2010 Middle Eastern Awards for excellence: By country

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Awards for Excellence 2010

Regional awards

Middle Eastern winners by country

Bahrain
Egypt
Jordan
Kuwait
Lebanon
Oman
Qatar
Saudi Arabia
UAE

BAHRAIN

BEST BANK
Ahli United Bank

The past 12 months have been difficult for the Bahraini banking sector – in no small part because of the island’s proximity to the Eastern Province of Saudi Arabia, where the two biggest Saudi corporate defaulters of 2009 are based. The defaults have affected lenders with large Bahraini operations in the corporate sector. That Bahrain-based banks Awal and TIBC, owned respectively by Saad and Al Gosaibi, were taken into administration by the Bahraini central bank also hurt sentiment last July.

Such problems were all the worse for Bahrain because of its economy’s heavy reliance on a financial sector dominated by its wholesale banks. Property prices have also fallen by 45% in some segments of the residential market.

Ahli United Bank(AUB) wins the best bank award despite only taking the number two spot for market share in loans and deposits among Bahrain’s retail banks, slightly behind BBK. But AUB is the bigger, more geographically diversified institution, with operations in Kuwait, Qatar, the UK, Egypt, Oman, Iraq and most recently in Libya. Indeed, thanks to its regional operation, AUB is one of the biggest banks in the GCC.

Provisions at AUB more than doubled in 2009 to $228.1 million. This included provisions of $171.5 million, exceeding 90% coverage, for its entire exposure to specified impaired Saudi corporate assets. As a result, its net profit dipped almost 21.5%. But at $226 million earnings were still healthy. Operating income increased by 5%. Despite tight liquidity and credit conditions in the first half of 2009 the bank managed to contain its cost of funding, with its net interest margins improving from 2.1% in 2008 to 2.4% in 2009.

Non-performing loans were just 2.8% of AUB’s total loan portfolio in 2009. Its loans, deposits and assets remained almost unchanged from the year before. The cost-to-income ratio dropped from 39.1% in 2008 to 34.2% in 2009 thanks to cost controls and efficiencies.

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EGYPT

BEST BANK
Commercial International Bank

Compared with some other banking sectors in the region, Egypt has had a healthy year. Commercial International Bank’s net profit grew 25% in 2009. Its ratio of non-performing loans to total loans remained at 2.9%, with a coverage ratio of 196%. It grew its market share in loans and deposits, while maintaining a capital adequacy ratio of 13.66%. In the first quarter of this year, its net profit was 12% higher than in the first quarter of 2009. All good reasons for it to take the best bank award.

Despite good results, CIB has shaken up its organizational structure with a view to further increasing productivity and focus. As part of an extra effort to improve risk management, it has created separate departments for interest rate and foreign exchange risk, as well as for liquidity management.

CIB has also created a new department for medium-sized companies. It launched a new car-loan product that has one of the largest market shares in Egypt and has expanded its wealth management division.

CIB’s attractiveness was reflected by the acquisition by emerging markets private equity firm Actis of 9.3% of the bank’s shares in July last year. Actis paid $244 million for the stake, becoming CIB’s single-largest investor.

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JORDAN

BEST BANK
Arab Bank

With a property market on the edge of a precipice and an equity market that fell 30% in 2008 and 10% in 2009, bankers in Jordan would have dearly loved a government with coffers as deep as some of its neighbours’. Unfortunately the Jordanian state’s oil-starved finances offer little room for a counter-cyclical fiscal policy.

The central bank has done what it can to strengthen the system and the economy. But non-performing loans rose from 4.2% to 6.4% in 2009 and some fear bigger defaults might be on the way.

Nemeh Sebbagh, Arab Bank: maintaining growth

Nemeh Sebbagh, Arab Bank: maintaining growth

Profits at Housing Bank for Trade and Finance, the country’s second-biggest lender, fell by 34%, with provisions about six times higher than in 2008. Profits fell 8.5% in 2009 at Jordan Kuwait, the third-biggest bank, part of Kuwait’s Kipco group. Jordan Kuwait’s provisions in 2009 were twice those of 2008.

Revenue at Arab Bank, by far the biggest with operations across the Arab world, dipped 31% in 2009 to $576 million. This compared with net profit of $91 million at Housing Bank and $63 million at Jordan Kuwait. Arab Bank’s provisions were five times higher than in 2008.

