Middle Eastern Awards for Excellence 2012: By country

Bahrain

Best Bank: Ahli United Bank

Before the Arab Spring, Bahrain’s status as a financial centre was already on the decline as Dubai’s star rose. The regional unrest tipped the balance even further in Dubai’s favour as mass protests broke out on the island, causing more bankers and tourists to flee for the relative safety of Dubai.

Ahli United Bank stood out, however, even as other banks based in Bahrain, both non-deposit wholesale institutions and onshore retail lenders, suffered. AUB cannot be blamed for Bahrain’s problems and, as the protests flared, some wondered how well it could cope.

But the firm’s back-up systems have proved robust.

The bank’s net profit rose 17% in 2011, reaching $310 million, its highest ever. AUB’s profit continued to rise in the first quarter of 2012. Return on equity increased to almost 13%.

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Egypt

Best Bank: NSGB

The Egyptian revolution had a huge impact on the country’s economic stability, and hence on the financial sector. Banks struggled to cope with this but some managed to hold their ground under adverse conditions better than others. CIB (Commercial International Bank) managed to increase deposits substantially and maintained profitability – if at a reduced level.

However, the bank that coped with the conditions most successfully was a subsidiary of France’s Société Générale: NSGB (National Société Générale Bank).

Despite the turmoil in the country over the past year NSGB has managed to post favourable financials, with increases to net income and deposits, along with a reduced non-performing loan ratio. Net income grew by 11%, deposits by 3% and the NPL ratio shrank to 0.4 percentage points – impressive numbers considering the conditions that the bank was operating under.

NSGB has had to put a lot of effort and energy into assisting its clients during the revolution and its aftermath. This has included providing advice on rapidly changing market conditions, extending tenors and changing currencies on deals and rescheduling and restructuring facilities. This has been aided by NSGB’s access to the parent bank and other subsidiaries, enabling it to support clients with offshore investments.

NSGB has suffered from a reduced market capitalization, but this is down by less than the average for its peer group. Given the turmoil, it would have been very surprising not to see a drop of some kind.

NSGB has also managed to expand its branch network, adding 15 branches over the course of 2011, giving it a presence in the majority of Egypt’s governorates.

NSGB has energetically targeted Egypt’s small and medium-sized enterprises sector – something that the government encouraged by loosening certain regulations in relation to SMEs – with total loans to the sector up 27.3% and total clients up 24% compared with year-end 2010.

Hapoalim was hit hard by the US sub-prime crisis, suffering losses from mortgage-backed securities. However, while the damage was severe, it has arguably left the institution with a more conservative stance that better suits the current climate. The numbers certainly indicate a recovery, with results consistently strong.

Hapoalim posted positive results for 2011, with net profits up by 25%, building on the rebound experienced in 2010. Deposits were up by 10% in 2011. Hapoalim has the second-largest deposit base among Israeli banks, behind Bank Leumi.

Hapoalim has also maintained steady growth in credit, with the loan book up by 6% in 2011. It is Israel’s largest lender, with a 29.9% market share. Credit growth was slower in the first quarter of 2012 but remains positive. The bank’s non-performing loan ratio fell to 3.29%.

Hapoalim has the largest retail network in Israel, with over 280 full-service branches, and it is the second-largest bank by assets. Assets stand at close to $66 billion.

Goldman Sachs was able to place strongly in Dealogic’s league tables for investment banking in Israel, with fixed income and M&A being particularly strong areas. It is the only bank to have participated in the Israeli sovereign’s last three bond issuances, the most recent of which was a $1.5 billion 10-year bond, for which Goldman Sachs was joint bookrunner.

Goldman Sachs also advised pharmaceuticals company Teva on its $5 billion bond issuance – the largest securities issuance in Israel’s history. Several months before, Goldman had advised Teva on its acquisition of Taiyo, Japan’s third-largest generic drug maker. The deal is the first Japanese takeover by an Israeli company.

Goldman Sachs also assisted in the financing of Israeli energy and infrastructure company Delek for its acquisition of US-based Lion Oil. The bank further acted as financial adviser to Bank Leumi on its acquisition of Swiss private bank Banque Safdie. The deal will enable Leumi to combine its existing Swiss private banking activities with those of Banque Safdie.

Bank of America Merrill Lynch is the undisputed leader in M&A in Israel this year, topping the Dealogic league table for both the number of deals and deal value. Most notable among the deals was the acquisition of US biopharmaceuticals company Cephalon by Teva. BAML acted as financial adviser to Cephalon. The $7.1 billion transaction was the largest Israeli M&A deal, and followed a hostile approach on Cephalon, and Teva being brought in as a white knight.

