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Kuwait Towers: the state’s leading bank has a commanding role in regional transactions |
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Awards for Excellence 2002
Best bank: National Bank of Kuwait
Best debt house: Merrill Lynch
Best equity house: UBS Warburg
Best M&A house: Deutsche Bank
Best at custody: Citigroup
Best at risk management and treasury: Citigroup
Best at cash management: HSBC
National Bank of Kuwait reclaims its position as the best bank in the Middle East from last year’s winner Gulf International Bank. The contest between the two is close, but this year NBK’s more diversified earnings base, financial strength, and growing regional influence give it the advantage. Its strategic alliance with National Commercial Bank in Saudi Arabia, has helped it to gain a toehold in the region’s largest market.
In investment banking, NBK is one of the only GCC banks capable of structuring and underwriting large regional capital market transactions.
Its diversified business lines also include a highly successful asset management business that it runs through a joint venture in London with Morgan Stanley Dean Witter, managing $4 billion of assets.
The best debt house in the Middle East this year is Merrill Lynch. Merrill faced stiff competition from last year’s winner Morgan Stanley, with which it worked on several deals, but comes out ahead both in terms of the number of deals and the amount of debt handled.
Merrill worked on eight transactions in the region, arranging a total of $1.361 billion. Clients included Egypt, Lebanon, Tunisia and Israel, and Banque de la Méditerranee in Lebanon.
As well as arranging the most issues this year, Merrill also participated in some of the year’s landmark deals. Merrill Lynch was joint-bookrunner for the Republic of Egypt’s $1.5 billion dollar bond, which was the largest to come out of the region in 2001. “The Egyptian issue was notable not only because of its size but also because it set a new standard of penetration into the US investor base,” says Paul Raphael, managing director and chairmen of CEEMEA at Merrill.
Israel’s equity market is the most important in the region in terms of its size, liquidity and sophistication. UBS Warburg’s strong Israeli franchise is therefore crucial to its status as best equity house in the Middle East.
UBS Warburg’s strength in the Israeli equity market comes from its multiple award winning research team that unlike many of its rivals is actually based in Israel. It is also the only foreign broker to have a seat on the Tel Aviv Stock Exchange, and last year led in what little primary market activity there was.
The poor economic and market conditions in some of the region’s largest countries have unfortunately forced UBS Warburg to delay its planned regional expansion. “Broadening our exposure and presence in the region is still a key commitment but the timing has to be right”, says Tutu Agyare, managing director and head of emerging European equities at UBS Warburg.
Deutsche Bank narrowly emerges ahead of SG as the best M&A house in the Middle East this year. The two advisers have very different strengths. SG’s M&A business is focused on North Africa, in particular Tunisia where it helped French companies in their Tunisian acquisitions, and in Egypt.
Deutsche on the other hand is strong in Israel, the region’s most advanced market, where it has strong advisory relationships with some of the country’s largest corporates. Major deals this year include its advisory to Clal Industries and Investments, one of Israel’s largest holding companies, on its disposal of 25% of Mahsav,owner of Israel’s cement monopoly.
Transaction breakdown
The division of last year’s award for “transaction services” into three – for best at custody, risk management and treasury, and cash management – results in Citigroup scooping the prizes for custody and risk management and treasury, and HSBC recognized as the regional leader in cash management.
Large local banks dominate custody in most markets in the region, so no bank has a clear leadership position in the region as a whole. Citigroup takes the award because of its strong position in important markets and because of the sophistication of its product offering and importance of its contribution to the markets in which it operates.
Corporate treasurers at major regional firms and multinationals believe that Citigroup offers the best pricing. Citigroup’s pole position in risk management and treasury in the region comes from its strength in foreign exchange products for currencies in the region, recognized in Euromoney’s annual forex poll. Citigroup has regional treasury centres in Bahrain, Egypt, Lebanon, the UAE and, through its affiliate Samba, in Saudi Arabia.
HSBC has the largest cash-management operation in the region, servicing the needs of more local and multinational clients than any other bank. It has pioneered innovative electronic cash management solutions in the region through its Hexagon electronic banking platform.