According to a Bloomberg report last July, Arab Bank had the third-highest exposure to Saudi Arabia’s defaulted Saad group after BNP Paribas and Citi. The drop in profit was also caused by an extraordinary gain of $37 million realized in 2008, resulting from the sale of bank branches in Cyprus.

But in other respects Arab Bank maintained its growth last year, with total assets increasing by 11% to reach $50.6 billion compared with $45.6 billion at the end of 2008. Core customer deposits increased by 11% to reach $34.9 billion, compared with $31.4 billion at the end of 2008, constituting 69% of total assets. Its total bank deposits increased by 19%, reaching $6.3 billion, compared with $5.3 billion at the end of 2008, reflecting continued confidence in the group worldwide.

Arab Bank continued its efforts to enhance and strengthen its capital base and was able to increase its already high liquidity ratios. Liquid assets (cash and quasi-cash) constituted 49% of total assets. Total shareholders’ equity increased by 8% to $8.1 billion at the end of 2009, coming to 16% of total assets, compared with $7.5 billion at the end of 2008. The bank’s capital adequacy ratio stood at 17.9%, exceeding the limits set by the central bank and the requirements of Basle II.

See Euromoney’s award for outstanding contribution to finance.

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KUWAIT

BEST BANK
National Bank of Kuwait

BEST M&A HOUSE
Gulf Merger

Given that Kuwait has one of the largest sovereign wealth funds, its performance through the crisis might have been expected to be better. But along with Dubai and Bahrain it has frequently been put in the riskier category of Gulf nations.

In many ways the state’s problems mirror those of its poorer neighbour, Jordan: a difficult relationship between government and parliament.

Problems in the investment companies, which first surfaced 18 months ago, as well as troubles elsewhere in the region, have weighed heavily on Kuwaiti banks despite the Kuwaiti authorities’ attempts to contain the troubles.

Commercial Bank of Kuwait’s profit fell from $345 million in 2008 to just $517,000 in 2009. Islamic financier Kuwait Finance House’s profits fell by 60% in 2009. In the first quarter, KFH’s profits fell 21%. Burgan Bank’s provisions doubled and its profits fell by roughly 40% last year.

The fact that some of these groups are large and quite regionally diversified further emphasizes the success of National Bank of Kuwait in achieving profit growth of 4% last year. NBK’s results cement its position as not just the best bank in Kuwait but also the best bank in the region.

Yann Pavie, Gulf Merger: closing deals through the crisis

Yann Pavie, Gulf Merger: closing deals through the crisis

Perhaps evidence of the quality of staff at NBK, a former board member and chief operating officer of NBK Capital was the founder of the outstanding institution that wins the best M&A house in Kuwait award. Only four years ago, Gulf Merger was little more than an idea in chief executive Yann Pavie’s head. Since then it has regularly closed deals through some of the worst parts of the crisis. It is even moving beyond Kuwait and beyond M&A, into other areas of the Gulf and into other areas of investment banking.

Over the period, Gulf Merger was sole adviser to Kuwaiti clients on no fewer than seven deals. For example, it advised Kuwait’s Jazeera Airways when that firm was sold to Boodai Enterprises (also of Kuwait) for $89 million in March of this year.

Among Gulf Merger’s other notable deals is the 51% acquisition of Jordan’s Comprehensive Multiple Transport Company by Kuwaiti transport firm City Group for $22 million in February. Gulf Merger has since helped City Group access funding from the World Bank’s International Finance Corporation for further acquisitions.

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LEBANON

BEST BANK
Bank Audi

For a small country Lebanon has provided an extraordinarily high number of the world’s most senior bankers. Lebanese professionals now support a large part of the banking industry in the Gulf.

But the fact that all three of the biggest banks in Lebanon enjoyed double-digit profit rises during one of the worst years for Middle East banking shows how much banking talent is still to be found at home.

Raymond Audi, Bank Audi: momentum makes the bank a winner

Raymond Audi, Bank Audi: momentum makes the bank a winner

Bank Audi
and Blom Bank, the two biggest lenders in Lebanon, have built an impressive regional franchise over the past few years – even while other Middle Eastern banks talked about regional expansion but never achieved it.