BAML also advised local firm Ness Technologies on its $322 million acquisition by Citi Venture Capital International. Finally, the bank acted as adviser to digital media service provider DG and provided the financing for its $517 million acquisition of Israeli digital advertising solutions provider MediaMind Technologies.

Best Bank: Arab Bank

There are 26 banks in the Jordanian market, but in that crowded field there is a clear leader. Arab Bank is the largest institution in the country, accounting for 24% of assets, 24% of deposits and 17% of credit facilities.

The Jordanian economy is not doing particularly well at the moment, with sluggish growth resulting from high prices for imported fuel and the impact of political unrest around the region. It is a time for consolidation rather than rapid expansion and, in that context, Arab Bank is holding its own. While the group’s asset base in Jordan fell slightly over the past year, by 0.4% to $10.35 billion, its revenues were up 0.3% to $367 million.

Arab Bank’s capital adequacy ratio at the end of 2011 was 15.1%, easily exceeding the 8% benchmark for Basle II, but the group’s greatest strength is perhaps its geographic diversity. It operates in 30 countries across five continents, which protects it against the vagaries of any one economy. Nonetheless, its home market of Jordan remains critical to its operations, accounting for 42% of its branch network and employing 44% of its staff.

In addition to the main bank, its Shariah-compliant subsidiary, Islamic International Arab Bank, has 32 branches around the country and the group also owns Arab National Leasing Company and Al Arabi Investment Group.

Its key rival is the Housing Bank for Trade & Finance. Although Housing Bank did relatively well in 2011, posting a 2.2% rise in the value of loans and a 0.5% rise in deposits, it still trails by overall market share, with 12% of the loans market, 15% of assets and 16% of deposits. In Jordan, Arab Bank remains the one to beat.

Best Bank: National Bank of Kuwait

Kuwait suffered from continuing political divisions between government and the opposition last year. Oil revenues flowed into government coffers but the corporate and financial sectors struggled with the excesses of the pre-crisis years, even as the political divisions prevented any boost from infrastructure spending.

Banks in Kuwait continue to suffer from these problems. But as in Saudi Arabia, some are recovering better than others. Gulf Bank, for example, which had to be rescued in 2008 after losses in the derivatives market, was upgraded by Standard & Poor’s in December.

Burgan Bank also continues to do relatively well, and its international expansion picked up pace in 2012 with the acquisition of the Turkish subsidiary of Greece’s EFG Eurobank.

National Bank of Kuwait (NBK) had only small loan and profit growth last year. However, its asset quality is far better than those of other players in the market, meaning it is much better positioned to take advantage of growth when it returns. Indeed, NBK’s bad debt ratio decreased to 1.5% in 2011 while its coverage ratio increased to 243%.

Kuwait’s national champion remains the biggest and best bank in the country.

Lebanon was for once a haven of relative stability last year, given the new democratic movements in the neighbourhood. Nevertheless, strife in Syria and beyond has had a negative impact on regional trade and tourism, and the property market has also slowed in some parts of the country.

Lebanese banks were faced with cataclysmic change in the two main countries they had targeted for regional expansion: Egypt and Syria. The two main players, Bank Audi and Blom Bank, have both seen their businesses slow or contract in Egypt and above all Syria.

That is understandable, particularly in Syria. Lebanese commercial banks’ net foreign assets declined by more than $4 billion in 2011. But this award is for Lebanon, and overall, Lebanon’s banking sector continues to do well.

As Euromoney has said before, these are institutions that know how to deal with a crisis. Neither Audi nor Blom has suffered big losses at group level as a result of the turmoil.

However, in the period from April 1 to March 31, Bank Audi managed to post better profit growth than Blom once again, and for many private-sector banks that is the core gauge of success between institutions.

Blom’s profit fell slightly – even this is perhaps understandable given the circumstances. Audi managed to grow its net profit, albeit by only 1.9%.

Audi continues to take better advantage of the opportunities. For example, it participated in a $400 million acquisition financing for a regional insurance group based in Lebanon. It also participated in a $122 million greenfield cement project, as well as other projects in energy and aerospace.

Audi has also made strides and won customers in retail, partly thanks to the introduction of new products including in mobile payments.

