
declined to 1.53% of the loan port-
folio in 2004, giving NBK one of
the cleanest loan portfolios of any
bank worldwide. The bank opened
its 47th branch in Kuwait last Sep-
tember, serving the Andalus area. It is
the bank of choice for multinational
companies operating in Kuwait and
serves local corporations with its
strong underwriting capabilities and
attention to customer needs.
■ Ibrahim Dabdoub, CEO
www.nbk.com
3 0 M AY 2 0 0 5
G L O B A L GF F I N A N C E
LEBANON
BLOM Bank
Naaman
Azhari,
chairman
and general
manager,
BLOM Bank
BLOM Bank has been the biggest
bank in Lebanon for more than 20
years, and in 2004 it expanded its
presence in the region. It opened
Bank of Syria and Overseas at the
beginning of last year. BLOM is the
largest shareholder in the Syrian
bank, with a 39% share, and the In-
ternational Finance Corporation
holds 10%; Syrian individuals hold
the remaining shares. BSO is the first
privately held bank to open in Syria
since the country’s banks were na-
tionalized in 1961. BLOM also
opened eight branches, worth $28.1
million, in Jordan last year. Besides
offices in London, Paris and Geneva,
it has an international banking unit
in Cyprus. The bank offers a full
range of banking, securities and in-
surance products. Its stock brokerage
unit Blominvest accounted for 36%
of the transactions on the Beirut
Stock Exchange in 2004, more than
any other broker.
■ Naaman Azhari, chairman and
general manager
www.blom.com.lb
MOROCCO
Attijariwafa Bank
Attijariwafa Bank, created by the
merger last year of Banque Com-
merciale du Maroc and Wafa Bank, is
the largest bank in the Maghreb re-
EMERGING MARKET BANKS: ME&A
gion of northwest Africa. Attijari-
wafa Bank already has operations in
Europe and Algeria and is planning
a regional expansion, starting with
a new subsidiary in Senegal. The
bank is a leader in trade finance and
foreign exchange, with extensive
global correspondent banking rela-
tionships. It also offers insurance
and asset management services.
Based in Casablanca, the bank has
more than 1 million customers and
nearly 500 branches.
■ Khalid Oudghiri, president-
director general
www.attijari.com
NAMIBIA
First National Bank of Namibia
First National Bank of Namibia,
the country’s leading bank, is a di-
vision of South Afr ica-based
FirstRand Bank, which owns a 55%
stake. A group of Black Economic
Empowerment partners holds 5%.
FNB Namibia merged at the be-
ginning of last year with Swabou, a
local savings and loan association,
creating a financial institution with
a more diverse range of products.
The bank posted a double-digit
gain in pre-tax profits last year,
thanks in part to its newly acquired
insurance operations. It is the only
bank listed on the Namibia Stock
Exchange.
■ Lazarus Ipangelwa, CEO
www.fnb.co.za
NIGERIA
First Bank of Nigeria
First Bank of Nigeria, the country's
largest bank, aims to take advantage
of the ongoing consolidation of the
banking industry to become even
bigger. It is holding discussions
with a number of potential
takeover targets ahead of the new
minimum capital requirements that
come into effect in December
2005. An oversubscribed rights is-

ANNUAL SURVEY
sue in February 2004 made FBN
the number-two most-capitalized
stock on the Nigerian Stock Ex-
change. First Bank maintains a net-
work of 363 branches, which are
gradually being remodeled. With a
subsidiary in London and a repre-
sentative office in Johannesburg,
FBN is beginning to expand out-
side of Nigeria as well. The bank,
which has followed a strategy of
growth and modernization, was the
country's first bank to offer Inter-
net banking.
■ Jacobs M. Ajekigbe, managing
director and CEO
www.firstbanknigeria.com
OMAN
BankMuscat
AbdulRazak
Ali Issa,
CEO,
BankMuscat
BankMuscat, Oman's leading bank,
aims to become a regional banking
institution in the Gulf Cooperation
Council states. It opened a branch
in Bahrain early last year and plans
a second branch in the country. It
also has a representative office in
Dubai. Meanwhile, it recently es-
tablished Bank Muscat Internation-
al, or BMI, an independent banking
entity that will focus on the GCC
region. As the economies of the
GCC nations become more inte-
grated, BankMuscat aims to pro-
vide a complete banking service to
its customer s as they expand
throughout the region. In February
2004 it acquired a 33% stake in
Centurion Bank, a new private-
3 2 M AY 2 0 0 5
G L O B A L GF F I N A N C E
sector bank in India. BankMuscat
and Centurion will develop trade
finance activities between India and
the GCC region and will service
non-resident Indian business and
investment flows.
■ AbdulRazak Ali Issa, CEO
www.bankmuscat.com
QATAR
Qatar National Bank
Saeed Al-
Misnad,
CEO, Qatar
National
Bank
Qatar National Bank, which is 50%
owned by the government, controls
nearly half of the country’s banking
assets. Its earnings rose 27% last
year, while its deposit base grew by
23%. The bank has developed core
competencies in project finance
and syndicated lending and is help-
ing to finance the country’s ambi-
tious plan for tourism development
by backing new hotel construction.
Several major five-star hotels are
scheduled to open by 2006, when
Qatar will host the Asian Games.
The Doha-based bank has the na-
tion’s largest distribution network,
with 35 local branches and offices
in London and Par is. Last year,
QNB implemented JPMorgan
Chase’s Horizon system for manag-
ing operational risk.
■ Saeed Al-Misnad, CEO
www.qatarbank.com
RWANDA
Bank of Commerce,
Development and Industry
Kigali-based Bank of Commerce,
EMERGING MARKET BANKS: ME&A
Development and Industry is one of
Rwanda’s largest banks and the only
one with an ATM network and
smart cards. The profitable bank
continues to gain market share and
is planning to expand into eastern
Africa. Founded in 1995 by Alfred
Kalisa, a former Bankers Trust vice
president, along with a group of lo-
cal businessmen, it focuses closely
on its customers. BCDI finances a
large share of Rwanda’s coffee and
tea exports, as well as the develop-
ment of hotels and offices in down-
town Kigali.
■ NK Passwell Shapi, managing
director
www.bcdi.co.rw
SAUDI ARABIA
Arab National Bank
Nemeh
Sabbagh,
managing
director and
CEO, Arab
National
Bank
Arab National Bank’s profits for
2004 increased by 52%, to $311
million, and its return on equity
reached 26.6%.These record results
came amid a buoyant Saudi econo-
my, which benefited from high oil
prices. ANB provides a full range of
retail, corporate and investment
banking services. The bank was es-
tablished in 1980, when it took
over the six branches of Arab Bank
of Jordan under the “Saudization”
program. It now has a domestic
network of 125 branches, as well as
a London branch. ANB is recon-
structing its branches, often in new
locations, to upgrade them and give
them a standard look. Three of the

S P O N S O R E
Commercial International Bank
Builds Advanced Infrastructure
Adopting state-of-the art technology to better serve customers
ver since our establishment in 1975,
E Commercial International Bank (CIB),
Egypt’s largest and most profitable private bank,
has continually worked to improve the service
we offer our customers.We have achieved this
over the years by investing in state-of-the-art
infrastructure, systems, delivery channels and
high-quality personnel.
In recent years one of the
bank’s main objectives has
been to update and develop
our information technology
and communications
infrastructure. New and
improved systems were
required to satisfy the
requirements of our overall
business strategy.
By utilizing and capitalizing
on the available infrastructure,
we have been able to install a
reliable centralized core
banking system to serve both
corporate and retail customers.The systems are
linked to the necessary modules to efficiently
provide a high-quality service.
CIB’s systems are securely connected to the
SWIFT global network in order to ensure fast
and accurate processing.We have also introduced
a new centralized system to manage loan
arrangements with small and medium-size
enterprises (SMEs).This new system is fully
integrated with the bank’s core banking system
and our trade finance and dealing networks.
CIB is also the first bank in Egypt to set up a
Chip Personalization Centre for our own
centralized card management and also to provide
Chip Cards for a number of other banks and
institutions.
Today CIB is able to offer a wide range of
banking solutions and services for both
corporate and retail customers using a variety of
different delivery channels.
C I B
D S T A T E M E N T
Our Internet banking service has proved
popular with many of our corporate and retail
customers and combines a number of unique
features, including a user-friendly multilingual
interface. Internet banking customers now have
access to a range of new services including fund
raising, automatic bill payment and automatic
requests processing.We have
also recently introduced new
cash management and trade
finance services for our
corporate Internet banking
customers.
CIB customers also have
access to a network of 220
ATM machines, allowing
them to perform a number of
everyday banking transactions
quickly and easily, including
depositing cash or checks,
paying utility bills,
transferring funds or foreign
exchange transactions. All our
ATM machines use state-of-the-art monitoring
and management systems to ensure reliable and
efficient service.
All of the bank’s systems use the latest security
and cryptography technologies, including a
variety of firewalls and PK Infrastructure
technology, which supports digital signatures and
other public key-enabled security services.
At CIB we never underestimate the
importance of our human talent, and we have
invested heavily in recruiting highly-trained,
specialized IT staff to manage and develop our
IT systems to ensure we continue to offer the
best possible service to our customers. ■
Contact information:
Strategic Relations and Finance
Programs Group
Tel: (202) 570-2679
Fax: (202) 571-2362
Email: maha.ragab@cibeg.com
2 0 0 5 M AY 3 5

ANNUAL SURVEY
branches offer exclusive Islamic
banking services.
■ Nemeh Sabbagh, managing
director and CEO
www.anb.com.sa
SOUTH AFRICA
Standard Bank
Jacko
Maree, CEO,
Standard
Bank
Standard Bank prospered in 2004, as
Africa’s economy expanded at twice
the average rate of the past 20 years
and emerging markets were strong.
The bank’s earnings increased by
22% last year, and the return on eq-
uity reached 26.4%. Earnings from
retail banking rose 28%, while earn-
ings from Africa, excluding South
Africa, increased by 30%. Operating
expenses in domestic banking rose
16%. Standard Bank is using broad-
band satellite service to expand its
ATM availability, especially in South
Africa’s rural areas. Standard Bank
London has been active in syndicat-
ed lending for trade finance. Along
with other banks, it signed a $47
million facility for Ukraine-based
Post Pension Bank Aval and a $100
million syndicated term-loan facility
for Halyk Bank of Kazakhstan in
March 2005.
■ Jacko Maree, CEO
www.standardbank.co.za
TUNISIA
Banque de Tunisie
Banque de Tunisie, the most consis-
tently profitable bank in Tunisia in
3 6 M AY 2 0 0 5
G L O B A L GF F I N A N C E
recent years, posted a 5% rise in net
income in 2004, to $30 million. As
a result of its good asset quality, the
bank was able to reduce its loan loss
provisions by 34%. Higher commis-
sions and fees helped to offset a de-
cline in the interest margin. Along
with other major Tunisian banks,
Banque de Tunisie joined Swift’s
online messaging system last year.
■ Faouzi Belkahia, president
director general
UAE
National Bank of Dubai
National Bank of Dubai's profits
increased by 15.3% in 2004, to
$253 million, while return on equi-
ty was 17.1%, compared to 14.6%
in 2003. While most of the bank’s
revenues come from its corporate
banking business, it is boosting its
retail banking operations and began
offering home loans in February
2005.The bank has 39 domestic of-
fices, as well as a branch in London
and a representative office in
Tehran. In addition to providing
loans to government entities and
businesses, NBD is active in trade
finance and project finance, as well
as foreign exchange and money
markets. Last September it intro-
duced a regional investment fund.
■ R. Douglas Dowie, CEO
www.nbd.com
UGANDA
Stanbic Bank Uganda
Kampala-based Stanbic Bank
Uganda is part of the Standard
Bank group of South Afr ica. In
Febr uar y 2002 Stanbic Bank
bought 90% of the shares in Ugan-
da Commercial Bank, a govern-
ment-owned mainly retail bank
with 67 branches. Stanbic Bank re-
modeled the branches and added a
centralized computer network, as
well as ATMs. Stanbic has operated
in Uganda since 1906 and pur-
EMERGING MARKET BANKS: ME&A
chased the Grindlays’ network in
Africa in 1993.
■ Kitili Mbathi, managing director
www.stanbicbank.co.ug
ZAMBIA
Standard Chartered Bank Zambia
Standard Chartered Bank not only is
profitable in Zambia, but its AIDS
initiative also is making a difference
in the communities where it oper-
ates. Mineral-rich Zambia remains
one of the poorest countries in the
world, but its economy is growing,
and Chinese companies have invest-
ed in its copper-mining industry.
Meanwhile, Zambia’s banking sys-
tem is being modernized, thanks in
large part to the presence of a hand-
ful of foreign banks, including Stan-
dard Chartered.
■ Thomas Aaker, managing
director
www.standardchartered.com/zm
ZIMBABWE
Stanbic Bank Zimbabwe
Stanbic Bank Zimbabwe is benefit-
ing from a flight to quality in Zim-
babwe’s consolidating banking sec-
tor. Stanbic Bank also has the
risk-management skills required to
succeed in a difficult economic and
political environment. Zimbabwe’s
economy is in its sixth year of reces-
sion, due in large part to the policies
of the government of Robert Mu-
gabe, which seized white-owned
farms and frightened away investors.
Mugabe’s party was returned to
power in a huge landslide in the re-
cent parliamentary elections, which
were marred by charges of fraud.
Stanbic is the brand name of Stan-
dard Bank of South Africa in the 17
African countries in which it oper-
ates outside of its home base.
■ Pindie Nyandoro, managing
director
www.stanbicbank.co.zm
—Gordon Platt
 G L O B A L GF F I N A N C E
ANNUAL SURVEY EMERGING MARKET BANKS: CEE

CENTRAL AND EASTERN EUROPE

Regional winner: RZB/Raiffeisen International

A
ustria’s RZB/Raiffeisen International was one of
the first European financial institutions to make a
serious commitment to Central and Eastern Eu-
rope, and through continued dedication—displayed by
new acquisitions such as the Savings Bank of Albania—it
has stayed ahead of the pack. Its total assets in the region
have grown from €1.395 billion in 1995 to more than
€28 billion by the end of 2004, with acquisitions ac-
counting for less than €5 billion of that. RZB has consis-
tently produced strong organic growth.The bank has now
added acquisitions to the growth mix, and in the past year
assets have increased by more than 40%. With almost
23,000 employees in 16 markets in the region, RZB has
grown its coverage, but not at the expense of profitability.
For the business year 2004, the group earned a before-tax
profit of €342.2 million—a record result and an increase
of €65.5 million, or 23.7%, over 2003.That growth is be-
ing driven by the phenomenal increase in demand for
banking services in the CEE market. GDP growth in the
CEE has been around twice that of the eurozone in recent
years, and the rate of growth of banking assets has been
even higher as historically the region has been under-
banked, according to RZB.With the bank well positioned
to benefit from increased activity in the SME market and
a potential explosion in consumer debt, it will take a lot to
unseat RZB as the dominant player in the region.
■ Walter Rothensteiner, chairman
www.rzb.at

ALBANIA bank launched a re-branding cam- Raiffeisen-owned since 2003, Pri-

Raiffeisen Bank (formerly
Savings Bank of Albania)
Savings Bank of Albania was al-
ready a Global Finance favorite be-
fore Raiffeisen took charge at the
privatized bank in April 2004. The
swift modernization that accompa-
nied its acquisition—the core
banking system was replaced in less
than four months—has predictably
improved its position further. Lo-
cals have taken well to the acquisi-
tion, and during the takeover the
number of accounts increased. In
the all-important retail market, the
paign and set about refurbishing orbank is the third-largest bank in
every branch, while also establish- Belarus, with around 12% of the
ing the largest ATM network in the
country, with 50 machines at the
end of 2004, another 50 planned Sergey
for 2005 and 10,000 Visa debit Kostyu-
cards issued. Meanwhile, the for- chenko,
mer Savings Bank has begun lend- chairman,
Priorbank
ing to the SME market in Albania
for the first time in eight years.
■ Steven Grunerud, CEO
www.raiffeisenbank.co.yu
BELARUS
Priorbank