During a year of troubles, when banks elsewhere in the region have faced deposit outflows or only negligible increases in deposits, deposits at Lebanon’s biggest banks have increased 20% and more.

In a country of such well-run financial institutions, choosing a best bank is not easy. Moreover, the performance of the two biggest banks has been almost identical for years. In 2009, Bank Audi earned $292 million, and Blom earned $293 million. No one can say there is a lack of competition in Lebanon’s banking sector.

At the end of the first quarter, Audi’s ratio of non-performing loans to total loans was only 3% with a coverage ratio of 96%. Blom’s ratio of non-performing loans was just 0.2 percentage points higher – with a slightly higher coverage ratio.

In their results for 2009, Audi’s performance is perhaps very slightly ahead of Blom’s. But there are some areas – for example loan growth – where Blom did better. Loan growth is important for Lebanese banks because of the pressing need to diversify from government securities.

Nevertheless, between April 1 and March 31 Audi’s advantage over Blom is clearer. In large part, this is because of Audi’s particularly strong performance in the first quarter, when it made almost 10% more in net profit than Blom and 24% more in operating income, even after its cost ratio declined over the year and Blom’s cost ratio increased.

Across the year Audi’s total net profit was slightly higher, while its net profit growth was almost twice as good. In this period, Audi’s loan growth was slightly better too, and its deposit growth was twice as good, even if Blom’s deposit growth of 15.7% is still impressive.

In addition, Audi’s fee and commission income is more than twice as high as Blom’s, and its growth in that area has been much better too. Blom’s fee and commission income actually decreased in 2009.

In short, Audi’s strategy of growth and investment appears to be working. Audi has the momentum.

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OMAN

BEST BANK
Bank Dhofar

Bank Dhofar, the third-largest Omani bank by assets, used to be regarded as a staid, unexciting institution. But under chief executive Kris Babicci, a former country head for Standard Chartered in Qatar appointed in 2007, it is waking up. According to ratings agency Fitch, its risk management systems and processes have improved. And its loan book grew 17% in 2009 and 12% in the first quarter of 2010, following even more rapid loan growth in previous years. Its customer deposits increased by 13% last year.

This happened even as Bank Muscat, the biggest bank in Oman, increased loans just 3% last year and just 0.8% in the first quarter of 2010. Bank Muscat’s customer deposits decreased by 3% in 2009.

Bank Dhofar has consistently grown profits over the past three years and in 2009 its profits grew a further 7%, while its cost-to-income ratio fell from 38% in 2008 to 36% in 2009. In the first quarter of this year, Bank Dhofar’s profits were up 35%. By contrast, Bank Muscat’s provisions quadrupled last year, contributing to a 20% decline in net profit; it has admitted that it is owed $171 million by the defaulted Saad and Al Gosaibi family groups. In the first quarter of this year, Bank Muscat’s profit was half its net profit in the first quarter of 2009.

Despite being smaller, Bank Dhofar has a credit rating similar to Bank Muscat’s. This is also despite the fact that the Omani royal family is far less dominant in Bank Dhofar’s ownership than in Bank Muscat’s.

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QATAR

BEST BANK
Qatar National Bank

Qatar’s rapidly expanding gas exports continue to give it one of the world’s fastest economic growth rates. As vast amounts of capital pour into this tiny nation, the state is buying up some of the most prestigious assets in the world, not forgetting to make sure its local banks are sufficiently liquid to withstand the Qatar and Gulf-wide property downturn.

Residential property prices have fallen 30% in Qatar and the glut in supply looks set to continue in commercial property too.

Qatar Islamic Bank’s profit fell 20% in 2009 and 14% in the first quarter of this year, in part thanks to higher provisions. Commercial Bank of Qatar’s net profit dropped 15% in 2009 and 40% in the first quarter, again partly thanks to higher provisions.

Qatar National Bankalso had to increase provisions but its profit was up 15% in 2009 and 14% in the first quarter of 2010. QNB’s ratio of non-performing loans to total loans was just 0.7% at the end of 2009. Its cost ratio also fell slightly during the year.

QNB’s deposits were up 43.5% at the end of the first quarter of 2010 compared with a year before. Its loans were up 44%. Its Islamic unit is also buoyant, having grown assets by 86% in the period and profit by 27% in 2009.