The banking sector is doing well in Oman these days. On the back of an economy that is growing faster than the regional average, most banks posted double-digit growth in loans, assets, deposits and profits in 2011.

Such metrics help explain the attraction of the country to HSBC, which is merging its local operations with those of Oman International Bank. That deal will shake up the local market in the years ahead, and is likely to put the newly enlarged HSBC Oman among the top three banks in the country.

For now, however, one bank remains dominant. Bank Muscat has a 39% share of the market in loans and deposits and its asset base of $18.8 billion at the end of December is three times larger than that of its nearest rival, National Bank of Oman.

Its pre-eminent position helped it to gain the mandate as financial adviser and issue manager on the initial public offering of SMN Power Holding, the only IPO launched in Oman in 2011, and it facilitated the successful closure of $562 million in financing for Octal Petrochemicals.

Overall, Bank Muscat grew its loan book by 20% in 2011, while its assets were up 23.5%. Although profits grew at a slightly lower rate than those of some rivals, it outperformed the market in deposit growth, which increased by 31% to $12.7 billion. That growth has continued in the first quarter of this year, with loans, assets and deposits all rising.

Bank Muscat’s recent initiatives suggest this trend should continue for the rest of this year too. During 2011, it opened a representative office in Singapore and became the first Omani bank to enable payments in Chinese renminbi. Both measures will help it tap into trade and investment flows between the Gulf and Asia. It also unveiled its Meethaq Islamic banking subsidiary, in preparation for the market being opened to Islamic banking for the first time.

The relative peace in the West Bank and Gaza Strip in recent years has meant that the local economy has been growing fast. According to a World Bank report published in March, GDP growth in the first nine months of 2011 was over 10%, led by a 26% rise in the Gaza Strip.

As the bank with the largest branch network in the area, Bank of Palestine is well placed to tap into that, and its performance hasn’t disappointed. Over the past year it has managed to increase the value of its loan book by 32% to $720 million, while assets grew by 7% to $1.65 billion and total deposits by 3.6% to $1.3 billion. All that contributed to a 12.9% rise in net profits for the year, taking the figure to $34 million.

The bank stands out as the most well rounded of the main institutions in the Occupied Palestinian Territories. It is engaged in retail, corporate, SME and micro banking, with the largest card-processing operations in Palestine. It is the sole agent for issuing and acquiring Visa and MasterCard in Palestine, with over 5,000 point of sale machines.

Among Bank of Palestine’s main rivals, Jordan’s Arab Bank has its roots in Palestine and claims its local subsidiary has the largest asset and deposit base there. However, it is widely seen as being heavily focused on attracting deposits and being far more conservative when it comes to loans. In addition, its branch network is only half the size of Bank of Palestine’s.

Helping to cement its position, Bank of Palestine launched a number of new services during the past year. It established a dedicated diaspora unit, aimed at the 8 million Palestinians living outside the country. It also set up an electronic payments subsidiary, called PalPay, and late in the year introduced bancassurance and mortgage products.

Before long, Qatar National Bank will be a formidable contender in the regional award for best bank. It has already become the biggest bank in the region by assets and profitability.

This year, QNB hit the headlines as it bid for Turkey’s Denizbank. It also bought a bank in Libya. This is part of a strategy to follow other Qatari state-owned firms in becoming a Qatari corporate ambassador in the emerging markets surrounding Qatar.

For the moment, almost 90% of QNB’s loans remain in Qatar. But it has launched a new cash management system and pushed forward its trade finance operation. This will serve it well as it becomes more of a regional bank.

Moreover, QNB’s dominance within Qatar is increasing. That can only be good news for the bank as the gas-rich state embarks on massive infrastructure spending in advance of the 2022 football World Cup.

Overall, QNB’s loan growth has been double the Gulf average over the past three years. Its bad debt level is just 1.1%.

In investment banking, Qatar looks set to become home to another regional champion. This time, the firm’s regional business might be even more rapidly established, thanks to its acquisition of a majority stake in the investment banking operations of Egypt’s EFG Hermes.

The acquisition, by QInvest, is due to close later this year. QInvest, however, has already built up an admirable home-grown and Qatar-centric investment banking operation since the firm’s establishment as a part subsidiary of Qatar Islamic Bank only five years ago.

This year, QInvest advised Qatari clients on a number of financings and acquisitions related to investments within and outside Qatar. These included a $40 million acquisition by a Qatari firm in Turkey, and the $1 billion new shopping mall in Doha being built by Dubai’s Al Futtaim Group alongside Qatari shareholders.

