Kuwait Times

Deal-making to drive 2017 Mideast activity

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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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