3 8 M AY 2 0 0 5

ANNUAL SURVEY
total market’s assets. Since the be-
ginning of 2002 the bank has in-
creased its loan portfolio more than
threefold and consequently in-
creased its market share by 4%, to
10.6%. One of the bank’s greatest
achievements has been to grow re-
tail lending from just 0.5% of the
market to 6.8% of the market. Pri-
orbank is now the most profitable
bank in the Republic of Belarus,
which is growing strongly but still
suffers the ill effects of hyperinfla-
tion and remains one of the most
closed economies of the region.
While Priorbank is still placed only
third in terms of assets, capital and
loans, it cannot be long before the
ambitious operation challenges the
largest banks in the country. Bank
assets now stand at €480 million,
having increased by 1.2 times dur-
ing the past year.
■ Sergey Kostyuchenko, chairman
www.priorbank.by
BOSNIA & HERZEGOVINA
Raiffeisen Bank
Edin Muftic,
CEO,
Raiffeisen
Bank
Competition is heating up in
Bosnia and Herzegovina. The
country’s Banking Agency spent
much of last year revoking licenses
of smaller banks and initiating liq-
uidations in a bid to clean up the
market. Meanwhile, approval was
given for two large mergers: one
between Zagrebacka Banka and
Universal Banka completed on
4 0 M AY 2 0 0 5
G L O B A L GF F I N A N C E
June 30, and the other between
HVB and Central Profit Banka on
September 30. Despite the chal-
lenges posed by these new groups,
Raiffeisen Bank maintained its
dominant position in the market,
with a 21% share of assets. Indeed,
it has increased its share of assets
from 19.8% in 2003. But the strug-
gle in the next 12 months will be
tougher: Instead of a fragmented
market, Raiffeisen now faces Uni-
Credito Zag rebacka, with 15%
market share in third place, and
HVB Central Profit Banka, with
8% of market assets. Further acqui-
sitions are expected in 2005.
■ Edin Muftic, CEO
www.raiffeisenbank.ba
BULGARIA
DSK Bank
Violina
Marinova,
chairman
and CEO,
DSK Bank
Solely owned by Hungary’s largest
financial institution, OTP Bank,
since last year, DSK Bank now has
an organization with a market cap-
italization of almost €8 billion be-
hind it. Just seven years after the
DSK’s creation from the hulk of a
state-owned savings bank, growth
continues apace, and innovation is
the key to increased profits. DSK’s
after-tax profits went up by 60% in
2004, and the bank shows no sign
of stopping.With the experience of
OTP behind it, the bank has
stepped up the introduction of new
products and services. The bank
EMERGING MARKET BANKS: CEE
now provides financing to more
than 560,000 individuals, giving it a
market share of 43%. Indeed, the
bank boasts that it reaches almost
every Bulgarian household, servic-
ing more than 3.8 million clients
with over 1 million payment ac-
counts and 700,000 cards. Mean-
while, DSK Bank has also doubled
commercial loans and increased its
corporate clients by 50,000.
■ Violina Marinova, chairman and
CEO
www.dskbank.bg
CROATIA
Privredna Banka Zagreb
Bozo Prka,
chairman,
Privredna
Banka
Zagreb
The largest and oldest of Croatia’s
financial institutions, Pr ivredna
Banka Zag reb—par t of Italian
Gruppo Banca Intesa since 1999—
has benefited from the flourishing
local economy in the past year. In
2004 group net profit increased
5.8% against a backdrop of strong
competition and constant pressure
on interest rates. Most importantly,
performance indicators show con-
tinuous improvements in profitabil-
ity and productivity. The return on
average equity at the level of the
group was 18.6% while the consol-
idated retur n on average assets
reached a very respectable level of
1.7%. Earnings per share also in-
crease by 5.7%. Total deposits in
2004 rose by 8.1%, and the bank
now commands a market share of
 BANK ASAKA
S P O N S O R E D S T A T E M E N T

Asaka Bank: Your Key for

Success in Uzbekistan
o support the development of key industries,
T the Government of Uzbekistan—
understanding the importance of such growth to
Development (EBRD), the Asian Development
Bank (ADB) and International Financial
Corporation (IFC).There are currently pending
the national economy—created specialized credit lines totaling $20 million from Islamic
financial institutions. Development of the motor Development Bank and the European Bank for
industry fell to the young and ambitious Bank Reconstruction and Development.
Asaka, which began its role as a Specialized State From its inception, the bank has successfully
Joint-Stock Commercial Bank at the end of offered trade-financing services. Short-term
1995, at which point it had authorized capital of credits were established with JPMorgan Chase,
US$150 million, 799 employees and 15 branches. UBS, BCP and several German banks, in addition
From the start, Bank Asaka took a lead position in to an agreement with the European Bank for
the banking market of the country. By 2003, Reconstruction and Development under the
capital had grown by 10.7%, assets by 59.5%, Trade Facilitation Program (TFP).
credit portfolio by 62.8% and A significant event for the
Republic of Uzbekistan
client base (including banking and financial system
investors) by 34.6%. By 2004, ● 4th place in the world in cotton of Uzbekistan was the
the bank had 26 branches and manufacturing and processing participation by Bank Asaka in
45 “mini-banks,” with a total ● 4th place in reserves of gold the syndicated loan for $36
staff of 1,966 employees, ● 10th place in reserves of natural gas million with a maturity of
At an early stage, the bank ● 11th place in reserves of copper three years for the Amantaytau
participated in the financing of ● 29th place in automobiles Goldfields gold extraction
delivery of accessories from manufacturing joint venture.The bank
Korea for the production of participated as the creditor
cars by the joint venture UzDaewooAuto, as well along with such major banks as West LB and
as for specialized engineering and the Standard Bank London.The project, which was
manufacturing of buses for SamCochAuto. In initiated by British company Oxus Researching,
addition, the bank financed seven new joint has continued in Khandiza (the Surkhan-Darya
ventures for manufacturing spare parts from local region), for which Asaka has been allocated a
raw materials, resulting quickly in the reduction of significant portion.
raw materials dependence for two manufacturers. With its growing list of clients, branch network
By following its strategic plan, since 2001 the and solid international reputation, the bank can
bank has been a dynamically developing review the past 10 years with pride and can look
institution, diversifying its activities by reducing its ahead with confidence. Global Finance magazine
concentration in the auto industry and has recognized Bank Asaka as “The Best Bank in
participating in investment projects totaling $200 Uzbekistan”—a distinction that will further
million, including 20 investment projects in the enhance the bank’s relations with the leading
textile industry, eight in pharmaceuticals, six in banks and financial institutions of the world. ■
information technology and two in transportation
and telecommunications. For these projects the Mr. Shokir J. Juraev, Chairman of the Board
credit lines of more than 160 foreign Contact person: Mr. Jamshid M. Rakhmonov,
correspondent banks were used, with insurance Head of International Division
coverage by export credit agencies. 67, Nukus Street
This adds to the bank’s growing reputation for 700015 Tashkent
reliability and trust within the world banking Republic of Uzbekistan
community. In addition, the bank has successfully Tel: (+998 71) 120 – 82 48 (203)
utilized four credit lines, totaling $60 million, Fax: (+998 71) 120 – 8 166
from such international financial institutions as Email: ifiteam@asakabank.com
the European Bank for Reconstruction and www.asakabank.com.

2 0 0 5 M AY 4 1

ANNUAL SURVEY
19.4%. Privredna Banka Zagreb al-
so continued its steady program of
ATM expansion and introduced
the PBZ American Express’s Plat-
inum card.
■ Bozo Prka, chairman
www.pbz.hr
CYPRUS
Bank of Cyprus
After two difficult years for the
banking sector in Cyprus—which
was affected by the prolonged
downturn of the stock market and
difficulties in the wider Cypriot
economy, along with stricter regu-
lations regarding loan quality—the
Bank of Cyprus Group exper i-
enced a solid 2004 and looks well
positioned for 2005. The bank has
instituted a new management
structure and expects return on eq-
uity to increase to more than 13%
in 2005 from 6.9% in 2004. Never-
theless, 2004 was a good year for
the bank: Group profit after tax for
2004 reached C£38 million com-
pared to a loss of C£29 million in
2003. Domestic core profit in-
creased 57% to reach C£79 million
compared to C£50 million in
2003. Much of this is due to pro-
grams for cost containment and en-
hancing revenue. Group total assets
increased 13% during 2004, and to-
tal customer deposits shot up by
17%.
■ Solon A. Triantafyllides,
chairman
www.bankofcyprus.com
CZECH REPUBLIC
Ceská Sporitelna
Ernst Bank-owned since 2000, this
bank is consistently seen as the
leading innovator in the Czech
market, serving retail and small and
medium-size businesses effectively.
It has one of the best networks in
the country, with 1,071 ATMs and
almost 2.8 million bankcards at the
4 2 M AY 2 0 0 5
G L O B A L GF F I N A N C E
end of 2004 and well over 5 million
customers. That dedication to ser-
vice and innovation has paid off
handsomely for the bank, which in
the six months to June 2004
achieved an unaudited net consoli-
dated profit after minority interests
of Ckr4.39 billion ($188 million)
under International Financial Re-
porting Standards (IFRS).That rep-
resents an increase of 30% while
operating profit for the same peri-
od increased by 50%. Ceská
Sporitelna expects its net profit to
grow around 10% this year.
■ John James Stack, chairman and
CEO
www.csas.cz
ESTONIA
Hansabank
Long the darling of international
investors—which essentially used
this dominant player as a proxy for
the entire Baltic region—the disap-
pearance of Hansabank from the
Estonia stock exchange following
its purchase by Swedbank is a dis-
appointment. But the factors that
made it such an attractive target are
clear: It is an efficient and dynamic
player in one of the fastest-growing
regions of the world. The bank
benefited from improved consumer
sentiment following Estonia’s ac-
cession to the EU in May 2004,
one result of which was an increase
in lending of 35% during 2004.
Due to faster-than-expected asset
growth and improvements in effi-
ciency, Hansabank’s net profit in-
creased 40% over the year, to
€182.8 million. Fur ther more,
Hansabank’s market value rose by
80% over the year, to €3.05 billion.
■ Erkki Raasuke, acting CEO
www.hansagroup.com
HUNGARY
OTP Bank
OTP Bank’s acquisition of DSK
EMERGING MARKET BANKS: CEE
Bank in Bulgaria last year—and its
continued expansion this year with
the purchase of a 95.59% stake in
Croatian bank Nova for €236 mil-
lion in April—is an indication of
the confidence the bank now has.
OTP is also in the process of trying
to buy 99.89% of the capital of
Niska banka in Serbia. Already
overwhelmingly the dominant
player in Hungary and the largest
bank in Central Europe by market
capitalization, the bank certainly
has the money to spend: Its before-
tax profit increased from Hf87 bil-
lion in 2003 to Hf123 billion ($641
billion) in 2004. Consolidated net
profit is expected to rise by 10.3%,
to Hf138.82 billion ($723 million),
in 2005, and the bank expects to hit
Hf245.89 billion by 2009.
■ Sándor Csányi, chairman and
CEO
www.otpbank.hu
LATVIA
Parex Banka
Parex Banka was the first company
from Latvia to access the syndicat-
ed loan market and in Apr il
launched the first eurobond from
the country. Already observers are
predicting the bank could float lat-
er in the year or in 2006, valued at
up to $1 billion. Parex Banka is the
largest bank in Latvia in terms of
assets. Its largest owners are the
bank’s top executives,Valery Kargin
and Viktor Krasovitsky. Bank assets
grew by 33.2% in 2004, the volume
of deposits by 32.1%, and the vol-
ume of loans issued by 43.7%. The
growth of Parex’s mortgage portfo-
lio was exceptional at 104.6% while
its market share in terms of assets
was 17.8%, its share of deposits
20.4% and its market share of loans
15.2%.
■ Valery Kargin, president and
chairman
www.parexgroup.com

ANNUAL SURVEY
LITHUANIA
SEB Vilniaus Bankas
Julius
Niedvaras,
president
and CEO,
SEB Vilniaus
Bankas
Now known as SEB Vilniaus
Bankas, to better reflect its owner-
ship by Sweden’s SEB, the bank is
the biggest in Lithuania and the
market leader for deposits and
lending. It is also being used to fur-
ther SEB’s expansion in the region.
In January 2005 it completed the
purchase of 95% of the shares of
Ukrainian Bank Agio. In 2003, the
last year for which figures are avail-
able, the bank’s assets increased by
29.1% while its mortgage loans in-
creased by 88%. Equally impressive
was an increase in consumer loans
of 76%.With a market share of cor-
porate deposits of nearly half the
market and a third of retail de-
posits, SEB Vilniaus Bankas appears
unassailable in its home market.
■ Julius Niedvaras, president and
CEO
www.vb.lt
MACEDONIA
Komercijalna Banka
Komercijalna Banka is celebrating
50 years of existence in 2005 and is
in fine shape as it does so. In the last
figures available, from its 2003 an-
nual report, the bank increased
gross profit by 21%. Retail deposits
increased by a healthy 20% while
other entities, principally corpo-
rates, increased deposits by 16%.
4 4 M AY 2 0 0 5
G L O B A L GF F I N A N C E
Lending to corporates increased a
huge 66% on 2002. The bank has
successfully modernized the bank-
ing market in Macedonia and
claims success in using the Internet
for services, not only for retail cus-
tomers but for international pay-
ment operations. The bank’s inter-
nal FX market had a turnover of
$821 million in 2003.
■ Trajko Davitkovski, chairman
www.kb.com.mk
Trajko
Davitkovski,
chairman,
Komercijalna
Banka
MALTA
HSBC Malta
Five years on from HSBC’s acquisi-
tion of Mid-Med Bank, the opera-
tion continues to go from strength
to strength, with 2004 being anoth-
er record year. Before-tax profit in-
creased by 26.3% while costs were
cut without reducing customer ser-
vice or investment for the future.
The bank’s fund management, in-
surance and stock-broking sub-
sidiaries contributed substantially
to the overall performance of the
group. Profit attributable to share-
holders increased by 31.9%. During
the year, the bank, in common with
other HSBC operations, focused on
customer-driven initiatives. The re-
sult in Malta was the reorganization
of operations into three groups:
personal financial services, com-
mercial banking, and corporate and
investment banking and markets.
The change has been backed up by
EMERGING MARKET BANKS: CEE
continued investment in technolo-
gy, premises and systems.
■ Shaun Wallis, CEO
www.hsbcmalta.com
MOLDOVA
Victoriabank
Unrelenting in its efforts to offer a
modern standard of universal ser-
vice to Moldovan customers,Victo-
riabank has begun offering Internet
banking services in order to im-
prove the quality and accessibility
of its operations. The country’s
largest bank says that improved cus-
tomer relations and a more profes-
sional approach to delivering ser-
vices helped to increase its number
of clients by almost 20,000, to more
than 86,000 in 2003, the last year
for which figures are available.That
helped to boost assets by 28%. The
bank has also been an integral play-
er in developing the Moldovan
economy—working with the IFC,
EBRD and other international or-
ganizations to distribute lines of
credit to new and growing busi-
nesses.
■ Victor Turcanu, president and
chairman
www.victoriabank.md
POLAND
Bank Pekao
In 2004 UniCredit subsidiary Bank
Pekao increased consolidated net
profit by 46% to hit a new record,
while return on equity increased
from 13.1% to 18.8% over the year.
The bank attributes this impressive
performance to improved efficien-
cy and a determination to identify
and resolve all the negative areas of
the bank’s revenue structure identi-
fied a year earlier. The bank set out
to improve its revenue mix. Fees
and commission income now rep-
resent 37% of total income com-
pared to 34% a year ago. Similarly,
Pekao achieved good results in sales

