Gulf regional banks challenge global competitors for bond fees

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TOP EARNER NBAD topped the regional banks in fees from bond advisory deals last year, with $14.1m, up from $4m a year earlier (Bloomberg Images)

TOP EARNER NBAD topped the regional banks in fees from bond advisory deals last year, with $14.1m, up from $4m a year earlier (Bloomberg Images)

Gulf Arab banks, long trailing international lenders in managing bond sales in the region, are hiring from their global competitors and looking to partner with them in an effort to build fee income.

With their experience, history in the region, greater ability to lend and access to global investors, international banks such as HSBC Holdings and Standard Chartered ]regularly top the Gulf’s bond league tables, a list that ranks banks by the amount of money they helped clients raise. Still, regional lenders are showing gains: Samba Financial Group climbed to Number 8 last year from 13th in 2009 and National Bank of Abu Dhabi moved up two places to Number 9, according to data compiled by Bloomberg.

Even as the value of bond sales fell 24 percent last year in the region, Gulf bankers say they have progressed by building trading in the secondary market necessary to support prices after the securities are sold. An announcement last month by the United Arab Emirates to borrow money may also be a step toward creating a domestic bond market, where local banks would likely be favored by Gulf governments over foreign competitors.

“The ascent up the league tables doesn’t happen overnight,” Robert Mohamed, NBAD’s senior vice president and co-head of investment banking, said in a telephone interview. “In an ideal world, I would like to see NBAD within the next 18 months within the top five and within the next three years within perhaps the top two and within five years, number one.”

Governments and companies in the six-nation Gulf Cooperation Council, which includes oil-rich Saudi Arabia, the UAE and Kuwait, raised $32.6bn from 58 bond sales in 2010, down from $42.8bn from 57 sales in the previous year, according to Bloomberg data. The decline mirrored a global drop and the uncertainty surrounding Dubai World’s $24.9bn debt restructuring, which hurt credit markets. Regional banks participated in 22 deals in 2010, the same as in 2009.

Banks operating in the GCC countries earned an average of 0.53 percent of the value of the deals, or $124.2m in fees from bond sales in 2010, according New York-based consulting firm Freeman & Co. That is up from an average of 0.25 percent of the value of the deals, or $86m earned by the banks in 2009, the data showed.

NBAD, the UAE’s second-biggest lender by assets, topped the regional banks in fees from bond advisory deals last year, with $14.1m, up from $4m a year earlier, according to Freeman. Samba was second at $8.2m compared with $8.5m in 2009, the data show. HSBC, which has been in the region for more than a century, earned $22.3m in fees last year. Standard Chartered, which has been doing business in the Gulf since 1923, earned $19.8m.

The Gulf lenders still can’t match the international banks in reaching bond investors around the world, bankers say. International banks such as Royal Bank of Scotland Group also lead the league tables because of their greater capacity to lend, Makram Kubeisy, head of investment banking at Dubai-based Shuaa Capital, said in an interview.

“It is distribution where the global banks have a big advantage,” Shahzad Shahbaz, chief executive of QInvest, a Doha-based Islamic investment bank, said in a telephone interview. “They have a global platform so they can distribute all over the world and which takes a very long time to build.”


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National Bank of Abu Dhabi
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