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Wed 28 Apr 2010 12:53 PM

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Saudi to lead bank lending in GCC in 2010 - survey

But poll of top corporate execs in GCC says 42% believe lending in general will decrease.

Saudi to lead bank lending in GCC in 2010 - survey
LENDING LEADER: Saudi Arabia is expected to lead bank lending activity in the GCC over the next twelve months.

Saudi Arabia is expected to lead bank lending activity in the GCC over the next twelve months, with the majority flowing into the telecoms sector, a new survey has found.

However, the survey of 75 top corporate executives in the GCC revealed that 42 percent believe lending in general will decrease across the region in the year ahead.

The research, which was carried out by international law firm Blake, Cassels and Graydon, found that 68 percent of those surveyed believe there will be an increase in mergers and acquisitions (M&A) in the GCC over the next twelve months.

While 45 percent of executives believe bank loans will be the main source of finance for M&A activity, 42 percent are pessimistic about the liquidity in the region and believe there will be a further decrease in lending activity this year.

However, over a third of executives said Saudi Arabia will lead the banking activity over the next twelve to 24 months, followed by Qatar (27 percent) and Bahrain (fourteen percent).

In the Kingdom, the telecoms sector was seen by 29 percent of executives as the sector banks were most likely to lend to, followed by infrastructure (fourteen percent), healthcare (twelve percent) and transportation (twelve percent).

“Despite what you hear it has been reported that the banks do have liquidity but are being careful and you can’t blame them [as] we are in a financial crisis. The banks are willing to lend but their criteria has changed,” said Dr Saud Al Ammari, managing partner of Blake, Cassels and Graydon in Saudi Arabia and Gulf region.

The economic conditions are perceived by executives to be the biggest obstacle to potential M&A transactions, 35 percent of executives surveyed see increased costs of financing as a major deterrent, followed by a demand for greater transparency (28 percent) and less reliability of debt (14 percent).

“We believe that there will be great activity in M&A [in the GCC] as there are a lot of companies restructuring and a lot of companies that do in fact have cash and want to take over other companies,” Al Ammari added.

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