ANNUAL SURVEY
of its strategic products: mutual
funds and mortgage loans. In 2004
the bank’s mutual funds increased
their market share to a record high
of 34.5% from 30.4%, while new
mortgages shot up by 99.5%. That
gave the bank a market share of
new sales of mortgages of 25.3%
from just 10.9% a year earlier.
■ Jan Krzysztof Bielecki, president
and CEO
www.pekao.com.pl
ROMANIA
Raiffeisen Bank
Steven van
Groningen,
president
and CEO,
Raiffeisen
Bank
Raiffeisen Bank is now a leading
universal bank in the Romanian
market, providing a complete range
of products and services to private
individuals, SMEs and large compa-
nies through its 200 banking out-
lets, its extensive ATM network and
its phone and mobile banking ser-
vices. It is also modernizing the
country’s banking industry: In the
past year it offered new loan prod-
ucts and the first drive-in ATMs in
Romania for retail customer s.
Meanwhile, Raiffeisen Bank
launched the largest cor porate
bond issue on the Romanian mar-
ket since 1989 and financed the
largest infrastructure project in Eu-
rope—the building of Brasov-Bors
motorway by American corpora-
tion Bechtel. Raiffeisen is also a
leading funding par tner of the
largest mobile communications
4 6 M AY 2 0 0 5
G L O B A L GF F I N A N C E
companies operating in the Ro-
manian market, Connex and Tele-
mobil.
■ Steven van Groningen, president
and CEO
www.raiffeisen.ro
RUSSIA
MDM Bank
Joint holder of the highest credit
ratings for a privately owned Russ-
ian banking group from all three
ratings agencies, MDM Bank shook
off many of the problems experi-
enced in the Russian market in the
past year to post an impressive set
of figures for the first three quarters
of 2004, the most recent figures
available. Group profit was $153
million while core revenues rose
10.4% on the previous year. Total
assets grew 13% while total share-
holder equity increased 23%, to
$839 million. One of the bank’s key
growth areas was consumer loans,
which increased 21% over the 2003
year-end level. Much of its solidity
can be attributed to a tier-one ratio
of 19.2%—well above the bank’s
own target of 13% to 15%.
■ Andrey Saveliev, CEO
www.mdmbank.com
SERBIA & MONTENEGRO
Raiffeisen Bank
After just four years of operations,
Raiffeisen Bank is now a true uni-
versal bank in Serbia and Montene-
gro, offering a full range of banking
products and services to all major
client groups such as corporates,
private individuals and SMEs. One
year ago, when Raiffeisen last won
this award, the bank was congratu-
lated for its extraordinary growth
and for placing fourth in the coun-
try. Now it is Serbia’s leading bank
by all main criteria: total assets,
loans to customers, deposits from
customers, and profit. In every area
of banking, market share soared in
EMERGING MARKET BANKS: CEE
2004. Market share of retail lending
increased from 7.54% at the end of
2003 to 12.82% by September
2004. Similarly, market share of
corporate deposits increased from
10.69% to 19.34% over the same
period.Total assets market share in-
creased almost 5% over the same
period.The figures behind these in-
creases in market share are incredi-
ble: a 261% increase in the retail
credit portfolio and a 70.2% in-
crease in corporate deposits.
■ Budimir Kostic, chairman
www.raiffeisenbank.co.yu
Budimir
Kostic,
chairman,
Raiffeisen
Bank
SLOVAKIA
VUB Banca
This majority-owned subsidiary of
Italy’s Banca Intesa since 2001
spent a year transforming itself into
a modern organization, and by the
end of 2003 that investment had
paid off. The bank entered 2004
able to offer products and services
as good as or better than the com-
petition. Net profit grew more than
47% in 2003 largely through cost
cutting. But more importantly, the
bank was set up for a stellar 2004.
Net operating profit under IFRS
grew an impressive 82% in 2004
against a backdrop of an increase in
operating revenues of just 14%—
further proof that efficiency is now
firmly embedded at VUB.The bank
increased total consolidated assets

ANNUAL SURVEY
by 14% while the customer loan
portfolio grew by nearly 12%. One
of the best-performing areas at the
bank was its fund management
franchise, which grew assets under
management by 106%.
■ Tomas Spurny, CEO
www.vub.sk
SLOVENIA
Nova Ljubljanska Banka
Although Nova Ljubljanska Banka,
which is one-third-owned by Bel-
gium’s KBC, suffered a drop in net
profits in 2003, the last year for
which figures are available, the bank
is still the one to beat in Slovenia. It
has 57,500 business accounts and a
Marjan
Karmar,
president
and CEO,
Nova
Ljubljanska
Banka
39.4% market share in the SME
sector. It dominates the retail mar-
ket to a similar extent. Nova Ljubl-
janska Banka also expanded its
range of services on the Slovenian
market in 2003 with the creation of
life assurance company NLB Vita, a
G L O B A L GF F I N A N C E
joint venture with KBC. In the first
six months of operation, the ven-
ture took a 4% market share.
■ Marjan Karmar, president and
CEO
www.nlb.si
TURKEY
Akbank
This is another win for Akbank,
which has undergone major change
in the past few years. Back-office
staff has been reduced and processes
centralized while branch staff have
been retrained and operations have
become more sales-focused. Ak-
bank’s success in modernization is
evident from the fact that 66% of all
banking transactions are now done
by alternative, non-branch means
such as Internet banking, call centers
or ATMs. Similarly, the new empha-
sis on sales has resulted in a 90% in-
crease in fees and commissions,
mainly from credit card and asset
management operations. In the con-
sumer market, Akbank is number
one in loans, with a 15.4% market
share, and is well positioned in the
rapidly growing mortgage market,
with 13.2%. The bank is the most
profitable private-sector bank in
Turkey, and with total assets of $26
billion at the end of 2004 it is a hard
act to beat.
■ Zafer Kurtul, president and
CEO
www.akbank.com.tr
EMERGING MARKET BANKS: CEE
UKRAINE
Privatbank
Despite the political upheaval of the
past year in the Ukraine, Privatbank
has carried on doing what it knows
best: improving banking services for
its 8.4 million retail customers and
365,000 corporate customers. The
bank now has more than 2,100 ATM
machines and 1,738 branches and a
staff of more than 23,000 employees.
It recently enhanced its ATM net-
Alexander
Doubilet,
chairman,
Privatbank
work, is now expanding its branch
network and is increasing its Visa and
MasterCard business. Privatbank has a
leading 35.7% share of the Ukrainian
financial services market. According
to figures from the National Bank of
Ukraine, Privatbank can boast num-
ber-one positions in total assets and
loan portfolio and is also a clear leader
when it comes to net profit.
■ Alexander Doubilet, chairman
www.pbank.com.ua
—Laurence Neville
 G L O B A L GF F I N A N C E
ANNUAL SURVEY EMERGING MARKET BANKS: ASIA

G MARKET B
GIN A
ER

NK
EM

S2
BEST

005
ASIA

Regional Winner: HSBC

W
ith operations in nearly 80 countries, HSBC’s
dominance in Asian banking reaches back to its
formation in Hong Kong in 1865 and contin-
ues with its recent inroads into the Chinese banking mar-
ket. Last year HSBC bought a $1.7 billion stake in the Bank
of Communications, China’s fifth-largest bank, and earlier
this year became the first foreign bank to provide local cur-
rency services in the Chinese capital of Beijing.The bank’s
renminbi services for local and international corporations
aims at strengthening the business links with domestic
companies based in the capital city of this Asian economic
giant. Elsewhere in Asia, HSBC also acquired a 14.6% stake
in an Indian private bank, UTI Bank, in 2004. HSBC
Group executives have targeted India and China, along
with Brazil and Mexico, as markets with strong growth po-
tential for the bank over the next several years.And in oth-
er recent expansions, this giant financial services firm that is
now based in London integrated the Bank of Bermuda in-
to HSBC Group and bought the retail financial services
arm of the Marks & Spencer Group.The bank provides a
comprehensive range of financial services to consumer and
corporate clients through a network of more than 9,800 of-
fices in 77 countries around the globe. Earnings in 2004
jumped to $11.8 billion,up from $8.8 billion in 2003,while
assets increased to nearly $1.3 trillion.
■ Stephen Green, group chief executive of HSBC
Holdings and chairman of HSBC Bank plc
www.hsbc.com

ARMENIA day. Converse Bank provides a full AZERBAIJAN

Converse Bank
Converse Bank has emerged as one
of the top banks in Armenia over a
tumultuous decade in which the
number of commercial banks
dropped drastically by more than
70%. Since this Southwest Asian
nation first created a banking sys-
tem in 1993, the Central Bank of
Armenia has implemented a wide
range of reforms to strengthen the
country’s financial system. Assets
and profit grew as the number of
commercial banks plummeted
from more than 70 to about 20 to-
range of services, including com- International Bank of
mercial lending, trade finance and Azerbaijan Republic
correspondent banking, to its busi-
ness clients and caters to retail cus-
tomers with consumer loans, Inter- Jahangir
net banking and a network of Hajiyev,
chairman,
branches. Its managers are dedicat-
International
ed to using the latest banking tech-
Bank of
nology and innovative solutions to
Azerbaijan
meet their clients’ financial needs.
Republic
The bank was listed on the Yerevan
Stock Exchange in 1995. Assets to-
tal $70 million.
■ Nasibyan Smbat, general director
www.conversebank.am

2 0 0 5 M AY 4 9

ANNUAL SURVEY
The largest bank in this former Sovi-
et Republic country, the Internation-
al Bank of the Republic of Azerbaijan
is majority-owned by the Ministry of
Finance. So even though it carries the
risk that goes along with rapid growth
and a concentrated balance sheet in a
volatile economy, the bank retains the
backing of the state, which held a
50.2% stake at the end of 2004.As part
of banking reforms announced by the
president earlier this year, the govern-
ment will sell off shares and is expect-
ed to sell a 20% stake to the European
Bank for Reconstruction and Devel-
opment. The bank remains strong in
foreign exchange; it was created in
1990 as a replacement for the local
branch of Vnesheconombank, the for-
mer USSR foreign trade bank. IBA is
also a leader in corporate lending as it
expands its retail operations.The bank
has about 35 branches and more than
100 outlets in 30 cities around the
country. With about $664 million in
assets, IBA retains slightly more than
half of the total assets in the nation's
banking system.
■ Jahangir Hajiyev, chairman
www.ibar.az/en
BANGLADESH
Islami Bank Bangladesh
In a banking system dominated by
four large state-owned banks, Islami
Bank Bangladesh stands out as one of
the successful privately owned banks
in Bangladesh. The bank was created
more than two decades ago to operate
under the principals of Islamic law,
known as Shariah, meaning it earns
profits on investments rather than
charging interest on loans and pays a
portion of gross returns to depositors.
Islamic banking principals require so-
cial goals to be emphasized before the
maximizing of profits, so Islami Bank
has maintained better-than-average
asset quality. This successful formula
encompasses a wide investment port-
folio that ranges from more than 40%
5 0 M AY 2 0 0 5
G L O B A L GF F I N A N C E
for trade to about 30% for industry to
2.5% for agriculture and rural invest-
ment. The bank has introduced such
projects as the Rural Development
Scheme to help improve the living
standards of people, especially women,
in rural areas. Operating in one of the
largest Muslim countries in the world,
this financial institution has assets of
nearly $1.4 billion, about 3,700 em-
ployees and 140 branches, mostly in
the urban areas of Bangladesh.
■ Abdur Raquib, executive president
www.islamibankbd.com
CHINA
ICBC
The largest of China’s four state-
owned commercial banks, the Indus-
trial and Commercial Bank of China
is a full-service bank offering a wide
range of services to corporations, gov-
ernments and consumers.The bank is
moving far from its roots in the mid-
1980s as a source of working capital to
state-owned enterprises.This spring it
received regulatory approval to launch
gold derivatives products, for example,
and analysts are waiting to see how
the bank’s much anticipated reorgani-
zation plays out this year. Bank execu-
tives hired China International Capi-
tal, the country’s largest investment
bank, in March to lead a reorganiza-
tion of the bank’s $640 billion worth
of assets and turn it into a joint-stock
company.The reorganization will pre-
pare ICBC for an initial public offer-
ing that could reach $10 billion and
be the nation’s biggest share sale. The
bank has a strong franchise, with
20,000 branches within China’s bor-
ders and about 70 branches overseas.
Those offices are servicing 100 mil-
lion individual customers and more
than 8 million corporate clients. Op-
erating profits for 2004 were up 20%,
to $9 billion.
■ Jiang Jianging, chairman and
president
www.icbc.com.cn
EMERGING MARKET BANKS: ASIA
GEORGIA
ProCredit Bank (Georgia)
ProCredit Bank (Georgia) has built
its success by providing credit and fi-
nancial services to entrepreneurs and
to micro and small businesses in this
country of nearly 4.7 million people.
Owned by a consortium of interna-
tional financial institutions, the bank
is part of a global network of nearly
20 banks spread through Eastern Eu-
rope, Latin America and Africa. It
was created in 1999 as Microfinance
Bank of Georgia. Analysts say the
bank’s Western management is expe-
rienced and efficient and adheres to
sophisticated risk management pro-
cedures.Assets are about $62 million,
and the bank is increasing lending to
mid-size companies and expanding
consumer services with home mort-
gages and improvement loans. The
bank is also attracting more retail
customer deposits.
■ Philip Sigwart, general manager
www.procreditbank.com
INDIA
ICICI Bank
K.V. Kamath,
managing
director and
CEO, ICICI
Bank
ICICI Bank has used its expertise in
technology to emerge as a significant
player in consumer banking, with
505 branches and about 1,800 ATMs
in more than 250 cities across India.
The bank’s retail deposit base has
more than doubled since its shift in

ANNUAL SURVEY
March 2002 from a development-
banking model into a commercial
bank. India’s second-largest bank
continues to serve the nation’s lead-
ing companies and small and mid-
size businesses with an array of ser-
vices from correspondent banking to
structured finance deals as its interna-
tional banking group caters to the
cross-border needs of its corporate
clients.The bank is financially sound,
with $33.6 billion in assets at the end
of 2004. About 16% of its equity re-
mains indirectly in gover nment
hands as a public company listed on
the New York Stock Exchange, and it
has access to foreign international in-
vestors, who hold close to a 70%
stake in the bank.
■ K.V. Kamath, managing director
and CEO
www.icicibank.com
INDONESIA
Bank Danamon
Francis A.
Rozario,
president,
Bank
Danamon
Bolstered by a strengthening econo-
my as well as the financial muscle of its
parent, Temasek Holdings, Bank
Danamon posted stronger profits and
a stronger capital position for the year
2004. The bank’s net profit after tax
was up by 57% last year as the bank
carved out a successful niche in In-
donesia’s growing market for con-
sumers and small and mid-size busi-
nesses.The purchase of a 75% interest
in Adira Finance in April of 2004 has
given it a strong entry into the high-
G L O B A L GF F I N A N C E
er-margin market of micro-credits or
small-scale loans.With $6.3 billion in
assets, Bank Danamon is the country’s
fifth-largest bank and accounts for 5%
of the nation’s system-wide assets.
While its loans to corporate clients
now make up a smaller percentage of
its loan portfolio, the bank still offers
corporates an array of services from
loans, to treasury services, such as for-
eign exchange and complex derivative
transactions, to standard trade finance
activities like letters of credit.
■ Francis Andres Rozario, president
www.danamon.co.id
KAZAKHSTAN
Kazkommertsbank
The largest commercial bank in this
Central Asian nation, Kazkommerts-
bank has shaped its success by offering
a wide range of services to mid-size
and large corporations. It provides do-
mestic and international clients with
expertise in everything from trade and
structured finance products to corpo-
rate lending to asset management ser-
vices.While its share of the corporate
loan market remains significant at
nearly 30%, the bank is generating
more business by targeting regional
small and mid-size enterprises as well
as retail clients. The bank now has
about 20% of the retail deposit market
and a network of about two-dozen
full-service banks. The bank has in-
creased profitability recently by ex-
panding into other markets through-
out the Commonwealth of
Independent States as it improves its
IT and risk management techniques.
■ Nina A. Zhussupova, chairman of
the management board
www.en.kkb.kz
KYRGYZSTAN
AsiaUniversalBank
This Central Asian financial institution
has leveraged an expertise in technol-
ogy and an extensive network of cor-
respondent banks to become one of
EMERGING MARKET BANKS: ASIA
the region’s leading providers of inter-
national banking services. The bank’s
management sees itself as bridging a
gap between East and West as it pro-
vides a wide range of banking services
to corporations throughout the Com-
monwealth of Independent States.
Created in 1997, AsiaUniversalBank
focuses on interbank clearing, curren-
cy exchange, export-import deals and
other international transactions for
clients throughout the region. It pro-
vides trade finance services to many of
the country’s leading corporations.
This year, the bank is continuing its
expansion into international activities,
including setting up a correspondent
banking account with American Ex-
press Bank in New York. AsiaUniver-
salBank already has correspondent re-
lations with banks throughout the
CIS, the Baltics and Europe.Assets to-
tal about $100 million.
■ Nurdin Akenovich Abdrazakov,
CEO
www.aub.kg/en
MACAU
Seng Heng Bank
Seng Heng Bank is Macau’s third-
largest bank by assets and a strong play-
er in the corporate market, with com-
mercial banking services accounting
for more than 80% of its loan book.
While the quality of the bank’s $2.5
billion in assets is sound, the bank’s
loan book is highly concentrated, and
the 10 largest borrowers account for
about 70% of its total loans. However,
it has the support of its parent, the So-
ciedade de Turismo e Diversoes de
Macau. Since its acquisition by STDM
in 1989, the bank has implemented
technology so it can offer services such
as phone banking while corporate
customers can obtain sophisticated ad-
vice on project finance deals or merg-
ers and acquisitions.
■ Hung Sun Stanley Ho, chairman
and managing director
www.senghengbank.com
2 0 0 5 M AY 5 1