QInvest also executed a number of syndications and sukuk transactions on behalf of Qatari clients. Furthermore, the firm developed its structured products division, particularly in Qatari equities.

The recovery in the Saudi banking sector began in earnest from the second quarter of 2011. Record government spending in the wake of the Arab Spring spurred consumer confidence.

Nevertheless, some banks have recovered more rapidly than others. On average, percentage loan growth reached the mid teens by early 2012. During the year to March 31, loan growth at SABB (Saudi British Bank) had already reached almost 20%.

For example, Samba’s net income declined for the second year running. By contrast, SABB’s net profit rose 58% in 2011. SABB posted a return on equity of almost 18% and in the first quarter of 2012 its net profit increased 14% year on year.

SABB has developed its franchise more actively than other local banks over the past year, and it has made better use of its underlying advantages. It has made particularly good use of its affiliation to HSBC, the 40% owner – improving its services, for example, for the Kingdom’s trade and investment with China (a core market for HSBC).

SABB impressed too with a number of innovative structured financings. It supported oil exports to India and Turkey amid high oil prices and scarce dollar funding, for example, via a swap structure using SABB’s riyal liquidity.

In retail, SABB is one of the Kingdom’s biggest providers of home finance. This is an area of increasing importance thanks to local housing shortages and the government’s focus on spurring home building and supporting mortgage lending. Growth in SABB’s home finance franchise was particularly strong in 2011.

SABB gained ground in private banking, rising to first place in Euromoney’s private banking poll in 2012.

Overall, in Saudi Arabia, it remains to be seen how much an expected slowdown in the local real estate market will affect local lenders. It is also to be hoped the resurgence in local stock trading in the first quarter will not mean a return to lax risk management in margin lending at Saudi banks.

Some say the bankruptcy of Bahraini Islamic bank Arcapita, for example, might affect some Saudi banks. Al Rajhi Bank might see some changes, hopefully positive, following the replacement of chief executive Abdullah Al Rajhi with Suleiman Al Zain.

SABB’s performance over the past year, however, is cause for optimism. The bank’s $400 million privately placed subordinated sukuk, arranged by HSBC Saudi Arabia in late March, also bodes well.

In investment banking, HSBC Saudi Arabia (of which SABB owns 51%) has long held the title of best investment bank in Saudi Arabia. It remains a market leader. But others have been building profitable investment banks over the past five years – above all Deutsche Bank.

In terms of profitability, Deutsche Bank’s Middle East franchise as a whole had a record year in 2011 and a record quarter in the first three months of 2012. Meanwhile, profits from its Saudi franchise doubled over the year, surpassing even the UAE as the bank’s most profitable market – a dramatic turnaround from the situation five years ago.

At the core of Deutsche Bank’s profitability in Saudi Arabia are hedging and structured-finance products – areas that have grown in line with the increasing sophistication of Saudi corporates, many of which are the region’s biggest in their sector.

In the first half of 2011, Deutsche Bank set up a fully fledged platform for sales and structuring and trading in fixed income, currency and commodities in Riyadh. Among the core trades that Deutsche Bank executed last year was a $750 million four-year dollar-riyal cross-currency swap for a local client, one of the biggest ever cross-currency swaps in the region.

Deutsche Bank was one of the banks, along with HSBC, behind the $1.2 billion financing for Axis, a subsidiary of Saudi Telecom. This was awarded Euromoney’s Islamic finance deal of the year.

Late last year, Deutsche Bank also helped arrange the region’s first-ever project sukuk for Saudi Aramco’s refinery joint venture with France’s Total. This SR3.75 billion ($1 billion) deal was also the world’s first sukuk for a greenfield project.

In debt capital markets in particular, however, HSBC Saudi Arabia remains the unrivalled best. Its market share, according to Dealogic’s bookrunning league table, was more than 75%.

In early 2012, HSBC was the sole arranger of an SR15 billion sukuk for the General Authority of Civil Aviation (GACA). This was the Kingdom’s first-ever government-guaranteed sukuk, setting a vital new benchmark and spurring an uptick in Saudi sukuk issuance in the first part of 2012.

Following the GACA sukuk, HSBC managed a $1.75 billion sukuk for Saudi Electricity Company in March, for example, achieving an order book of some $17 billion. It also raised SR1 billion for Almarai, a private-sector dairy firm.

