Global banks hiring again in Saudi Arabia

RIYADH: Global banks are pushing ahead with growth plans in Saudi Arabia four months after a crackdown on corruption threatened to derail ambitious plans to transform the economy.

Lenders including UBS Group AG and Goldman Sachs Group Inc have been hiring and Citigroup Inc just won its first local advisory mandate since returning to Saudi Arabia after a 13-year absence.

Deutsche Bank AG said it’s expanding in the kingdom as the outlook for bond and stock sales improves.

While the speed of the purge and the lack of transparency unsettled markets when it started late last year, the banks appear unfazed after several of the princes and officials who were arrested have since been released.

That’s good news for Crown Prince Mohammed Salman, who’s trying to solidify his grip on power without alienating the international investors he needs to transform the economy into a financial powerhouse and away from oil.

“Over the medium-term, foreign investors will likely take comfort from the fact that no foreign investor was targeted by the anti-corruption drive,” said Ehsan Khoman, head of research for the Middle East and North Africa at Mitsubishi UFJ Financial Group Inc.

In the long run, “we view the anti-corruption drive as a net positive for investors.”

That’s quite a change from November, when the arrests of Prince Alwaleed Talal and other billionaires sent shock waves through the region. The prince’s Kingdom Holding Co put on hold a plan to raise about US$1bil in loans.

Efforts to revive a share sale of Fawaz Alhokair Group’s mall unit were shelved after the accounts of its co-founder were frozen in the crackdown.

Local investors in the Middle East’s largest initial stock offering last year reneged on hundreds of millions of dollars on the last day of the sale. The disruptions fueled speculation how the crackdown would affect the global banks that manage much of the region’s wealth, including UBS, JPMorgan Chase & Co, Credit Suisse Group AG and Citigroup, which counts Prince Alwaleed as a long-term backer.

Many lenders had also invested in anticipation of a fee bonanza from what could be the largest IPO in history, the planned listing of parts of Saudi Arabian Oil Co, or Aramco.

“I don’t think the investor sentiment has fully recovered after November,” said Joice Mathew, head of equity research at United Securities in Oman.