ANNUAL SURVEY
MALAYSIA
Maybank
Datuk
Amirshamz
Aziz,
president
and CEO,
Maybank
As Malaysia’s largest bank, with nearly
a quarter of the country’s banking as-
sets, Maybank is dominant in both
conventional and Islamic banking.
With almost half of the market share
for Islamic trade financing, for exam-
ple, this international bank also retains
nearly a quarter of the country’s over-
all business in trade finance activities.
Analysts laud its management team for
continually striving for improvement.
Maybank serves the consumer market
with strong online banking services
and retail services like auto financing
and home loans. But its sheer size,
with more than $42 billion in assets,
makes it a logical player in the corpo-
rate market as it maintains a strong
presence in commercial lending—a
business that should increase as the
country’s corporations have restruc-
tured their balance sheets and the
economy keeps improving. The bank
has about 460 offices in 12 countries
and 1,100 ATM machines.
■ Datuk Amirshamz Aziz, president
and CEO
www.maybank2u.com.my
MONGOLIA
The Agricultural Bank of Mongolia
From its base in the capital city of
Ulaanbaatar,The Agricultural Bank of
Mongolia is a leading provider of fi-
nancial services in this giant Asian na-
tion, with a network of nearly 400
5 2 M AY 2 0 0 5
G L O B A L GF F I N A N C E
branches. The roots of the company
go back eight decades to when it be-
gan operations as the State Bank of
Mongolia. Now more commonly
known as The Khan Bank, the institu-
tion was privatized in 2003 after being
run for nearly three years under a spe-
cial corporate governance structure
that involved the Mongolian and US
governments and the World Bank.To-
day, the bank has a team of well-
trained managers. Assets stand at $120
million, and the bank serves more
than 30% of the 2.5 million people
living in this landlocked nation that
borders Russia and China.
■ J. Peter Morrow, CEO
www.khanbank.mn
PAKISTAN
National Bank of Pakistan
Majority-owned by the government,
the National Bank of Pakistan is the
largest commercial bank in the coun-
try in terms of assets and acts as a busi-
ness partner with the government to
foster Pakistan’s growth. National
Bank of Pakistan was created in 1949
to provide loans to the agricultural
sector, particularly the troubled jute
trade. Today it offers a wide range of
corporate and retail banking products
through a network of nearly 1,200
domestic and 16 overseas branches.
Most of its lending was historically to
the public sector, but private-sector
loans now make up about 70% of its
total loans. The bank remains one of
the most important financial players in
this nation of more than 150 million
people and holds a market share of
about 21% of total deposits.Assets to-
tal more than $8.2 billion.
■ Syed Ali Raza, president
www.nbp.com.pk
PHILIPPINES
Bank of the Philippine Islands
The Bank of the Philippine Islands
has been a leader in the financial sec-
tor since its creation in 1851 as the
EMERGING MARKET BANKS: ASIA
first bank in both the Philippines and
Southeast Asia. The merger with the
Far East Bank and Trust Company in
2000 cemented that leadership posi-
tion, and today the bank is the coun-
try’s second-largest, with about $7.5
billion in assets—about 13% of the
system’s total assets. The financial in-
stitution’s solid financial strength and
its conservative management style
have helped turn it into the country’s
largest consumer bank and among
the top corporate lenders. By invest-
ing in technology, the bank has been
able to meet consumer demand for
the latest technologically driven
products, such as its online banking
service, BPI Direct.
■ Jaime Augusto Zobel de Ayala II,
chairman
www.bpi.com.ph
SOUTH KOREA
Shinhan Bank
Founded in 1982 by Korean expatri-
ates living in Japan, Shinhan Bank to-
day is one of Korea’s largest, with a
10% share of the market. Its savvy
managers and solid financials helped it
weather the banking crisis of the late
1990s and the credit card crisis of
2003. Shinhan Bank is the largest sub-
sidiary of the Shinhan Financial
Group, which in late 2003 acquired an
80.4% controlling stake in Chohung
Bank. Analysts are waiting to see how
the holding company will integrate
the operations of the two banks. The
merger should be completed in Sep-
tember of next year, creating a new fi-
nancial entity that would be the sec-
ond-largest bank in Korea, with more
than 15 million customers. Analysts
like the focused approach of Shinhan’s
managers and the prudent risk man-
agement techniques they wield to
produce an upmarket brand image
and strong capital ratios. Assets are
more than $58 billion.
■ Sang Hoon Shin, CEO
www.shinhan.com

ANNUAL SURVEY
SRI LANKA
Commercial Bank of Ceylon
Amitha
Gooneratne,
managing
director,
Commercial
Bank of
Ceylon
Commercial Bank of Ceylon is this is-
land nation’s fourth-largest bank in
terms of assets and holds a 10% share
of the banking business.The legacy of
its lengthy relationship with Standard
Chartered Bank, which dissolved in
the late 1990s because of local regula-
tory changes, is a strong risk manage-
ment system. In addition to its tradi-
tional strength in corporate banking
and trade finance, the bank has devel-
oped a strong franchise for small and
mid-size businesses as well as con-
sumers. It is among the most techno-
logically advanced banks in Sri Lanka
and has used this strength to create a
network of about 115 branches and
more than 160 ATMs. Assets stand at
about $1.1 billion. In March the bank
set up a fully owned subsidiary, X-
Pertise, to offer modern training and
development techniques to local
companies.
■ Amitha Gooneratne, managing
director
www.combank.lk
TAIWAN
Chinatrust Commercial Bank
Chinatrust is the largest private sector
bank in Taiwan in both assets and eq-
uity size. With the successful acquisi-
tion of Grand Commercial Bank in
late 2003 and Fengshan Credit Coop-
erative in July 2004, this family-con-
trolled bank has increased its distribu-
G L O B A L GF F I N A N C E
tion network to 111 branches and
grown market share. The bank now
has about 6% of the Taiwanese bank-
ing sector’s deposit and loan market,
up from about 4% several years ago. Its
investment in technology and a strong
risk management system have helped
the bank carve out a leading position
in the credit card business—it has
nearly 20% of the market measured by
card spending—and smoothly inte-
grate its customer relations manage-
ment system into its retail banking
operation. To survive in Taiwan’s in-
tensely competitive banking market,
Chinatrust opted for a corporate
banking strategy that generates in-
come by cross-selling corporate ser-
vices, ranging from treasury-related
products such as foreign exchange and
derivatives to corporate finance and
traditional commercial lending.
■ Jeffrey J.L. Koo Jr., CEO
www.chinatrust.com
Jeffrey J.L.
Koo Jr., CEO,
Chinatrust
Commercial
Bank
THAILAND
Kasikornbank
Created 60 years ago by the Lamsam
family, Kasikornbank has evolved into
Thailand’s third-largest commercial
bank, with 13% of the country’s de-
posits and loans and $20 billion in as-
sets.The bank is enjoying the recovery
of the Thai banking sector, which has
seen nonperforming loans drop to
about 10%—down sharply from 50%
in 1999, two years after the Asian fi-
nancial crisis. Known as Thai Farmers
EMERGING MARKET BANKS: ASIA
Bank until the spr ing of 2003,
Kasikornbank has restored profitability
by reducing costs, reorganizing a net-
work of nearly 500 domestic branches
and five overseas offices and strength-
ening its risk management techniques.
The bank continues to grow by diver-
sifying its revenue base. Last month,
the bank announced plans to intro-
duce leasing and securities services
through Kasikorn Securities and
Kasikorn Leasing.The creation of the
two units is part of the bank’s plan to
introduce universal banking services
this year with five units under the
Kasikornbank Group banner.
■ Banthoon Lamsam, chairman and
CEO
www.kasikornbank.com
UZBEKISTAN
Asaka Bank
Asaka Bank is the second-largest bank
in Uzbekistan and one of the largest
banks in the CIS.The bank was creat-
ed in 1995 primarily to provide bank-
ing services to the automobile indus-
try. Over the past 10 years, it has
diversified its activities and now oper-
ates as a full-service commercial bank.
While its main focus has been on cor-
porate clients,Asaka Bank has expand-
ed into the retail sector to diversify its
revenue stream and funding base.And
like many other banks in this former
Soviet Republic, the bank’s main
strengths remain its experienced se-
nior managers, who have good con-
nections with important government
ministries and some of the largest
companies in the nation. The down-
side is the continued dominance by
the state, which owns a majority share.
About 500 employees work at the
bank’s headquarters in the capital city
of Tashkent while another 1,500 are
spread through about two-dozen
branches around the country.
■ Shokir J. Juraev, chairman
www.asakabank.com
—Paula Green
2 0 0 5 M AY 5 3
 G L O B A L GF F I N A N C E
ANNUAL SURVEY EMERGING MARKET BANKS: LATAM

G MARKET B
GIN A
ER

NK
EM

S2
BEST

005
LATIN AMERICA

Regional Winner: Citigroup

T
he world’s largest financial institution, Citigroup
has been a major player in Latin America’s financial
sector for nearly a century. The financial giant
opened its first Latin American office in Buenos Aires in
1914—the first foreign branch of any nationally chartered
US bank—and has maintained its commitment to the re-
gion through both the boom years and the crises, with op-
erations in 24 countries. It affirmed this commitment
when it acquired Mexico’s Banamex for $12.5 billion in
2001 in a landmark deal that remains the largest-ever US-
Mexican corporate merger. Citigroup contributes to ex-
panding the region’s capital markets, such as when Citi-
group Chile structured and placed the country’s largest
local bond issue to date last year—a $428 million deal to
finance construction of an expressway in Santiago. Conse-
quently, it has become one of the most respected US brand
names throughout Latin America and the Caribbean. Its
net income in the region rose from $114 million in third-
quarter 2003 to $391 million during the same period in
2004. In March 2004 Citigroup named Banamex CEO
Manuel Medina Mora as the group’s new chairman and
CEO for Latin America and Mexico, quickly appointing a
new senior team that will further boost its profile.
■ Charles Prince, CEO
www.citigroup.com

Argentina banks, Banco Macro Bansud acquired FirstCaribbean, created in 2002 to

Banco Macro Bansud
Banco Macro Bansud is one of Ar-
gentina’s few remaining 100% locally
owned financial institutions. It is also
one of the country’s few remaining
profitable banks, ending 2004 with
total earnings of $66.5 million and a
16.2% return on equity after distrib-
uting some $21 million in dividends
last July.While loans to private sector
borrowers grew by 23% in Argentina
last year, the bank boosted lending by
103% in 2004 (versus a 42% expan-
sion in 2003), consolidating its market
leadership. Continuing with its acqui-
sitions drive launched in 1996, when
it began buying privatized provincial
Nuevo Banco Suquia in 2004 in a
deal that added 256 branches and
gave it the largest branch network of
any domestic private bank. Formed
through the merger of Banco Macro
and Bansud, it was first a wholesale
bank before it reinvented itself as a re-
tail banking operation after the
“tequila crisis,” focusing on Argentine
provinces with underbanked popula-
tions that presented the greatest
growth potential.
■ Jorge Horacio Brito, president
www.bansud.com.ar
Barbados
First Caribbean International
combine the Caribbean operations
of Barclays Bank and CIBC, is the
English-speaking Caribbean’s largest
bank, doing business on 26 islands
and territories. Its pan-regional pres-
ence allows the bank to offer a one-
stop approach for investors. It offers
international mortgage loans, for ex-
ample, for purchasers of residential
real estate in Barbados, the Bahamas,
Belize, the British Virgin Islands, the
Cayman Islands, St. Kitts, St. Lucia
and the Turks & Caicos. Loans are
available in US and Canadian dol-
lars, sterling or euros. This year, it
rolled out Internet and phone bank-
ing throughout the region and ex-

5 4 M AY 2 0 0 5

ANNUAL SURVEY
panded into Tr inidad & Tobago
through the acquisition of Mercan-
tile Bank. CIBC, which entered the
Caribbean market in 1920, and Bar-
clays, which arrived in 1837, each
hold a 43.6% stake in First-
Caribbean. The remainder is traded
on the Trinidad & Tobago, Barbados
and Jamaica stock exchanges, with a
market cap of $2.4 billion. Assets are
more than $8 billion.
■ Charles Pink, CEO
www.firstcaribbeanbank.com
Bolivia
Banco Bisa
A banking-sector innovator, Banco
Bisa was the first to introduce ATMs
and telephone banking in Bolivia and
has recently added the country’s first
interest-bearing checking accounts to
its lengthy product portfolio. It now
offers clients checking accounts in bo-
livianos as well as in euros and dollars.
Founded in 1963 as a second-tier
bank and offering commercial bank-
ing services since 1988, it is the flag-
ship company of Bolivia’s first and
largest financial-sector conglomerate.
Since then, it has remained in expan-
sion mode, growing its nationwide
branch network from merely three
branches a decade ago to a current 18
branches. Throughout the period, it
has also included supporting Bolivia’s
economic development as one of its
stated missions, while gaining wide-
spread brand recognition within the
country’s business sector. Bisa Finan-
cial Group, the bank’s holding compa-
ny, reported assets of $813 million at
September 30, 2004, when Banco
Bisa reported assets of $600 million.
■ Julio León Prado, president
www.grupobisa.com
Brazil
Banco Itaú
Banco Itaú remains one of Brazil’s
most profitable banking institutions,
with net income rising from $1.2 bil-
G L O B A L GF F I N A N C E
lion in 2003 to $1.5 billion in 2004.
Total assets rose from $46.3 billion to
$50.9 billion during the period.With
credit cards now among Brazil’s
fastest-growing retail financial prod-
ucts (number of cards in circulation
grew by an annual average of nearly
16% in 1991-2004, when transac-
tions were up 22.3% annually), Itaú
has been making a strong entry into
the profitable market segment. In
2004 it upped its stake in Credicard
Banco—Brazil’s largest credit card is-
suer (7.6 million cards issued through
September 2004)—to 50%. Together
with its Itaúcard credit card division,
the bank now holds more than a 20%
share of the country’s credit card
market. It also upped its stake in Or-
bitall, the country’s largest credit card
processor, from 33.3% to 100% last
year. Its positive earnings outlook led
Moody’s to upgrade the bank’s finan-
cial strength rating this year to C
from a previous C-.
■ Roberto Egydio Setubal, president
and CEO
www.itau.com.br
Chile
Banco de Chile
Segismundo
Schulin-
Zeuthen,
president,
Banco de
Chile
Ranked as Chile’s second-largest
bank, Banco de Chile has a nearly
18% share of the nation’s loan market
at end-2004.Total assets last year were
$17.2 billion, with $12.3 billion in
loans and more than $10 billion in de-
posits. Mainly engaged in commercial
EMERGING MARKET BANKS: LATAM
banking, the bank offers its clients as-
set management, securities brokerage,
financial consulting, insurance, factor-
ing, securitization and credit collec-
tion services. Return on capital was
27.6% in 2004, compared to an aver-
age of 20.6% for its main peer group.
The bank’s stellar performance was
due to an improved asset mix, focus
on pricing, integration of its sub-
sidiaries’ businesses with the bank’s
core business, a conservative risk poli-
cy and an emphasis on adding value
through technology-supported prod-
ucts. It is currently involved in the
NEOS project to upgrade its technol-
ogy platforms. Its shares are listed in
Santiago, New York, Madrid and Lon-
don, with local stocks gaining 28%
year-on-year and ADRs advancing
37% in 2004.
■ Segismundo Schulin-Zeuthen,
president
www.bancochile.cl
Colombia
Banco de Bogotá
Founded in 1870 as Colombia’s first
financial institution—with authoriza-
tion to issue currency at that time—
Banco de Bogotá is a market pioneer
that has gained a standing as one of
the country’s greatest “top of mind”
brands. Its D+ financial strength rating
from Moody’s is the highest of any
Colombian bank and is based on its
strong franchise, conservative manage-
ment and diversified funding base,
among other factors. Its non-per-
forming loan ratio is also among the
lowest in Colombia, at just 1.2%. Re-
turn on equity rose from 24.6% in
2003 to 27.1% in 2004, which was
well above the 25.8% average for the
system as a whole last year.Assets were
up 30.7% year-on-year, nearly double
the system’s average of 16.4%. Banco
de Bogotá is currently involved in a
mass campaign to boost the country’s
domestic savings levels, raising its de-
posits by 61.4% last year alone and
2 0 0 5 M AY 5 5