Peter Koh
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National Bank of Bahrain Tower, Manama: the bank has grown market share domestically and regionally |
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BAHRAIN
Best bank: National Bank of Bahrain
Best equity house: Securities&Investment Company (Sico)
National Bank of Bahrain has built upon its long dominant domestic network to increase its market share in a number of market segments. The bank recorded record year-on-year growth in its savings deposits of 50%, and also made significant advances in expanding its project finance capabilities. In 2001 NBB was involved in several major regional project financing deals including the $400 million syndicated loan for the Qatar Fertiliser Company, and also in structuring a $19 million bond issue for a regional finance company. Securities&Investment Company (Sico), takes the award for best equities house in Bahrain. Sico is the largest broker on the Bahrain Stock Exchange with a market share of approximately 25% and is currently the only active market maker. As well as providing brokerage services in Bahrain and throughout the GCC states, the investment bank also offers custody accounts.
EGYPT
Best bank: Commercial International Bank
Best debt house: Merrill Lynch&Morgan Stanley
Best equity house: EFG-Hermes
Commercial International Bank is still the best bank in Egypt thanks to its superior asset quality, strong financial health and highly regarded management.
The Egyptian Central Bank estimates the non-performing loan ratio of the system to be 14%. However most analysts view this as a conservative estimate. Public sector banks are particularly affected, with provision charges that typically absorb over 50% of their pre-provision profits. Commercial International Bank has managed to escape these problems better than its peers as it focuses more on better-quality customers and because it benefits from a greater amount of fee and commission income.
Merrill Lynch and Morgan Stanley share this year’s award for best debt house in Egypt. The two were joint bookrunners for the Arab Republic of Egypt’s $1.5 billion two-tranche bond issue in June 2001. The deal, the only international debt issuance out of Egypt over the past year, was composed of a $1 billion 10-year tranche and a $500 million five-year tranche.
EFG-Hermes still stands out from its peers as the best equity house in Egypt. The group has two operations, Financial Brokerage Group and Hermes Securities Brokerage, that service institutional and high-net-worth individuals. Egyptian equities have taken a beating this year, with the Cairo and Alexandria Exchange’s Case 50 index falling from 46 to 26 over the past 12 months. EFG-Hermes, however, is better placed than most to ride out this turmoil through its dominance of trading in Egyptian GDRs registered in New York and London.
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Tel Aviv: Israel’s leading banks have coped best with slowdown |
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ISRAEL
Best bank: Bank Hapoalim
Best debt house: Lehman Brothers
Best equities house: UBS Warburg
Best M&A house: Deutsche Bank
The Israeli banking sector has suffered greatly this year from the country’s economic slowdown and continued political instability. Bank Hapoalim, however, has managed the challenges posed by this difficult environment marginally better than its closest rival, Bank Leumi. The two banks have a similar market share in most segments but analysts observe that Hapoalim’s management seems slightly more focused on the considerable problems at hand. The launch of Hapoalim’s new private banking unit in New York and slightly stronger retail market and asset management positions also give it the advantage over Leumi.
In terms of the number of deals managed this year in Israel, the competition for the best debt house award is very tight, with the top four contenders all having participated in a similar number. Lehman Brothers’ role as sole bookrunner in Teva Pharmaceutical Finance’s 20-year $360 million convertible and participation in other major transactions, however, give it a substantial lead in terms of the quantity of debt arranged. Lehman Brothers is therefore the winner of this year’s award.
UBS Warburg’s Israeli equity research team has won numerous awards for its superior coverage of the market. It is also one of the largest brokers in the country and is the only foreign broker to have a seat on the Tel Aviv Stock Exchange.
UBS Warburg was the bookrunner for the largest deal in the primary market, a SFr192.9 million ($113.3 million) international private placement for Card Guard Scientific Survival, a healthcare and pharmaceuticals company.
