Deal-mak­ing to drive 2017 Mideast ac­tiv­ity

Kuwait Times - - BUSINESS -

DUBAI: A Mid­dle Eastern in­vest­ment bank­ing fee bo­nanza should ex­tend into 2017, spurred by a com­bi­na­tion of bond and share sales and merg­ers and ac­qui­si­tions as the re­gion ad­justs to lower oil prices, bankers say. Deal such as Saudi Ara­bia’s $17.5 bil­lion de­but in­ter­na­tional sov­er­eign is­sue has helped banks’ earn­ings, off­set­ting falls in other re­gions due to eco­nomic uncer­tainty and volatile mar­kets.

Fees from the Mid­dle East reached $581 mil­lion dur­ing the first nine months of 2016, an 11 per­cent rise com­pared to the same pe­riod in 2015, ac­cord­ing to Thom­son Reuters data, while global fees for th­ese ser­vices fell 11 per­cent to $60.9 bil­lion. JPMor­gan Chase & Co, HSBC and Bank of Amer­ica Mer­rill Lynch are among the banks that have been most ac­tive in Mid­dle East in 2016 and ex­pect more in 2017.

“Next year could also be good. Five or six GCC (Gulf Co­op­er­a­tion Coun­cil) states will have to is­sue debt and they don’t need a long lead time as they’ve is­sued be­fore,” Sjo­erd Leenart, JPMor­gan’s se­nior coun­try of­fi­cer for Mid­dle East, Turkey and Africa, said in emailed com­ments. Bahrain, Saudi Ara­bia, Oman, Abu Dhabi, Kuwait and Qatar could press ahead with new bond is­sues in 2017 as they seek to fill bud­get deficits caused by low oil rev­enues. With the out­look for prices im­proved by OPEC’s move to cur­tail oil out­put, bor­row­ers in the re­gion are likely to use the op­por­tu­nity to fill their cof­fers. “We ex­pect the strength­ened com­mod­ity fun­da­men­tals to cre­ate a good win­dow for is­suers in early 2017,” Matthew Wal­lace, HSBC’s head of global bank­ing, Mid­dle East and North Africa, said in emailed com­ments. Cou­pled with the re­gion’s growing fi­nan­cial mar­kets and the use of fi­nanc­ing ar­range­ments rang­ing from par­tial pri­va­ti­za­tions and non-core di­vest­ments to Asian pri­vate place­ments to struc­tured com­mod­ity-based fi­nanc­ings, this will drive fur­ther ac­tiv­ity, Wal­lace pre­dicted.

Bor­row­ers such as Emi­rates NBD and Al-Hi­lal Bank have turned to pri­vate bond place­ments to ac­cess liq­uid­ity dis­creetly. The dry­ing up of cash­flows due to lower oil prices has also spurred ap­petite for struc­tured fi­nance, par­tic­u­larly among oil firms. While es­ti­mates for debt and eq­uity rais­ing in 2017 are tricky to cal­cu­late due to mar­ket uncer­tainty, an­a­lysts ex­pect more cor­po­rate bonds in 2017 than 2016 as re­cent sov­er­eign is­sues cre­ate a pric­ing bench­mark, while bank­ing sources say more com­pa­nies are weigh­ing ini­tial pub­lic of­fer­ings. Bankers are also pre­dict­ing more M&A, with the merger of Na­tional Bank of Abu Dhabi and First Gulf Bank to form one of the largest banks in the Mid­dle East and Africa set to com­plete. Wadih Boueiz, man­ag­ing di­rec­tor and co-head of cor­po­rate and in­vest­ment bank­ing for MENA at Mer­rill Lynch In­ter­na­tional, part of Bank of Amer­ica Mer­rill Lynch, said he is op­ti­mistic of more op­por­tu­ni­ties in 2017 fol­low­ing a change in mind­set among com­pa­nies in the re­gion in 2016. — Reuters

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