ANNUAL SURVEY
giving it a market share of more than
11% for savings accounts (nearly 19%
for checking accounts).
■ Alejandro Figueroa Jaramillo,
president
www.bancodebogota.com.co
Costa Rica
Banco Interfin
Despite some difficulties in 2004, In-
terfin remained the strongest player in
Costa Rica’s financial sector, with to-
tal assets rising from $546.6 million in
2003 to $709.9 million in 2004. Its
credit portfolio also grew, reaching
$529.2 million last year, compared
with the previous year’s $403.9 mil-
lion. Much of the bank’s success is at-
tributable to its focus on servicing the
country’s medium-size to large com-
panies. To better serve its clients, In-
terfin rolled out new IT systems at the
end of 2004, having already invested
more than $10 million on technology
over the past two years alone. Interfin
is part of the larger Corporación In-
terfin conglomerate, which owns
100% of the bank as well as
Transamerica Bank and Trust in the
Bahamas, a securities brokerage, pen-
sion fund manager, private develop-
ment bank and leasing units in Pana-
ma, Honduras, Guatemala, Nicaragua
and El Salvador. Interfin operates a
network of 22 branches throughout
Costa Rica.
■ Luis Liberman, general manager
www.interfin.fi.cr
Ecuador
Banco del Pichincha
Banco del Pichincha topped itself in
2004, when net profits rose by nearly
41% to $26.6 million from the previ-
ous year’s $18.9 million, once again
giving it the lion’s share of the
Ecuadorian banking sector’s total
profits. Assets rose 15.31% year-on-
year, to $2.1 billion in 2004 from
2003’s $1.7 billion. In addition to its
successful retail banking operations,
5 6 M AY 2 0 0 5
G L O B A L GF F I N A N C E
the bank is a local leader in debt
placement and underwriting for do-
mestic issuers and is a major player in
such areas as cash management and
private banking. Its extensive branch
network gives Banco del Pichincha a
presence in 20 of Ecuador’s 21
provinces.The bank, founded in 1906,
also operates an agency in Miami and
an offshore bank in Nassau. Despite
the country’s ongoing political tur-
moil, Banco del Pichincha’s manage-
ment has implemented sound strate-
gies to allow it to continue
weathering the storms and producing
benefits for both its clients and share-
holders alike.
■ Fidel Egas Grijalva, president
www.pichincha.com
El Salvador
Banco Agricola
Since its establishment in 1955, Banco
Agricola’s slogan has been “A Progres-
sive Bank Servicing A Progressive Na-
tion.”As a banking sector innovator, it
was an important driver in establish-
ing the market for personal loans in El
Salvador, which remains one of Cen-
tral America’s strongest economies
and one of just a handful of Latin
countries with a coveted investment-
grade rating. But Banco Agricola has
been looking beyond the country’s
borders to attract investments by the
growing community of Salvadorans in
the US, to whom the bank also mar-
kets its money remittance services
through bank agencies at three Cali-
fornia locations: Los Angeles, Hunt-
ington Park and San Francisco.
Bursabac is the bank’s securities bro-
kerage unit. In 2002 the bank also es-
tablished a subsidiary in Panama. Ban-
co Agricola’s assets rose from $2.9
billion in 2003 to $3.2 billion in 2004,
with net profits also rising from $30.5
million to $34.7 million during the
period.
■ Rodolfo Schildknecht, president
www.bancoagricola.com
EMERGING MARKET BANKS: LATAM
Guatemala
Banco Agromercantil
Rafael Viejo,
CEO, Banco
Agromercantil
Banco Agromercantil has embarked
on the third phase of a three-pronged
program to boost efficiency and im-
prove its customer service. The latest
phase involves investing in upgrading
its IT capabilities, after a first phase
that increased the bank’s capitalization
and a second phase that sought to im-
prove efficiency. So far, the strategy has
paid off nicely, with Banco Agromer-
cantil continuing to wrest market
share away from some of its larger ri-
vals. Net assets at September 30, 2004,
were $543.4 million. The bank oper-
ates a network of 77 branches and 600
ATMs nationwide, as well as three of-
fices in California and Illinois. It is al-
so an important participant in the
money remittance market, operating
in the US through an alliance with El
Salvador-based Banco de Comercio.
Banco Agromercantil is the result of a
merger in 2000 between Banco del
Agro and Banco Agricola Mercantil,
both of which had initially been es-
tablished to service Guatemala’s agri-
cultural sector.
■ Rafael Viejo, CEO
www.bam.com.gt
Honduras
Banco Atlántida
Founded in 1913, Banco Atlántida is
Honduras’s oldest as well as largest fi-
nancial institution. It is part of the

ANNUAL SURVEY
larger Grupo Atlántida diversified fi-
nancial services organization that in-
cludes banking, insurance, real estate,
warehousing, leasing, reinsurance and
logistics divisions. Fitch upgraded the
outlook to positive from stable last
year for Seguros Atlántida, the group’s
insurance subsidiary and a major
health, life and casualty insurance
provider in Honduras.Yet the bank is
the group’s key asset, operating a net-
work of 225 branches and ATMs
throughout the country. Mobile units
also take banking services directly to
job sites and shopping malls, helping
the bank to gain even greater market
share and customer allegiance. Much
of the bank’s success continues to be
driven by its ability to grow its base of
depositors by offering low fees and
low minimum deposits to establish ac-
counts. The bank also maintains a
strategic alliance with MoneyGram
for money remittances.
■ Guillermo Bueso, president
www.bancatlan.hn
Guillermo
Bueso, CEO,
Banco
Atlántida
Mexico
Banamex
When Banamex was established in
1884, it operated as both a commer-
cial bank and a national bank, with
authorization to issue currency and
collect taxes while also supporting
private-sector development. More
than a century later, Banamex has
consolidated its identity as one of
Mexico’s premier financial services
G L O B A L GF F I N A N C E
Manuel
Medina
Mora,
CEO,
Banamex
providers to both individual and
corporate clients. With more than
1,400 branches and nearly 4,500
ATMs, one is never far from a Ba-
namex location virtually anywhere
in Mexico.Acquired by Citigroup in
2001, Banamex can also tap the
know-how and capital of the world’s
largest financial group. A market in-
novator, Banamex was the first Latin
American bank to open a New York
office in 1926 and the first Mexican
bank to introduce ATMs as far back
as 1972 and last year unveiled the
first and only bi-national credit card
for shared use by clients on both
sides of the US-Mexican border.
Citigroup’s net income in Mexico
rose to $1.7 billion last year from
$1.2 billion in 2003.
■ Manuel Medina Mora, CEO
www.banamex.com
Panama
Banistmo
Banistmo continues to grow by leaps
and bounds. Having unleashed an ex-
pansion strategy through acquisitions
in 1986, the bank developed a region-
al network of subsidiaries in Costa
Rica, Honduras, El Salvador, and the
Bahamas. Last year it not only entered
the Nicaraguan market but also
jumped into South America with the
acquisition of Lloyds TSB Bank in
Colombia. Founded in 1984 by a
group of Panamanian investors with a
staff of only 20, Banistmo has grown
EMERGING MARKET BANKS: LATAM
to a staff of more than 3,000. Its $5.6
billion in assets at September 30,
2004, make it the largest bank in
Panama as well as in all of Central
America. Banistmo shares are traded
in Panama and Costa Rica. Last year,
profits were up 30% to over $100 mil-
lion. Moody’s upgraded Banistmo’s
long-term foreign currency deposits
rating to Ba1 and its financial strength
rating to D+, partly due to the bank’s
expansion into new markets. Rumors
say Mexico and Venezuela may be
Banistmo’s next targets.
■ Samuel Lewis Galindo, president
www.banistmo.com
Peru
BBVA Banco Continental
Jose
Antonio
Colomer,
CEO, BBVA
Banco
Continental
Part of Spain’s BBVA financial group,
BBVA Banco Continental continued
to grow its business in Peru last year,
reaching a nearly 26% share of the
country’s deposits. Assets were up
4.1% to $4.3 billion in 2004, while net
profits were up 28% year-on-year to
$71.6 million. Return on equity also
jumped from 17.66% in 2003 to
21.93% in 2004, for a hefty 427-basis-
point gain. The bank’s 2.15% non-
performing loan ratio is the Peruvian
market’s lowest and has continued to
improve from the 3.7% level reported
in mid-2003. While the bank, estab-
lished in 1951, saw fit to increase its
branches by merely one office last
year, for a nationwide total of 201
branches, it nevertheless increased its
2 0 0 5 M AY 5 7

ANNUAL SURVEY
ATM network by 15.5% for a total of
298 cash machines in operation at
end-2004. Internet banking transac-
tions were up 25% year-on-year for
individual clients and an even greater
44% for corporates.
■ Jose Antonio Colomer, CEO
bbvabancocontinental.com
Puerto Rico
Banco Popular de Puerto Rico
It would be nearly impossible to dis-
cuss the growth of Puerto Rico’s busi-
ness sector without mentioning Ban-
co Popular. Established in 1893 to
serve the island’s working class, Banco
Popular has grown into Puerto Rico’s
largest bank and the largest Hispanic-
owned bank in the United States.
Banco Popular N.A., the bank’s main-
land US operation, operates branches
in New York, Illinois, California, New
Jersey, Florida and Texas and made
two new acquisitions in 2004: Quak-
er City Bancorp in California and
Kislak National Bank in Florida. Pop-
ular Inc., Banco Popular’s financial
holding, reported a 37% year-on-year
hike in net income during first quar-
ter 2005 to $162.9 million, for a re-
turn on assets of 1.43% (versus 1.29%
in first-quarter 2004) and a return on
common equity of 21.62% (versus
17.95% in first-quarter 2004). In
March 2005 Banco Popular became
the first bank to offer mobile banking
in Puerto Rico, allowing clients to ac-
cess accounts on their mobile phones.
■ Richard Carrion, chairman,
president and CEO
www.bancopopular.com
Trinidad & Tobago
Republic Bank
Republic Bank’s appetite for acquisi-
tions remains strong. In 2004 the bank
acquired Reliance Stockbrokers in
Trinidad & Tobago, increased its
shareholdings in Barbados National
Bank to 65.1% and upped its stake in
East Caribbean Financial Holding
5 8 M AY 2 0 0 5
G L O B A L GF F I N A N C E
(parent company for the Bank of St.
Lucia) to 20%. The bank, founded in
1837, now maintains subsidiaries in
Trinidad & Tobago, Guyana, Grenada,
Barbados, the Cayman Islands and the
Dominican Republic—giving it a
pan-regional franchise that continues
to expand each year. Despite the dev-
astation brought to some of its mar-
kets by four hurricanes that swept
through the Caribbean last year, the
financial group still managed to post a
profit attributable to shareholders of
$663.7 million in 2004—a 13.7%
year-on-year increase. Share prices
soared last year as well, raising share-
holder value to a record $958.3 mil-
lion. A new technology platform in-
troduced a year ago should continue
to boost efficiency and profitability.
■ Ronald Harford, chairman and
managing director
www.republictt.com
Uruguay
ABN AMRO Uruguay
Francisco Di
Roberto Jr.,
CEO, ABN
AMRO
The Uruguayan unit of ABN AMRO,
one of Europe’s most prominent fi-
nancial institutions, is also the South
American nation’s most profitable
bank and a force to be reckoned with
by rivals. Although the 2002 Argen-
tine financial crisis had a spillover ef-
fect into neighboring Uruguay, where
it sparked the loss of 40% of ABN
AMRO Uruguay’s bank deposits and
pushed assets down by more than
32%, the bank nevertheless managed
EMERGING MARKET BANKS: LATAM
to turn a profit. ABN AMRO
Uruguay, in existence since 1952, op-
erates 23 branches in Uruguay and is
the largest foreign bank in the coun-
try. Last year it remained an important
supporter of the nation’s export sec-
tor, with the Inter-American Devel-
opment Bank approving a partial
credit guarantee of up to $22.5 mil-
lion for a trade finance facility to ex-
tend credit to exporters.ABN AMRO
Uruguay offers a full line of products
for individual and corporate clients. Its
Real Seguros insurance division has
been offering insurance products in
Uruguay for a century and opened a
24-hour customer service desk last
year.
■ Francisco Di Roberto Jr., CEO
www.abnamro.com.uy
Venezuela
Banco Mercantil
Banco Mercantil marks its 80th an-
niversary this year, and it has much to
celebrate. In a country immersed in
political turmoil, the bank still report-
ed a 41.5% year-on-year rise in total
assets last year. Banco Mercantil’s assets
represent 13.9% of the system’s total.
The bank also holds a 16.9% share of
the overall credit market and a 15.8%
share of the market for financial trusts.
The bank services its more than
1.8 million clients through a network
of 297 branches and 821 ATMs
located throughout Venezuela. First
established to focus on agricultural
loans and to service trade with Eu-
rope, the bank still operates an office
in Zurich. It also maintains rep offices
in the UK, Netherlands Antilles, Mex-
ico, Colombia, Peru and Brazil and
agencies in Miami, New York and
Houston. It owns BMC Bank & Trust
in the Cayman Islands, Banco del
Centro in Panama and Commerce-
bank in the US.
■ Gustavo A. Marturet, president
www.bancomercantil.com
—Santiago Fittipaldi