The total value and number of M&A transactions in Israel was down nearly 70% in 2001 from the previous year. However, the best M&A house in Israel this year, Deutsche Bank, owes part of its success to the changing trends driving Israeli M&A activity, as it has long targeted the non-tech sector that many rivals had overlooked.
Boaz Swartz, Deutsche’s country head and MD of global corporate finance, says: “In the next few years Israeli M&A will be driven more by Israeli companies looking to expand abroad. There will also be some significant activity related to the changing of the guard at some of Israel’s most important business families”.
In one of the most visible deals in the market this year, Deutsche Bank advised IDB Holding Corporation, one of the largest conglomerates in Israel, on a proposed management buyout. This deal later collapsed, but Deutsche won a mandate from the Gandan group on its interest in acquiring IDB.
JORDAN
Best bank: Arab Bank
Best debt house: HSBC
Arab Bank is by far the largest bank in the country and has a dominant franchise throughout the market.
The bank has a wide presence throughout the Middle East and substantial operations internationally. The bank is one of the largest in the Middle East and is well regarded by its peers.
Despite regional economic conditions and the situation in the Palestinian territories, in which several Jordanian banks are key players, Arab Bank has a long history of surviving all manner of catastrophes unscathed. The bank’s conservatism, prudence and willingness to tackle problems has helped it survive 70 years of wars, nationalizations, and economic crises.
This year, despite tough conditions in its key markets Arab Bank managed to achieve profit growth of 7%.
HSBC is the best debt house in Jordan this year, principally on account of its handling of the $45.9 million bond issue for Jordan Phosphate Mines Co, the only international bond issue out of Jordan this year.
KUWAIT
Best bank: National Bank of Kuwait
Competition in the Kuwaiti banking sector is intensifying, but National Bank of Kuwait has maintained, its dominance. It controls 33% of Kuwait’s banking assets, 35% of customer deposits and 24% of the loan market. All major public contracts awarded to foreign companies in Kuwait have been lead financed by NBK, and the bank has 50% of the trade finance market.
NBK has been more prudent than its domestic competitors and so has managed to lower its non-performing loan levels at a time when those of other Kuwaiti banks have increased.
LEBANON
Best bank: BLOM
Best debt house: Citigroup
Best equity house: Banque Audi
Best M&A house: Banque Audi/Lebanon Invest
BLOM’s conservative approach has enabled it to maintain a higher-quality portfolio than its leading competitor, Banque Audi, and so to largely escape the bad debt problems that dog the Lebanese banking sector. Despite the weak macro conditions of the country and the region, BLOM managed to keep its proportion of non-performing loans to a relatively low 5.85% and to achieve a superior increase in total asset growth of 8.9% compared with 5.86% for the sector as a whole.
Citigroup/Salomon Smith Barney is this year’s best debt house in Lebanon, narrowly beating Merrill Lynch. Citigroup acted as joint bookrunner or co-lead manager for three of the sovereign’s five bond issues this year, handling a total of $883.3 million of debt, and was also active in helping Solidere, Lebanon’s largest company, arrange a euro-denominated loan.
Banque Audi is the best equity house in Lebanon on account of the high proportion of the volume that it trades on the Beirut stock exchange and on the strength of its Lebanon Invest unit’s strength in primary market activities.
Banque Audi also takes the prize for the best M&A house in Lebanon. Audi’s Lebanon Invest advised on a number of important transactions this year including the takeover of ING Barings’ Lebanese assets by Byblos Bank, and the merger of two of Lebanon’s biggest internet service providers.
MOROCCO
Best bank: Banque Commerciale du Maroc
Best equity house: Société Générale Marocaine de Banques
A clear leader in terms of market share, Banque Commerciale du Maroc is more profitable than its competitors and enjoys the highest Moody’s financial strength rating of any bank in the country, C-. BCM has done well out of following the industry trend of diversifying into non-banking financial services such as insurance and asset management.
European banks are deeply involved in the Moroccan banking industry through substantial equity and managerial participation. BCM in particular benefits from its relationship with Santander Central Hispano, which has a 20% interest in the bank, and which brings in substantial managerial experience.