In retail, QNB expanded its network and launched new payments systems and credit-card products, while in investment banking QNB Capital has managed important capital-markets issuance, including Qatar’s record-breaking $7 billion sovereign bond in November. The group has also continued to expand its fund management business, and at the end of 2009 it started operations in Switzerland and Syria.

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SAUDI ARABIA

BEST BANK
Al Rajhi

BEST INVESTMENT BANK
HSBC Saudi Arabia

Last year’s defaults by the Saad and Al Gosaibi groups – two of the biggest corporations in Saudi Arabia – wreaked havoc on the Saudi banking system.

HSBC research at one time estimated that the total exposure of Saudi banks to the two groups might have been as much as $7 billion. Even worse were worries that problems were not restricted to these two groups and that bank aversion to other family groups could accentuate the problems.

Nevertheless, there were no other large corporate collapses in the Kingdom. Moreover, local banks have been affected by the problems to varying degrees.

A Bloomberg report listed Samba as the Saudi bank with the biggest exposure. Samba’s chairman, replaced by the chief executive, Eisa Al Eisa at the beginning of 2009, was a member of the Al Gosaibi family.

Saudi British Bank, an HSBC affiliate, quadrupled provisions and its profit fell by 30% last year. Arab National Bank and Banque Saudi Fransi suffered smaller profit drops.

By contrast, Al Rajhi, the biggest Islamic bank in the kingdom and one of the biggest Islamic financiers in the world, has continued to make more money than any other bank in Saudi Arabia: $1.8 billion in 2009. Al Rajhi’s nearest rival in terms of profitability, Samba, made $1.2 billion in 2009.

Al Rajhi’s asset quality has held up well too. Non-performing assets made up just 3.2% of Al Rajhi’s total loans plus real estate at the end of 2009, according to Standard & Poor’s.

The biggest bank by assets, National Commercial Bank (NCB) – which is not yet listed – reported the best increase in profits in 2009. But this was after profits halved in 2008, when the bank had to write off large losses on its financial investments. NCB’s 2009 profit was still far below its profit in 2007.

Riyad Bank, the second-best performer in 2009 in terms of profit growth, was also recovering from a much poorer 2008. Al Rajhi’s profit this year, on the other hand, was higher than in either 2008 or 2007. At 27%, Al Rajhi’s core earnings to average adjusted common equity ratio is by far the highest in the kingdom and almost twice as high as many of its local rivals’.

HSBC Saudi Arabia was the first foreign investment bank to be licensed in Saudi Arabia and it remains the best all-rounder. It came second in terms of Saudi investment-banking revenue volume in the period from April 1 to March 31, according to Dealogic. Local lender Riyad Bank was number one, but HSBC had 11 deals to Riyad Bank’s nine.

HSBC’s role as sole underwriter in the $88 million IPO of Mouwasat Medical Services made it the foreign bank with the biggest market share in the equity markets, according to Dealogic. This was the first Saudi IPO in the healthcare sector.

Meanwhile, no local banks had a top-10 position in M&A but HSBC did make the M&A top 10, with two deals, according to Dealogic. Perhaps most notable was HSBC’s advisory work for Saudi car dealer Abdul Latif Jameel in that firm’s $85 million acquisition of a local Toyota car distributing company in Turkey from local Turkish group Sabanci Holding.

DCM had more than twice as much volume in Saudi Arabia ($4.6 billion) than either ECM or M&A between April 1 and March 31, again according to Dealogic. Out of a total of eight DCM deals, four were claimed by HSBC – a higher number than any rival. Riyad Bank was only on one DCM deal in the table. In DCM, HSBC’s market share was roughly 50% bigger than its nearest rival’s.

As an example, HSBC managed a $533 million three-year Saudi riyal bond for Bahrain-based (but Saudi-owned) Gulf International Bank: the largest-ever private placement in Saudi Arabia. In May, HSBC managed a $200 million riyal sukuk for Dar Al Arkan: the first sukuk for a public real-estate company in Saudi Arabia, and the first DCM issue in the kingdom in 2009.

HSBC has a top-five position in the loans market, according to Dealogic. It was mandated lead arranger for the $2.5 billion syndicated bridge loan for mobile telephone firm Zain Saudi Arabia, for example. This was one of the largest deals in the kingdom in 2009.