TREASURY & CASH MANAGEMENT
Changing Standards,
Changing Markets
We brought together some of the industry’s
leading players to discuss recent developments
in the cash management industry.
GLOBAL FINANCE: How will cor-
porate treasuries interact with banks in
the future? How will this be affected
by changes in standards? And how far
in the future is true straight-through
processing for corporates?
FOLIA GRACE, director, Oracle appli-
cations, Oracle: Our customers are very
committed to straight-through pro-
cessing, so we’re working on the stan-
dards to enable that. We are investing
in SWIFTNet for corporate-to-bank
Kamback: A big aspect of the future
service is how well we can develop
the people side of the business
MODERATOR: JOSEPH GIARRAPUTO
communication. We are incorporating
the corporate-to-bank XML payment
ke rnel designed by SWIFT, OAG i ,
TWIST and IFIX in the next release
and have support for the prior-day and
intraday bank statement.
J.L. “JOHN” ALARCO N , general
m a n a g e r, N o rth A m e rican opera t i o n s,
X RT: When companies work with
multiple banks—and a network of
strategic partners—they need a com-
mon technology to support multiple
Coffing: People are going to see a
big drive to all-electronic payment
RO U N DTA B L E
d ata f o r m ats an d c om mun i ca ti on
protocols, while giving them flexibili-
ty and reducing costs. The key for
companies is to remain agile and to
have full visibility into their financial
transactions.
JOEY BRODE, senior vice president,
director-client integration solutions, global
treasury services, Bank of America: Even
very small clients, although they’re not
looking for straight-through process-
ing as such, are looking for data from
us in a form they can use. In terms of
standards, the challenge for us as banks
is that we have new standards, but we
need to have the flexibility to help our
clients normalize data from multiple
areas so they can use it whether they’re
big or little.
DANIEL J. ROSENSTEIN, head of
US corp o rate sales, cash management,
Deutsche Bank Global Transaction Bank-
ing: Benefits of straight-through pro-
cessing can include real-time access to
i n f o r mation that leads into better
management of working capital and
i m p roved deployment of re s o u rc e s .
One way to start the move to STP is
to establish a globally centralized trea-
sury, an initiative that has moved a lot
slower than some thought it would.
ALFRED CA R P E T TO, senior vice
president, western hemisphere sales execu-
t i ve, t r e a s u ry serv i c e s, JPMorgan Chase:

RO U N DTA B L E
Financial institutions do STP ve ry
we l l , and the efficiencies that come
along with that are endless. For corpo-
r a t e s , the pri m a ry difference is that
most manufacture a product and have
to sell it. At JPMorgan Chase, we are
transferring what we already provide
to the FI space into the corp o r a t e
space to allow them the same benefits
that these efficiencies provide.
SCOTT COFFING, managing director,
Americas, SunGard Treasury Systems: In
terms of banks interacting with banks,
we do things like balance transaction
reporting and payments. From a cor-
porate perspective it’s “Tell me what’s
in my bank account, give me a cash
position that I can act upon, maybe I’ll
do some short - t e rm investing and I
m a ke a pay m e n t , get some flow s
through to the bank, the bank gives
me a confirmation back in real time
with that reference number.” It’s paid
pretty large dividends for a lot of our
joint large customers.
MARIA MANDLER, managing direc-
tor, global cash management, global transac-
tion services, Citigroup: Corporates want
to link from their workstations and
ERP systems directly into our back of-
fice. Convergence in terms of formats
and protocol is happening, at last, so
now smaller corporates can start to see
the benefits—this should be a gre a t
opportunity.
ERIC KAMBACK, executive vice pres-
ident,The Bank of New York: We all talk
about moving toward the Internet and
common standards, but, in fact, it will
n ever be perfect because of the
variations and diversity of the needs
for each corporation. So a big aspect
of the future service is how well we
can develop t he people side of
the business.
JEAN FRANCOIS HAMANT, vice
president, corporate cash management, SG:
That is a true cost for us, which is
really substantial, and banks have
to take that into account in their pric-
ing program.
GF: What impact are Sarbanes-Oxley
G L O BA L GF F I N A N C E
Grace: People are now asking if the
money they’re spending will really
do anything for them in the end
and other corporate governance issues
having on treasury functions?
CARPETTO: Companies are taking
operational risk more seriously and are
actively engaging their banks in look-
ing for ways to help them manage
their operational risk.
MANDLER: It’s fostered a real appre-
ciation for transparency overnight.
BRODE: Sarbanes-Oxley is indicative
of a whole tren d towa rd a mu c h
greater interest in risk.We used to talk
about managing cash flow ; n ow it’s
about managing risk. That gives us a
benefit; it is really what we as banks
know how to do.
R OS E N ST E I N : Companies are
starting to realize it takes resources to
help their tre a s u ry and financial de-
partments implement proper controls.
It is beneficial when management
loosens its purse strings so their inter-
nal groups have sufficient resources for
complying with the law.
COFFING: I’m stunned by the num-
ber of companies that don’t know how
many bank accounts they have, or who
has signing authority and what sort of
account features are on them. O n c e
you understand your banking account
TREASURY & CASH MANAGEMENT
Alarcon: For some businesses that
operate with very low margins, going
electronic will be a matter of life or death
landscape, you can have some sort of
central repository so you can manage
signers, etc.
KAMBACK: There will be real bene-
fits for corporates as banks part n e r
with them to ensure they have the
technology and the infrastructures to
comply with the va rious re g u l a t o ry
environments. This will create a more
efficient process, which hopefully will
lead to better value.
GRACE: People are now asking if the
money they’re spending will really do
anything for them in the end. They’re
now talking about “sustainable com-
pliance.” We are delivering tools that
help with the documentation and test-
ing of risk and controls and automa-
tion of business pro c e s s e s . One key
learning from all of this is that you not
only have to document policies, proce-
dures and business processes, but you
have to make sure people know and
understand them. You have to ensure
people are properly trained as well.
ALARCON: There is an incentive for
companies to push for more automa-
tion so they have control over who ac-
cesses information. For those compa-
nies that have already automated their
20 05 M AY 61

RO U N DTA B L E
cash management function, t h ey ’re
looking beyond that, at access controls
and the reliability of their banking
communications.
H A M A N T: I t ’s still going to take
some time, if yo u ’re a tr ue global
client. The problem is automation is
only for the US and Western Europe.
You’re going to a very different image
if yo u ’re going to A f rica or Eastern
Europe.
GF: The importance of checks is di-
minishing. What impact will this have
on corporates and the banks and tech-
n o l og ies that are trying to serv i c e
them?
KAMBACK: The impact overall will
be positive because it enhances the
available cash and money flows through
the corp o r a t e s . U n f o rt u n a t e l y, c a s h
management institutions will have to
maintain check processing because
checks will be around for a long time.
CARPETTO: Culturally, the United
States is much slower to adopt this
type of technology, but Check 21 is
f o rcing the issue. N ow, banks either
have to come on board or it’s going to
start costing them more money.
Carpetto: More firms are going global
so they need our technology and our
guidance to help them compete
62 MA Y 2 0 0 5
G L O BA L GF F I N A N C E
M A N D L E R : You’re starting to hear
the phrase “ n a t ive electronic pay-
m e n t s ,” w h e re transactions start out
electronically as opposed to just end-
ing electronically. There’s an opportu-
nity going forward, especially in the B-
to-B space, by having the invoice and
related data go along with the pay-
ment.
CO F F I N G : As the technology gets
c l e a n e r, the economics will actually
drive things to native electronic pro-
cessing. People are going to see a big
drive to all-electronic payment.
B RO DE : M a ny of our clients are
considering leapfrogging the imaging
stage and going straight to electronic
p ay m e n t s . Bu t we will still need
to serve clients at all these differe n t
stages and be able to combine the data
f rom those payments and deliver it
back to clients.
ROSENSTEIN: Checks will still ex-
ist for a while, and with Check 21
t h e re has been a concern about the
potential for an increase in attempts at
check fraud. Companies need to en-
sure they’re using all the tools offered
by their banks to prevent check fraud,
such as positive pay and payee match
Rosenstein: Companies need to ensure
they’re using all the tools offered by
their banks to prevent check fraud
TREASURY & CASH MANAGEMENT
services.
G RACE: As it becomes easier from
the technology standpoint and fro m
what the banks offer to customers ,
we’ll see a greater adoption of elec-
tronic payment and bill pre s e n t m e n t .I t
a l l ows companies to provide gre a t e r
service to their customers.
ALARCON: For some businesses that
operate with very low margins, going
electronic will be a matter of life or death
because that’s where it will be deter-
mined if they can continue to be com-
petitive within the marketplace or not.
G F: What developments have there
been in the outsourcing of tre a s u ry
functions in the past year, and what is
expected in the future?
KAMBAC K: Some financial institu-
tions have been forming alliances to
create more efficient processes, which
have created opportunities for the bank-
ing institutions and efficiencies for the
corporates.While it may not be direct
outsourcing,those alliances have created
a lot of value for corporate clients.
CA R P E T TO : O ve rseas corp o r a t e s
are much more willing to outsource,
whereas in the States people have real-
ly struggled with the idea that they’re
giving up some control. Now, though,
we see a lot more traction in the US
than we’ve seen for years.
MANDLER: We ’re seeing tre m e n-
dous focus on specific, e s p e c i a l l y
strategic, aspects of treasury and a will-
ingness to outsource everything else. It
often takes place while clients are cen-
tralizing activities themselve s . C u s-
t o m e rs are really looking for their
banks to move up the value chain and
offer end-to-end services.
B R O D E : For anything companies
don’t perceive as key to their compet-
itive edge, we’re seeing a much greater
willingness to talk to partners about
outsourcing.
R OS E N ST E I N : We see a gre a t e r
p ropensity towa rd outsourcing for
processes that will become more stan-
dard and for those areas where compa-

RO U N DTA B L E
nies feel they can hold their vendors
m o re accountabl e. As more ve n d o rs
have entered the space, it’s becoming
easier to hold them accountable be-
cause there are other options.
G RAC E : Outsourcing is picking up
a c ross the board on two leve l s . One
is the IT foundation—the ability
to buy softwa re as a serv i c e. T h e n
there’s outsourcing of the daily busi-
ness processing of transactions. We are
seeing more widespread adoption of
shared service centers .M a ny large cor-
porations are moving routine transac-
tion pro c e s s i n g — l i ke customer pay-
ments and receipts—to lowe r - c o s t
locations, such as India. On the other
hand, companies usually keep some of
th e more strategic fu nctions in -
h o u s e — l i ke planning and bu d g e t i n g
and forecasting.
COFFING: One key hurdle is that if
you’re going to be outsourcing any of
your technology functions, we need to
be SAS 70 type-2 compliant. For tech-
nology companies that’s quite an in-
vestment because you’re taking some
of that Sarbanes-Oxley stuff and push-
ing it off on your vendor.
G F: What developments have there
been in working capital management
in the past year, and what’s expected in
the future?
ALARCON: Treasurers and CFOs are
b ri d ging the disconnect between cash
management and workin g capital
management [business planning].
P rogress is being made in cash flow
forecasting from both short-term and
long-term planning perspectives. Cash
flow forecasting is being taken more
seriously.
MANDLER: There’s much more at-
tention paid to automated execution
based on the corporate policy with re-
spect to ri s k . This is where eve ry-
thing’s coming together—audit trails,
risk profile and execution.
COFFING: CFOs’ bonuses are being
d riven by keeping the cash balances
to an absolute minimum. To be able
G L O BA L GF F I N A N C E
Hamant: In the US everybody had to
deliver their own solution very quickly
so each bank rushed to the Web
to have control over that, you need to
be able to run a daily cash cycle.
Chief executives are wanting to move
f rom quar terly down to mont hly
down to weekly—and the end goal is
to get daily—cash visibility across the
entire corporation.
CARPETTO: If we get the efficien-
cies right and CFOs have access to this
information, they can then plan a lot
better from a liquidity perspective and
m a ke proper investments to manage
down to a zero balance. Traditionally,
treasury areas are not viewed as a rev-
e nue-generation are a , but they are
starting to demonstrate that they can
save millions of dollars in processing.
ROSENSTEIN: As banks and tech-
n o l ogy ve n d o rs give our customers
tools to save them time, they can then
get directly involved in the manage-
ment of inventory, the invoicing and
payables process; these things directly
impact the working capital.
BRODE: The Homeland Investment
Act changes the landscape. If a global
client has a lot of money ove rs e a s ,t h ey
can bring it home and use it to invest.
The client just found a new, inexpen-
sive source of working capital.
TREASURY & CASH MANAGEMENT
Brode: We’re seeing a much gr eater
willingness to talk to partners
about outsourcing
KAMBACK: The banks have done a
relatively good job in advancing ac-
counting practices and inform a t i o n
technology to allow treasurers to bet-
ter manage their cash, especially on a
global basis. There are real efficiencies
that have truly helped the treasurer’s
office manage their global cash flow.
MANDLER: T h e re ’s also, in North
America, an appreciation of new tech-
niques for facilitating re c e iva bles fi-
nancing.
GRACE: In terms of technology, peo-
ple are moving toward consolidating
their systems. Now you can have one
global instance running all over the
world, which means a treasurer can not
only get the daily bank statement in-
f o rmation but also have visibility to
a ny future impacts on cash—in any
currency for any number of days they
want to forecast.
GF: There are indications particularly
in the US that the size of firms in need
of global treasury management solu-
tions is becoming smaller.What impli-
cations does this have for banks and
technology vendors?
CARPETTO: It means opportunity.
20 05 M AY 63