Société Générale Marocaine de Banques continues to shine in the Moroccan equity market and takes the award for best equity house for the second year in a row. It is one of the largest traders on the Casablanca Stock Exchange, having traded 26.7% of the volume so far in 2002. It also stands out in the Moroccan market because of its superior research coverage, which is enhanced by its close links with SG Securities in London.
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Bank Muscat, Oman: a dominant force in the Oman market bent on more acquisitions |
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OMAN
Best bank: Bank Muscat
Best equities house: Bank Muscat
A year on from its merger with Commercial Bank of Oman at the start of 2001, the new Bank Muscat has emerged as a dominant force. Bank Muscat has an impressive 35% market share of the corporate banking market and was involved in all of the project finance deals in Oman last year. Bank Muscat has also begun an ambitious strategy to expand its product offerings and regional presence. Towards these ends, it has embarked on a series of acquisitions. It acquired Bahrain’s largest brokerage and asset management firm, Al Ahlia Securities, in December 2001 and took possession of ABN Amro’s Bahrain operations. It has also announced a planned merger with Industrial Bank of Oman.
Bank Muscat is also expected to benefit from its relationship with SG which recently increased its stake in the bank to 10%.
Bank Muscat is also the best equity house in Oman this year, thanks mainly to its acquisition of Al Ahlia Securities. The new brokerage division handles around 20% of the volume of trading on the Muscat Securities Market and around 75% of all transactions executed for foreign investors. The division’s research covers 40 actively traded corporates and has an extensive penetration within Oman, and through the branches of Bank Muscat, in Bahrain and the UAE.
QATAR
Best bank: Qatar National Bank
Qatar National Bank completely dominates the banking sector in Qatar. Its equity accounts for 60% of the total banking system’s equity base, and it has a market share of more than 50% in terms of the banking system’s total assets.
Much of its strength comes from the fact that its main shareholder, the State of Qatar, is also the largest customer of the banking system as a whole. This relationship, and the bank’s size, mean that it gets the lion’s share of government-related business.
Qatar National Bank’s size and expertise also mean that it is the only Qatari bank capable of direct participation in the country’s large energy sector project-financing opportunities.
Saudi Arabia
Best bank: Saudi American Bank (Samba)
Saudi American Bank is one of the largest and most profitable banks in the Kingdom and in the region as a whole. Helped by its Citigroup connection, Samba also enjoys a well-established reputation as the leading innovator in the market. This year Samba became the first bank in the Kingdom to offer internet share-trading.
Samba also managed simultaneously to increase its lending by 7% and cut its proportion of non-performing loans to 6.7%, down from 6.9% at the end of 2000. This was largely a result of improved recovery rates and an active approach to writing down doubtful loans.
TUNISIA
Best bank: Banque de Tunisie
Best debt house: Merrill Lynch
Banque de Tunisie continues to stand out among its competitors as the best bank in Tunisia. It consistently outperforms its peers financially and is the clear leader in terms of efficiency and in its use of technology.
Banque de Tunisie is a conservative lender that focuses on profitability. As a result, it has placed a greater emphasis on the quality of its loan portfolio rather than on simply expanding its share of the market.
Banque de Tunisie has market shares of approximately 6% in most areas and is the fourth-largest privately owned bank and the seventh overall.
Market analysts note that although it is not as aggressive as some of its competitors it has a greater depth of management experience and a more consistent strategy.
Merrill Lynch was the sole bookrunner for the all three of the central bank’s deals in 2001 and 2002, raising a total of roughly $1.1 billion.
UAE
Best bank: Emirates Bank International
Most of the major UAE banks are heavily dependent on government related work in the particular emirate in which they are based and whose government is typically a major shareholder. Emirates Bank International has however worked hard to reduce its reliance on this business and increase its penetration of the retail market which has a greater growth potential.
EBI was originally formed from the merger of three failing banks but the management has been very successful at integrating and strengthening the businesses. Today, EBI has one of the strongest financial strength ratings in the UAE and a deposit rating at the sovereign ceiling.