Many banks in the UAE were hit hard by the 2009 debt crisis in Dubai and the regional property and stock crashes of late 2008. As a result, for the past three years, Euromoney has given the award for best bank in the UAE to an institution whose profits have been remarkably resilient despite the crisis: National Bank of Abu Dhabi (NBAD).

Even if profit growth was roughly flat last year, and even if bad debt inched up very slightly, NBAD remains a solid bank, with good prospects – largely thanks to chief executive Michael Tomalin, now retiring after 13 years. Meanwhile, Abu Dhabi Commercial Bank (ADCB) has also made improvements in the past year, and benefited from the reclassification of Dubai World debt as performing.

But it is time to acknowledge a bank that, like NBAD, has demonstrated resilience – and whose profitability and low bad-debt levels throughout the crisis have wowed investors. First Gulf Bank has been a spectacular turnaround story over the past 10 years.

Members of the Abu Dhabi royal family bought the bank as a struggling lender from Ajman in the late 1990s, relocating the firm to Abu Dhabi. Over the past 10 years, management from international firms including Citi has helped create a bank whose profitability is now second only to the national bank.

In 2011, First Gulf Bank’s net profit was less than 1% behind that of NBAD. This has been partly thanks to a greater focus than some on higher-yielding local corporates, names that nevertheless have strong local shareholder support. First Gulf Bank has also followed a policy of deploying retail sales agents in the place of a larger branch network, even while maintaining centralized risk management. This has allowed the bank to rapidly resize its business in line with opportunities, and control costs extremely effectively.

Investors’ ease with First Gulf Bank was proved this year with the issuance of two dollar-denominated sukuks, one of which blazed a trail in being the first international sukuk by a conventional bank incorporated in the GCC.

In investment banking, Standard Chartered advised on many of the year’s most important, most successful and most innovative fixed-income deals, including First Gulf Bank’s sukuk. It brought some important Dubai names to the market too, such as mortgage lender Tamweel, which issued a $300 million sukuk earlier this year: Tamweel’s first issuance since 2008.

According to Dealogic, in total Standard Chartered was bookrunner on 14 DCM deals during the period, with a total volume of almost $2 billion, giving it a market share of almost 12%. These included a good mix of repeat mandates and first-time issuers, such as Dubai private-sector conglomerate Majid Al Futtaim.

Standard Chartered’s deals included the first dim sum bond from the Middle East, by Dubai bank Emirates NBD. It also included the first ringgit issuance by a Middle East corporate (Abu Dhabi energy firm Taqa) and the first public bond issuance by a Dubai bank since 2007 (Emirates Islamic Bank’s $500 million sukuk in early 2012).

In equity, the period was another sparse one for the UAE, with issuance still failing to recover to anywhere near pre-crisis levels. Nevertheless, Bank of America Merrill Lynch was bookrunner on the €1.25 billion exchangeable bond from Abu Dhabi sovereign investment vehicle Aabar. The five-year notes were issued over 21% of Aabar’s 9% stake in German truck and car manufacturer Daimler.

This was the largest-ever exchangeable bond from an unrated issuer in Europe. Middle East and Africa. It created a new precedent for sovereign wealth funds to tap equity-linked investors and was a Euromoney deal of the year for 2011.

BAML was also bookrunner on a $225 million rights issue for London-listed but Middle East-focused oilfield services firm Lamprell, in relation to its acquisition of Dubai-based Maritime Industrial Services. BAML also acted as adviser to Lamprell on the acquisition.

As further evidence of the strength and breadth of BAML’s UAE M&A franchise, it was financial adviser to Dubai private equity firm Abraaj, in Abraaj’s $1.7 billion sale of its 50% stake in Acibadem, a Turkish healthcare firm, to a consortium of Malaysian sovereign wealth fund Khazanah and Japan’s Mitsui Group.

BAML also acted as financial adviser to the Dubai-Jordanian sovereign wealth fund Jordan Dubai Capital on the sale of the fund’s controlling stake in the largest power generator in Jordan to Acwa Power of Saudi Arabia, a deal of some $150 million.

Back in Abu Dhabi, BAML acted as financial adviser to ADCB on the $1.9 billion sale of its 24.9% stake in Malaysian lender RHB Capital to Aabar. It also advised on Etihad Airways’ €72.9 million acquisition of a 27% stake in Air Berlin.

Finally, BAML was lead adviser to the acquiring consortium (which included a UAE sovereign wealth fund) in the sale of a $3.25 billion, 24.1% stake in Norwegian pipeline firm Gassled, sold by Statoil.