RO U N DTA B L E
More firms are going global so they
need our technology and our guidance
to help them compete.
GRACE: It’s not just a trend in trea-
sury; it’s a trend overall. Small compa-
nies need to have the same advantages
that the large companies do to com-
pete. The challenge is delivering soft-
ware at lower cost and making it easi-
er to install and seamless in terms of
set-up. Oracle has focused on lowering
the total cost of software ownership to
address this need.
M A N D L E R : T h e re will be eve n
m o re demand for standardization to
enable smaller companies complete ac-
cess without having to adapt to pro-
prietary formats.
ROSENSTEIN: Small companies are
going to rely more heavily on their
vendors. In particular they will require
their banks to deliver infor m a t i o n
g l o b a l l y, and perhaps automate how
they function on a global basis.
HAMANT: The Web changed every-
thing, and in the US everybody had to
deliver their own solution very quick-
ly so each bank rushed to the We b.
That’s why they’re probably more ad-
vanced than the Europeans.
COFFING: A lot of smaller corpora-
tions don’t have the technology or the
IT staff to support systems so the ASP
model has been a boon.We can get rid
of the IT and the hosting.You just get
the functionality at your fingert i p s ,
portable around the world.
K A M BA C K : The challenge for a
smaller company is that they’re being
driven by their own customers to be-
come more global, so the opportunity
for us is to give our direct customers
the tools to deliver effective global fi-
nancial access to their clients.
BRODE: The challenge for us is how
to reach those people and deliver in
such a way that it is not as costly as
what we deliver to the larger global
c l i e n t s . The smaller companies are
forcing us all to cross some of the silos
inside our own walls—the silos be-
t ween the consumer side and the
64 MA Y 20 0 5
G L O BA L GF F I N A N C E
Mandler: Smaller companies cannot
afford to custom-make or adapt to
proprietary formats
wholesale side, for example.
A L A R CO N : Small companies don’t
deal with the kinds of complexities
you deal with in a large organization
so they expect different, simpler tools;
it’s not just a cost function. Our ap-
proach is to provide simpler, easy-to-
use software for small companies that
will allow them the same benefits—to
gain visibility of cash.
GF: What are you doing to help your
corporate customers perform a better
job with global enterprise risk man-
agement?
COFFING: First you need to get all
your data consolidated. Without con-
solidated data there is no true ri s k
management. Once you’ve got all the
information in one place and you can
ve ry easily present that. The third ,
m o re sophisticated step is to assess
what is important to each individual
corporation and base risk management
decisions on that.
CARPETTO: O ve r a l l ,i t ’s about edu-
cation, best practices and roundtables
that get corporates to better under-
stand their operating ri s k . M a ny of
them have ignored certain ri s k s . I t ’s
TREASURY & CASH MANAGEMENT
Giarraputo: The size of firms in need of
global treasury management solutions
is becoming smaller
our job to make them aware of those
risks and help them to manage them.
K A M BAC K : Most of us have the
technology in place that will help all
these institutions really mitigate and
manage their risk. But we need to ed-
ucate them about the risks inherent in
certain businesses and certain transac-
tions.
R OS E N STEIN: I t ’s extremely im-
portant that companies take advantage
of the information that banks can pro-
vide for them, particularly for cash po-
sitioning on a global level. In addition,
as companies start to outsource and
source important material and produc-
tion from emerging markets, they need
a centralized point within their com-
pany to monitor the sovereign risk and
better understand their exposure.
G RACE: Another area of grow i n g
importance is operational risk—being
able to have visibility at every level of
the company and across the globe. We
can help them monitor the operational
risk, as well as consolidate information
in one place—which is one of the keys
mentioned earlier.
 G L O B A L
CORPORATE FINANCING FOCUS
High-Yield Market
Gets Ready to Embrace
Falling Auto Angels
A
nalysts say it’s not a question of if,
but when the bonds of General
Motors and Ford Motor will slide
below investment grade, probably late
this year.
The once triple-A-rated US
automakers are flirting with high-
yield status, and the outlook is
negative from the rating agencies.
“If GM and Ford, along with their
financing arms, join the high-yield
space, they will account for 15%
Sandy Wong
of the market,” says Kingman
Penniman, director of research at
Montpelier,Vermont-based
KDP Investment Advisors, a firm
that provides research and pricing
services on high-yield bonds,
Debt Deb
including a daily index of the
market.
While GM and Ford are two of
the largest issuers of corporate debt,
with a total of about $475 billion outstanding,
including the bonds of their profitable financing units,
they should be assimilated easily into the high-yield
sector, Penniman says.
“Fallen angels are not a new phenomenon to the market,
and the automakers will be considered as good credits by
buyers of high-yield debt,” he says.
“Of course, nobody knows where the bottom is for
these bonds and how quickly they will come back,”
Penniman says. “But it is more of a technical rather than a
fundamental issue.”
With GM bonds yielding more than 500 basis points
more than comparable US Treasury securities, they appear
attractive to investors who can afford to hold on to them for indicating that the next rating change was likely to be a
the long term, he says.
Many institutional investors, including pension funds,
however, are not allowed to invest in securities that are
GF F I N A N C E
CORPORATE FINANCING NEWS CORPORATE DEBT
rated below investment grade. Some
of these funds already are selling GM
and Ford bonds in anticipation of
another downgrade, according to
Penniman.
“Nevertheless, a lot of investment-
grade accounts won’t sell this paper,
even if it is downgraded,” he says.
“They can pick up 250 basis points
in yield compared with KDP’s high-
yield index.”
Meanwhile, about one-third of the
participants in the high-yield market
already have invested in GM debt,
Penniman says.
A drop below investment grade
would increase borrowing costs for
Ford and GM, both of which need to
t invest in new models to compete with
bt
Asian producers, which are gobbling up
De
US market share.
Toyota Motor of Japan, which
makes the popular Prius hybrid model that
runs on a combination of gasoline and electric
power, could soon pass GM as the world’s largest
automaker.
Prices of the bonds of Ford and GM already have been
beaten down so low, analysts say, that a downgrade to
“junk” status already has been priced into the market to
some extent.
The yield on GM’s euro-denominated bonds rose sharply
in late March after the automaker slashed its 2005 profit
outlook and forecast a loss for the first quarter.The spread
against US Treasury issues widened further when Standard &
Poor’s issued a “negative outlook” on the automaker,
downward move.
A downgrade wouldn’t precipitate liquidity problems for
GM, which holds nearly $20 billion in cash and another
2 0 0 5 M AY 6 5
 G L O B A L GF F I N A N C E

$10 billion in credit market debt if investors become less tolerant for risk.
CORPORATE FINANCING NEWS CORPORATE DEBT

facilities, says Scott Spreads between interest rates on riskier bonds and US
Sprinzen, a managing Treasury bonds have widened suddenly in recent weeks, says
director at S&P. General Stephen Poloz, chief economist at Export Development
Motors Acceptance Canada.
Corporation, or GMAC, Spreads on Brazilian bonds, for example, widened to
the automaker’s nearly 450 basis points in mid-April from as narrow as 370
financing unit, holds basis points in early March. Spreads also widened for
nearly $23 billion in Mexican, Russian and Turkish bonds.
cash. In contrast, Poloz says, US corporate bond spreads are still
GM is relatively well at their lowest level in eight years, just under 100 basis
positioned to sustain a points.
downgrade, Sprinzen “US interest rates are moving back up to normal and are
wrote in a recent note to attracting investment back to the US,” Poloz says. “This has
investors. caused the dollar to stabilize and is leading to some
Ford cut its 2005 widening of risk spreads,” he says.
earnings forecast on According to Poloz, the widening is not so much a
April 11 and said it will retreat from risk as it is a return to a more balanced flow
Kingman Penniman, not reach its profit of international capital that includes the US as a
director of research, target for 2006 because destination.
KDP Investment Advisors of rising gasoline prices
and health-care costs.
S&P responded by cutting the outlook on Ford debt,
Market Share Shifts
which is rated BBB-, the lowest investment grade, to Daimler Chrysler, the number-three US automaker, has
negative from stable. gained market share in the past 12 months, even as GM
and Ford have lost ground to Toyota and other Asian
automakers.
Breathing Room GM’s 25.7% share of the US market for light-vehicle sales
The automakers may win a temporary reprieve from in the first quarter of 2005, according to New Jersey-based
index-related selling of their bonds as a result of changes Autodata, was the lowest since 1925.
that Lehman Brothers is making in the inclusion rules for GM shook up its top management in early April, putting
its widely followed investment-grade indexes. Beginning CEO Rick Wagoner in charge of day-to-day control of its
July 1, 2005, Fitch ratings will be used in addition to those core North American operations.
from Moody’s Investors and S&P when calculating the “One of our biggest challenges is our lack of cost-
index quality assigned to individual securities. competitiveness in the United States, which is due to our
Two out of the three legacy costs, especially the
agencies would need to rate ever-increasing burden of
the security investment-grade MARKET SHARE OF US LIGHT-VEHICLE SALES high health-care expenses,”
(FIRST QUARTER 2005)
for it to be eligible for being Wagoner said in a statement
included in Lehman’s in- Others indicating that he will be
vestment-grade indexes. 3.4% General Motors seeking concessions from
These changes could become 25.7% labor unions.
important if issuers are The US automakers have
downgraded or upgraded by been forced to use price-
a single rating agency in the and interest-rate incentives
future. to convince consumers to
Ford and GM are the buy their cars. Rising rates
second- and third-largest Ford Motor have made cash-back offers
issuers of corporate debt, 19.5% and zero-interest financing
following General Electric, in more costly.
Asian automakers
the Lehman US Credit Meanwhile, GM needs
36.2%
Index. to refinance or pay nearly
Analysts say it is possible $45 billion of debt in
Daimler Chrysler
that concern about the credit 15.2% 2006, and Ford has $37
quality of the US automakers billion of debt coming
could spread to emerging- Source: Autodata due next year. Most

6 6 M AY 2 0 0 5
 G L O B A L GF F I N A N C E

suppliers for both companies already are residents of

CORPORATE FINANCING NEWS CORPORATE DEBT

US HIGH-YIELD NEW-ISSUANCE VOLUME
the high-yield neighborhood.
20

Issuance Dries Up 18
2004
US issuance of high-yield corporate debt fell to less than 16
2005
$8.3 billion in March from $9.3 billion in February, 14
according to KDP Investment Advisors.The monthly total
was as high as $18 billion last November. 12

($ billion)
An inflation scare and the auto-related problems 10
contributed to an increase in risk aversion in March,
8
according to analysts. Investors pulled billions of dollars from
high-yield bond funds. 6
El Segundo, California-based DaVita, which operates 4
kidney dialysis centers, was the largest issuer in March.The
company offered $500 million of senior notes due 2013 and 2
$850 million of senior subordinated notes due 2015 in a 0
private placement. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
DaVita plans to use the net proceeds from the offering, Source: KDP Investment Advisors
along with available cash, to repay all outstanding amounts un-
der the term-loan portion of its senior secured credit facilities. income strategist at Citigroup’s global markets division in
Bethesda, Maryland-based Host Marriott placed $650 New York.
million of senior notes due in 2015.The net proceeds were While the severity of the downturn in high-yield bond
used to fund a tender offer for $300 million of senior notes prices was hard to explain, it seems to have been triggered
due in 2006, as well as to redeem $169 million of senior by the problems of the automakers, Fenn says.
notes due in 2008 and to repay the $140 million mortgage The market is bracing for the $140 billion mountain of
debt secured by two of the company’s Ritz-Carlton hotels GM and GMAC debt set to hit the market sometime this
located in Atlanta, Georgia, and Naples, Florida. year, he says.
“It strikes us that the increased volatility in the market
has pushed investors to rebuild cash balances, as the market
Sudden Downturn in Market is suffering from a lack of confidence,” according to Fenn.
Auto contagion led to a noticeable pullback by investors The auto-parts sector was particularly hard hit. “With
in high-yield bonds in mid-April, says John Fenn, fixed- Ford and GM [yield spreads] widening dramatically, the
relative value being offered
by the parts companies is
TOP US HIGH-YIELD ISSUES IN MARCH 2005
questionable when compared
Issuer Offer Date Coupon % Issue Type Maturity Date Private/Public Amount ($mil) with the lofty yields being
DaVita 3/15/05 7.250 Sr.Sub.Notes 3/15/15 144A 850 offered by both of the
Host Marriott 3/3/05 6.375 Senior Notes 3/15/15 144A 650 investment-grade credits,”
Allied Waste Industries 3/3/05 7.250 Senior Notes (Secured) 3/15/15 144A 600 Fenn says.
DaVita 3/15/05 6.625 Senior Notes 3/15/13 144A 500 But in a clear case of the
Atibi-Consolidated of Canada 3/22/05 8.375 Senior Notes 4/1/15 Public 450 good being thrown out with
Levi Strauss 3/7/05 Floating Rate Notes 4/1/12 144A 380 the bad, some higher-quality
Corrections Corporation of America 3/8/05 6.250 Senior Notes 3/15/13 144A 375 parts suppliers, such as Lear,
Revlon Consumer Products 3/11/05 9.500 Senior Notes 4/1/11 144A 310
American Axle and TRW,
Pogo Producing 3/23/05 6.625 Sr.Sub.Notes 3/15/15 144A 300
have been oversold and
appear extraordinarily cheap,
TTI Holding 3/11/05 10.000 Sr.Sub.Notes 3/15/13 144A 300
he says.
Exide Technologies 3/15/05 10.500 Senior Notes 3/15/13 144A 290
“Sure Lear has exposure to
Suburban Propane Partners 3/18/05 6.875 Senior Notes 12/15/13 144A 250
Ford’s production schedule,
Trustreet Properties 3/17/05 7.500 Senior Notes 4/1/15 144A 250
as well as GM’s, but the Lear
US Oncology 3/15/05 Floating Rate Notes 3/15/15 144A 250 operators know about Ford
Progress Rail Services 3/17/05 7.750 Senior Notes 4/1/12 144A 200 production cuts before
WCI Communities 3/3/05 6.625 Sr.Sub.Notes 3/15/15 144A 200 [CEO] Bill Ford does—and
Colorado Interstate Gas 3/2/05 5.950 Senior Notes 3/15/15 144A 200 they plan accordingly,” Fenn
Source: KDP Investment Advisors says. —Gordon Platt

2 0 0 5 M AY 6 7
 G L O B A L GF F I N A N C E

Dollar Faces Still-Wider

CORPORATE FINANCING NEWS FOREIGN EXCHANGE

CURRENCY FORECASTS

Current Account Deficit 1.0

0.9
Euro
(Euro/US$)

Judging by all the recent shows how ingrained the 0.8

attention given to the J- deficit has become, reflecting 0.7

curve by economists and the stronger growth of the Source: Bank of New York Forecast
analysts, the outlook could US economy, as well as US 0.6
A M J J A S O N D J F M A M J J A S O N D J F M
get worse for the dollar preference for foreign goods, 2004 2005 2006
140
before it gets better. DiClemente says. Japan
(Yen/US$)
The dollar has been rising Until now, foreign firms 120

in recent weeks in an- have chosen not to raise

100
ticipation of higher US prices to compensate for the
interest rates, but analysts still dollar’s losses, accepting 80

concur that the greenback narrower profit margins, for 60

Source: Bank of New York Forecast

will need to decline further fear of losing US market A M J J A S O N D J F M A M J J A S O N D J F M

2004 2005 2006
in order to boost US exports share. 0.7
UK
and begin to reduce the This won’t continue (Pound/US$)
current account deficit. forever, DiClemente says, and 0.6

In time, rising exports will there already are signs that

rein in the current account, prices of imported goods 0.5

but not before higher import have begun to march higher, Source: Bank of New York Forecast
prices expand the deficit even excluding petroleum. 0.4
A M J J A S O N D J F M A M J J A S O N D J F M
toward 7% of gross domestic 2004 2005 2006
1.6
product in 2006, says Robert
DiClemente, chief US
Triangular Trade Switzerland
(Franc/US$)
1.4

economist at Citigroup Neal Soss, chief economist at

1.2
global markets in New York. Credit Suisse First Boston,
Many forecasters expect says US consumers will 1.0

that the current account remain addicted to Asian- 0.8

Source: Deutsche Bank Forecast

may be on the verge of a sourced goods and that Asian A M J J A S O N D J F M A M J J A S O N D J F M

turnaround, attributing the central banks will continue 1.6

2004 2005 2006

Canada
past year’s increase in the to invest their surplus dollars (C$/US$)
deficit to the traditional J- in US securities. 1.4

curve effect, he says. “This triangular trade is

“However, we believe that really quite stable,” he says. 1.2

the J-curve effect has not yet “Asia needs the jobs, we like
Source: Bank of New York Forecast
come into play,” DiClemente the subsidy, and this 1.0
A M J J A S O N D J F M A M J J A S O N D J F M
says.“The J-curve will add to addiction continues.” 2004 2005 2006
the deficit when foreign firms Meanwhile, continuing 14
Mexico
begin to raise US import gains in US productivity will (Peso/US$)

prices more aggressively, keep inflation from getting 12

probably this year,” he says. out of control, according

10
If Americans continue to to Soss.
import the same amount of Average hourly earnings in Source: Bank of New York Forecast
8
foreign goods, they will pay the US are rising at a slower A M J J A S O N D J F M A M J J A S O N D J F M

a larger import bill as prices pace than inflation, he says, 4.0

2004 2005 2006

go up. and until wages increase Brazil

(Real/US$)
The current account deficit faster than prices, there is no 3.5

has continued to widen des- real inflation threat. 3.0

pite the dollar’s decline since Real GDP increased at a
early 2002.The gap account- 4% rate last year, and the big 2.5

ed for about 4.5% of GDP question is how much 2.0

Source: Deutsche Bank Forecast

three years ago and is now tolerance the Federal A M J J A S O N D J F M A M J J A S O N D J F M

2004 2005 2006
around 6.25%.This widening Reserve will have for above-

6 8 M AY 2 0 0 5
 G L O B A L GF F I N A N C E

trend growth in the US bond yields, according payrolls, suggests that the much weaker than expected.