HSBC has a project-finance team based in Saudi Arabia and was mandated lead arranger and financial modelling bank in the financing of the $2.5 billion Rabigh power plant, which was the only project financing in Saudi Arabia to achieve financial close in 2009.

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UAE

BEST BANK
National Bank of Abu Dhabi

BEST INVESTMENT BANK
Standard Chartered

Banks and investment banks in the UAE have not just had to contend with problems in Kuwait, Saudi Arabia and in the rest of the world, the UAE had its own scare when Dubai World announced a debt standstill at the end of November. Banks are estimated to have an exposure of $15 billion to Dubai World. The debt crisis in state-linked Dubai companies and in Dubai’s property market (where prices and rents have fallen 50%) has even begun to spread to Abu Dhabi businesses, despite that emirate’s far higher government financial reserves.

Dubai’s banks are understandably regarded with some trepidation by many investors. In Dubai, even Mashreq Bank – previously regarded as relatively immune to the worst excesses – suffered a profit fall of 40% in 2009, and this level of decline continued in the first quarter of 2010.

The pain at Abu Dhabi Commercial Bank has been even more severe: it posted a net loss of $140 million in 2009. A senior executive at ADCB told Reuters last year it had about $2.18 billion to $2.45 billion of exposure to Dubai World and related entities. And ADCB’s troubles are not restricted to the UAE. The bank had $609 million in exposure to the defaulted Saad and Al Gosaibi groups, according to a separate report from Reuters. Abu Dhabi’s First Gulf Bank, which performed relatively well in 2009, had $104 million in exposure to the Saudi groups.

In contrast, the exposure of Abu Dhabi’s biggest bank, National Bank of Abu Dhabi(NBAD), to the two defaulted Saudi groups was just $10.9 million. The bank has said its total Dubai World lending and investment is $345 million, but this could be substantially lower than other UAE banks, especially in proportion to the size of their respective loan books.

According to a Credit Suisse report in May, NBAD has the lowest non-performing loan ratio of all the Abu Dhabi banks at just 1.3%, covered to 166%.

In 2009 NBAD maintained the same profit levels of 2008 ($822 million) despite the past year’s credit and liquidity challenges. Credit Suisse research expects NBAD to grow profits much faster in the coming years. In the first quarter of this year, profits rose by 35% to $280 million.

In March, NBAD became the first UAE issuer to access the international bond markets since Dubai World’s announcement in November, with a $750 million five-year bond. Its assets grew 20% in 2009, while customer deposits grew 17%. Customer loans grew 18%. Total capital adequacy on Basle II principles rose to 17.4% in 2009 from 15.4% in 2008.

In the past year NBAD has opened 12 new branches in the UAE, as well as branches in Jordan and Hong Kong. The firm has expanded its call centre, seen growth in internet banking, launched a new SMS remittance service and introduced one of the first exchange-traded funds in the Middle East.

In investment banking, the Dealogic revenue table for UAE from April 1 to March 31 is swayed by the presence of some large M&A deals, causing Credit Suisse to gain by far the highest total revenue, but with just three deals. Goldman Sachs came second in revenue terms, with 11 deals. Standard Chartered gained a top-five position in the revenue league tables, with 17 deals. HSBC gained higher revenue than Standard Chartered, and had 21 deals, according to Dealogic.

But Standard Chartered is the only bank to gain a top-five position in all the UAE league tables for loans, DCM and M&A (there were only three equity offerings, for a total of $162 million, and none of the bookrunners gained a top-five position in any of the other categories).

In June 2009 Standard Chartered was part of the club that secured a $5 billion syndicated facility for Abu Dhabi’s International Petroleum Investment Company, the year’s largest Middle East corporate syndicated loan. Despite the difficult local environment, Standard Chartered was also bookrunner on Dubai’s dual-currency $3 billion sukuk in October, the largest sovereign sukuk issuance of the year. The firm was also bookrunner on Abu Dhabi Commercial Bank’s $1 billion bond in October: the first 144A/RegS bond issued by a GCC bank.

It was also mandated lead arranger and hedging bank in the $2.2 billion Shuweihat 2 water and power plant, which achieved the longest tenor for commercial debt for any Middle East project in 2009.

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