By Ed Attwood
Analyst report shows major declines in fees and deal activity for local investment banks.
Mergers and acquisitions (M&A) in the Middle Eastern investment banking market have slipped by 40% in the last year and by a hefty 67.5% from their 2007 high, according to a report released by Thomson Reuters.
Overall, local M&A activity stood at $13bn in 2009, well down from $40bn in 2007.
Middle Eastern equity capital markets slid from $36bn in 2008 to $6.89bn last year, with overall fees being paid to investment bankers and advisers almost halving during the same period to $599m.
Equity issues dropped by 81% to $6.89bn year-on-year, while loans fell to $17.1bn – an 81.5% decrease. Debt issues rose by 151% to $38.3bn.
"These have undoubtedly been tough times worldwide with the investment banking business feeling the effects. As these league tables illustrate, the Middle East investment banking industry saw its fair share of pressure in 2009 and will be looking now for a period of consolidation," said Basil Moftah, managing director of Thomson Reuters, Middle East and Africa.
The Thomson Reuters fourth-quarter 2009 report – which includes rankings of banks and advisors operating in the Middle East based on deal activity and fees – showed that HSBC holds the top spot in local debt and equity capital markets' fee rankings with $13.4m and $8.1m respectively.
In M&A with any local involvement, Morgan Stanley was highest placed, advising on deals worth $15.4bn. The top targeted M&A deal for 2009 involved the Iranian government’s plan to divest its 50% interest in Iran Telecommunications to the public for $7.7bn.
The top Middle Eastern acquisition of the year was Qatar Investment Authorities' $9.5bn acquisition of an increased stake in Volkswagen.
As loan activity fell by over 80%, Middle Eastern issuers and borrowers managed to raise a total of only $17bn. In the overall Middle East loan ranking, Standard Chartered topped the league with eight deals worth a total of $1.91bn.
"As we begin a new year, the road may remain bumpy for a while. For a sustainable return to growth we need to see an increase in investment banking activity with a revival in mergers and acquisitions as well as renewed interest in both initial public offerings and bond issues," Moftah added.