CORPORATE FINANCING NEWS FOREIGN EXCHANGE

economy, Soss says. to Gilmore.The financial reason behind the dollar’s re- The tankan, the Bank of
markets are trading on cent strength may not be Japan’s quarterly survey of
assertions, rather than facts, entirely due to interest-rate corporate sentiment, rein-
Open-Mouth Policy he says. expectations, says Michael forced doubts about the
There seems to be a major “Markets seem content Woolfolk, senior currency staying power of the upturn
disconnect between the to follow, rather than to strategist at the Bank of New in Japan’s economy that be-
inflation data, which have challenge, the Fed,” Gilmore York. gan in the fourth quarter of
generally been tame, and the says. “What we end up with “The dollar’s gains may 2004, according to analysts at
behavior of the US Treasury are exaggerated moves also be based in part upon Brown Brothers Harriman in
bond market, says David around the time of the growth expectations,”Wool- New York.
Gilmore, economist and FOMC statements, or public folk says. “By comparison The report was consistent
partner at Essex, Connec- remarks by Fed officials, and to other major economies, with BBH’s expectations
ticut-based Foreign any hint of supporting the US economy is doing that Japan will experience
Exchange Analytics. “The evidence on what the Fed quite well.” Nonetheless, yet another year of very
data on inflation are not has in its craw at any given with ongoing concerns modest economic growth
what is driving Treasury time,” he says. about financing a widening in 2005.
yields up,” Gilmore says. US trade deficit, the dollar Most of the details in
“This is the result of Fed bulls cannot afford to the report were not
open-mouth policy.”
Growth Expectations become complacent, he says. nearly as negative as the
The mention of elevated The resiliency of the dollar in headline, but “not as
inflation risk in the March the face of a weaker-than- negative” doesn’t translate
22 Federal Open Market expected March employment
Tankan Tanks to “positive,” the BBH
Committee’s statement was report, which showed a gain Japan’s tankan report, analysts note.
the main impetus for higher of only 110,000 in non-farm released on April 1, was —Gordon Platt

CURRENCY FORECASTS
1.6 1600
Australia South Korea
(A$/US$) (Won/US$)
1400
1.4

1200

1.2
1000

Source: Bank of New York Forecast Source: Deutsche Bank Forecast

1.0 800
A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M
2004 2005 2006 2004 2005 2006
9.0 1.8
China Turkey
8.8 (Yuan/US$) (Million Lira/US$)
1.6
8.6

8.4
1.4
8.2
Source: Deutsche Bank Forecast Source: Deutsche Bank Forecast
8.0 1.2
A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M
2004 2005 2006 2004 2005 2006

EU’s Prospectus Rules
CORPORATE FINANCING NEWS GLOBAL EQUITY/DR S
Fail to Roil GDR Market
On July 1, 2005, the
European Union will
implement the Prospectus
Directive, a cornerstone in
the creation of a single pan-
European capital market.
The new legal framework,
which applies to both EU
and non-EU issuers, will in-
troduce a single set of docu-
ments, or passport, for raising
capital on a regulated market
in any member country.
Once a prospectus is
authorized in one member
state, it can be used in all the
others.
Lawyers warn that the
harmonization of prospectus
requirements will lead issuers
to be exposed to liability for
their prospectuses in all EU
member states.This could
make the preparation of a
prospectus more costly and
time-consuming, they say.
For equity securities, the
Prospectus Directive, or PD,
requirements are based on
the disclosure standards for
cross-border equity offerings
issued by the International
Organization of Securities
Commissioners.
The main requirement is
that the prospectus must
contain all the information
necessary for investors to
make an informed assess-
ment of the assets and lia-
bilities, financial position,
profit and losses and
prospects of the issuer.
Although global
depositary receipts are non-
equity securities for purposes
of the PD, the prospectus
requires equity-style
disclosure by the issuer.
“The new EU regime has
had little impact to date on
7 0 M AY 2 0 0 5
G L O B A L GF F I N A N C E
lated exchange within the flows, funding structure,
EU when planning to issue treasury policies and peak
equity in the international
capital markets,” Hughes says.
borrowing requirements.
Significant recent trends
The TOD deals with the in production, sales and
the GDR market,” says ongoing periodic disclosure inventory, and costs are
Mike Hughes, director and obligations of issuers, includ- required, as are statements
global product manager for ing annual and half-yearly on conflicts of interest and
equity products at Deutsche reports under IFRS or the corporate governance.
Bank in London. equivalent. Existing issued GDRs will
Most issuers of GDRs will A third directive, the become subject to the TOD
have no problem in meeting Market Abuse Directive, to be when it is implemented.
the prospectus requirements, implemented at a later date, The net effect of these
which call for much of the will require immediate public changes may lead existing
same information to be disclosure of price-sensitive issuers of GDRs to review
disclosed as previously, but information by issuers that whether to maintain a listing
in a different format, he says. have securities admitted to an on an EU-regulated market,
Another EU directive, the EU-regulated market. Linklaters says.
Transparency Obligations Di- The PD will require dis- Both the London Stock
rective, or TOD, which isn’t closure that is different in se- Exchange and the Luxem-
scheduled to go into effect veral respects to what is cur- bourg Stock Exchange are
until 2007, will have a much rently required, according to creating new segments,
bigger impact on the GDR a report issued in February by known as exchange-regulated
market, according to Hughes. London-based global capital markets, which are not
Non-EU issuers of GDRs market lawyers Linklaters. regulated markets for the
will have until January 1, A 2,500-word prospectus purpose of the EU regime
2007, until they are required summary must be prepared but will be regulated by the
to prepare prospectuses that that conveys the essential relevant exchange.
include accounts that follow characteristics and risks “We believe that the
International Financial associated with the issuer significant number of
Reporting Standards. and the securities. existing GDR issuers who
“The IFRS is not an issue An operating and financial will be unable to comply
right now, but it may become review also is required. with the TOD will need to
a problem for smaller issuers, Considerable detail is move across to an exchange-
who may decide in some required on sources and regulated market,” Linklaters
cases not to list on a regu- amounts of an issuer’s cash says. —Gordon Platt
REGIONAL ADR INDEXES
160
Latin America Europe Asia
140
120
100
80
Oct 8, 2004
Jul 30, 2004
Jun 18, 2004
Nov 5, 2004
Jul 16, 2004
May 21, 2004
Feb 11, 2005
Feb 25, 2005
Oct 22, 2004
May 7, 2004
Sep 24, 2004
Mar 31, 2005
Aug 13, 2004
Mar 25, 2005
Dec 31, 2004
Jan 14, 2005
Jan 28, 2005
Mar 11, 2005
Nov 20, 2004
Dec 3, 2004
Dec 17, 2004
Apr 9, 2004
Aug 27, 2004
Sep 10, 2004
Apr 23, 2004
Jul 2, 2004
Jun 4, 2004
Mar 31, 2004
Source: Bank of New York

Private Equity Firms
Working Together
A listing of the members
of the investor group that
agreed to acquire SunGard
Data Systems in an $11
billion leveraged buyout
in late March reads like
a Who’s Who of private
equity.
Silver Lake Partners, a
Menlo, California-based
buyout firm that focuses
on market leaders in
technology businesses, put
together a team of seven
private equity firms to bid
for SunGard, which makes
software for financial
institutions as well as
treasury-management
systems for corporations.
Private equity firms,
formerly fierce com-
petitors, increasingly are
pooling their resources in
order to pursue bigger
corporate takeover targets
than they could tackle on
their own. Joining in the
formation of such groups is
known as clubbing.
The SunGard purchase
group includes Kohlberg
Kravis Roberts, or KKR,
one of the oldest and most
experienced buyout firms,
which bought RJR
Nabisco in 1989. The
SunGard buyout is the
largest since that storied
deal, which was valued at
more than $26 billion.
Other members of
the SunGard buyout team
are:
• Boston-based Bain
Capital, which recently
floated a $3.5 billion
proposal with sports in-
vestment bank Game Plan
to buy the entire National
Hockey League.
G L O B A L GF F I N A N C E
CORPORATE FINANCING NEWS MERGERS & ACQUISITIONS
record of working in Sachs and Morgan Stanley,
partnership with which also acted as
management to build great
companies,” he says.
financial advisers to the
investors.
Each partner in the The second-largest M&A
• Blackstone Group, a consortium brings transaction in the US in
leader in private equity complementary expertise to March, the $7.6 billion
investing, whose funds the investment, says Glenn acquisition of Toys “R” Us,
manage more than $14 Hutchins, a co-founder and also was a club deal.
billion.The firm has raised a managing member of Silver The investor group that
total of about $32 billion Lake Partners. bought the retail toy store
for alternative-asset “Our interests are aligned operator comprised KKR
investing since it was with the long-term and Bain Capital Partners,
founded in 1985. interests of SunGard’s along with Vornado Realty
• GS Capital Partners, customers and employees,” Trust, one of the largest real
which makes private equity Hutchins says. estate investment trusts in
investments on behalf The transaction will be the US.
of its parent, Goldman financed through equity Washington, DC-based
Sachs. contributed by each of the Carlyle Group launched
• Providence Equity consortium partners and two new buyout funds in
Partners, a Rhode Island- debt financing provided by late March, totaling more
based private investment JPMorgan, Citigroup, than $10 billion.
firm specializing in equity Deutsche Bank, Goldman —Gordon Platt
investments in media
and communications
AMERICAS M&A: TOP DEAL ADVISERS
companies. It has invested
in more than 80 companies Rank Value % Mkt # of
in 20 countries. Adviser ($million) Rank Share Deals
• Texas Pacific Group, a Goldman Sachs 135,546 1 49.3 42
Fort Worth, Texas-based Merrill Lynch 84,704 2 30.8 26
private investment Morgan Stanley 80,724 3 29.4 26
UBS 77,660 4 28.3 21
partnership managing more
Credit Suisse First Boston 73,185 5 26.6 26
than $15 billion in assets. Industry Totals* 274,699* - 2,083
TPG is a leading global
private equity investor in
the technology sector. EUROPE M&A: TOP DEAL ADVISERS
Two other prominent Rank Value % Mkt # of
private equity firms— Adviser ($million) Rank Share Deals
Thomas H. Lee Partners Goldman Sachs 49,663 1 30.0 28
and the Carlyle Group— Morgan Stanley 36,160 2 21.8 24
had planned to be part of JPMorgan 35,561 3 21.5 40
Citigroup 32,296 4 19.5 25
the buying group but
Lehman Brothers 31,468 5 19.0 19
dropped out at the end Industry Totals* 165,785* - 2,223
over a disagreement about
price.
“The new investors in ASIA M&A: TOP DEAL ADVISERS
SunGard are world-leading Rank Value % Mkt # of
private equity firms,” says Adviser ($million) Rank Share Deals
Cristóbal Conde, president Nomura 51,630 1 46.5 36
and CEO of SunGard, Mitsubishi Tokyo Financial 49,195 2 44.3 24
which is based in Wayne, Merrill Lynch 48,986 3 44.1 13
Pennsylvania. Morgan Stanley 48,334 4 43.6 14
JPMorgan 45,299 5 40.8 4
“They have a long-term Industry Totals* 110,979* - 1,906
view toward growing the
January 1, 2005 – April 1, 2005 Source: Thomson Financial Securities Data
businesses in which they * Figures may not add up, as more than one bank typically obtains credit for any one
invest and an excellent track transaction.
2 0 0 5 M AY 7 1
 G L O B A L GF F I N A N C E
CORPORATE FINANCING NEWS MERGERS & ACQUISITIONS

TOP MERGERS AND ACQUISITIONS (MARCH 1, 2005–APRIL 1, 2005)

AMERICA
Date Target Name Acquirer Name Ranked Value
Announced (Target Advisers) Country (Acquirer Advisers) Country Description ($billion)
3/28/05 SunGard Data Systems US Investor group US Definitively agreed to acquire provider 10.84
(Lazard) (Morgan Stanley) of information technology, in a leveraged
(Credit Suisse First Boston) (Citigroup) (JPMorgan) buyout.
(Goldman Sachs) (Deutsche Bank)
3/17/05 Toys “R” Us US Investor group US Definitively agreed to acquire owner 7.64
(Credit Suisse First Boston) (JPMorgan) (Morgan Stanley) and operator of retail toy stores.
(Duff and Phelps) (Deutsche Bank)
(Banc of America Securities)
3/6/05 Hibernia US Capital One Financial US Definitively agreed to acquire Louisiana- 5.27
(JPMorgan) (Bear Stearns) (Credit Suisse First Boston) based bank, in a stock-swap transaction.
3/7/05 United Defense Industries US BAE Systems North America US Unit of UK-based BAE Systems 4.20
(Lehman Brothers) (Goldman Sachs) definitively agreed to acquire manufacturer
(JPMorgan) (Gleacher Partners) (Hoare Govett) of combat vehicles, artillery and
(Dresdner Kleinwort Wasserstein) ammunition.
3/7/05 Insight Communications US Investor group US Management-led investor group made an unsoli- 3.34
(Citigroup) (Morgan Stanley) cited offer to acquire the remaining 86% it did
(Stephens) not already own in provider of cable TV services.
3/21/05 Inamed US Medicis Pharmaceutical US Definitively agreed to merge with 2.66
(JPMorgan) (Deutsche Bank) manufacturer of medical equipment, in a
(Thomas Weisel Partners) stock-swap transaction.
3/21/05 Ask Jeeves US IAC/InterActiveCorp US Agreed to acquire provider of question- 1.97
(Citigroup) (JPMorgan) and-answer services on Internet, in a
(Allen & Company) stock-swap transaction.
3/9/05 Great Lakes Chemical US Crompton US Definitively agreed to merge with chemical 1.77
(Merrill Lynch) (Morgan Stanley) (Citigroup) manufacturer, in a stock-swap transaction.
3/1/05 Oakwood Worldwide’s US Archstone-Smith Trust US Agreed to acquire 30 apartment 1.40
apartment communities communities.

EUROPE
3/14/05 Gecina France Metrovacesa Spain Agreed to launch a tender offer to 10.00
(Lehman Brothers) (Morgan Stanley) acquire the remaining 70% it did not
(Credit Suisse First Boston) (Calyon) already own in real-estate agency.
3/18/05 Banca Nazionale del Lavoro Italy Banco Bilbao Vizcaya Spain Planned to launch a tender offer to 8.39
(JPMorgan) Argentaria acquire the remaining 85.28% it did not
(Rothschild) (Morgan Stanley) already own in Rome-based bank, in
(Mediobanca) (Merrill Lynch) (Goldman Sachs) a stock-swap transaction.
3/30/05 Banca Antonveneta Italy ABN-AMRO Bank Netherlands Planned to launch a tender offer for the 8.14
(Goldman Sachs) (ABN-AMRO Holding) remaining 87.3% it did not already own.
(Lehman Brothers) (Rothschild)
3/11/05 Amadeus Global Travel Spain Wam Acquisition Luxembourg Agreed to launch a tender offer for 5.82
Distribution (JPMorgan) developer of online travel and tourism
(Credit Suisse First Boston) (Morgan Stanley) services, in a leveraged buyout.
(Lazard) (UBS Investment Bank)
(Dresdner Kleinwort Wasserstein)
3/29/05 ISS Denmark PurusCo Sweden Investor group planned to launch a tender 5.14
(Nordea Securities) (Goldman Sachs) offer to acquire provider of property-
(Citigroup) (Enskilda) management services, in a leveraged buyout.
3/15/05 Oskar Mobil Czech Vodafone UK Definitively agreed to acquire Czech 4.40
(Lehman Brothers) Republic (UBS Investment Bank) telecom and to increase its interest is
(Lazard) (JPMorgan) MobiFon of Romania to 99%.
3/29/05 Celtel International Netherlands Mobile Telecommunications Kuwait Agreed to acquire an 85% interest in 3.40
(Rothschild) (UBS Investment Bank) Dutch telecom and planned to acquire
(Goldman Sachs) (Citigroup) the remaining 15% stake.
3/25/05 Turkcell Iletisim Hizmetleri Turkey TeliaSonera Sweden Planned to raise its interest to 64% from 3.10
(JPMorgan) (Citigroup) 37% by acquiring shares from Cukurova Group.
3/9/05 RAC UK Aviva UK Planned to launch a tender offer to acquire 2.42
(Lazard) (Hoare Govett) (Goldman Sachs) the remaining 99.1% it did not already own
(ABN-AMRO Holding) (JPMorgan Cazenove) in wholesaler of automobiles and electronics.

ASIA
3/9/05 Hanjaya Mandala Indonesia Philip Morris Indonesia Indonesia Unit of Altria of US planned to launch 3.14
Sampoerna (Credit Suisse First Boston) mandatory tender offer to acquire the
remaining 60% it did not already own in
cigarette manufacturer.
3/28/05 Mitsubishi Paper Mills Japan Chuetsu Pulp & Paper Japan Definitively agreed to merge, in a reverse 2.45
(Mitsubishi Securities) (Mizuho Securities) stock-swap transaction.

Source: Thomson Financial Securities Data

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