Regional Awards for Excellence 2011: Middle East
Euromoney, is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Regional Awards for Excellence 2011: Middle East

Awards for Excellence 2011
Middle East Country Awards
All regions and countries


Best bank National Bank of Kuwait
Best investment bank Standard Chartered
Best project finance house Standard Chartered
Best debt house HSBC
Best risk management house HSBC
Best cash management house HSBC
Best equity house JPMorgan
Best M&A house Goldman Sachs
Best flow house Deutsche Bank
Best bank

The Arab Spring’s short-term economic effects will inevitably impact on those banks with widespread Middle East operations. Regional property and equity crashes as well as defaults and debt restructurings by family groups have already wrought havoc on balance sheets and income statements in the Gulf.

However, markets can take comfort from the fact that, far from sinking, some of the biggest commercial banks in the region have managed to increase their earnings and lending in these tough years. National Bank of Kuwait is foremost among such banks. It remains the regional banking champion for its size, geographic network, financial performance and quality of risk management and governance, as well as its range of banking products and services.

With a network across 10 Middle Eastern countries, NBK’s assets rose 9.4% over the 12 months from April 2010 to March 2011, reaching $50.6 billion. Deposits increased by 13%. In 2010, the bank’s net profit breached a psychological barrier, hitting $1.075 billion. This is a rise of 13% over 2009. Profit growth rose 5% in the first quarter of 2011.

One of the areas in which NBK’s advance over rivals is evident is in cash management, where its Watani Online Corporate platform handled transactions of $10.6 billion in 2010. NBK is particularly dominant in corporate banking.

The bank has also been busy developing its retail platform as well; for example, in the mass-affluent segment, it launched new equity, property and Islamic investment funds. It initiated new products too in its private-banking and wealth-management business.

NBK is one of the few regional lenders building a franchise to challenge the dominance of global investment banks in the Middle East. Take private equity: among other transactions, NBK Capital’s funds took a 42% stake in Newton School Group, one of the largest private-education companies in Qatar, and made a mezzanine investment in the United Arab Emirates’ Metito, one of the region’s biggest water utilities.

Best investment bank

Overall, however, regional investment banks struggle more than ever to compete with the globals. Global banks still win mandates in the Middle East by charging low fees, making money from ancillary business. They also have much better access to term funding; in the UAE, which is the region’s biggest investment-banking market, local banks’ access is especially strained.

This year’s winner of best investment bank, Standard Chartered, has been among the best positioned of the globals in terms of sustained health at group level during the financial crisis. While rivals have been in retreat, it has had the will and the ability to continue financing in the region. The bank’s strength in Asia and Africa has helped its Middle East business to benefit from the increasing trade and investment between emerging-market regions.

Standard Chartered’s most successful and innovative debt deals include bonds for Abu Dhabi Islamic Bank, the government of Dubai, Dubai Water and Electricity Authority, Emaar Properties (in Dubai), the Islamic Development Bank (in Jeddah), sovereign wealth fund Mumtalakat (in Bahrain), MB Petroleum Services (in Oman), Qatar National Bank, Qatar Telecom and developer Qatari Diar. It was also joint lead manager of Burgan Bank’s $400 million 10-year subordinated bond – a rare example of a Kuwaiti bank issuing lower tier-2 bonds. Standard Chartered was particularly effective at bringing in crucial Asian buyers of Gulf bonds.

Standard Chartered was lead adviser to India’s Bharti Airtel in its $10.7 billion acquisition of the African assets of telecoms firm Zain. Much of the negotiation took place in the Middle East, as Zain is Kuwaiti – making this by far the region’s biggest M&A deal of the year.

Also in M&A between emerging markets, the bank was sole adviser to UAE contracting firm ETA Star in that firm’s $381 million sale to Indian conglomerate Aditya Birla of its cement businesses in Bahrain, Bangladesh and the UAE. As part of a wider deal with US energy firm Apache, Standard Chartered advised BP on a $650 million sale of Egyptian energy assets. The bank played a key role too in acquisition and leveraged financing for Kuwait’s Al Shaya group and for Dubai private equity firm Abraaj, among others.

Standard Chartered has one of the biggest trading floors in the region and some of its global trading heads are now based in Dubai. Over the past few years, in Euromoney’s foreign exchange survey, Standard Chartered has climbed close to the very top in the Middle East. In risk advisory, this year the bank introduced a number of important methods to help Middle Eastern clients hedge renminbi exposure.

Best debt house

Meanwhile, the most noteworthy bond deals from HSBC include the first issuance by a UAE property company since Dubai’s real-estate crash: a $500 million five-year sukuk for Emaar Properties. HSBC was joint lead manager in the government of Dubai’s $1.25 billion bond in September, the sovereign’s first bond since Dubai World’s debt standstill announcement. The 10-year tranche is the sovereign’s longest tenor yet.

HSBC’s bonds for bank issuers included National Bank of Abu Dhabi’s two M$500 million ($160 million) sukuks, the first (issued in June) for five years and the second (issued in December) for 10 years. The deals broke new ground for foreign issuers of ringgit sukuk, both in terms of the issuer (a financial institution) and the tenors. HSBC also joint-led Abu Dhabi Islamic Bank’s $750 million sukuk. Issued in November, this was the first UAE sukuk of 2010. It nevertheless has one of the lowest ever coupons for a Gulf bank in a five-year maturity (3.745%).

HSBC was joint lead manager in the first high-yield 144a/RegS bond in the region: Omani MB Petroleum Services’ $320 million five-year bond. Another of its tombstones is a $500 million five-year RegS sukuk for the triple-A-rated Islamic Development Bank. This has one of the lowest coupons ever in the region, just 1.775%.

Among sovereign wealth funds, HSBC helped price five- and 10-year notes totalling $2.5 billion for Abu Dhabi’s Ipic, the firm’s debut Eurobond issuance. And in June 2010 it joint-led a $750 million bond for Bahrain’s Mumtalakat – not long after the EU’s debt scare that spring.

As well as capturing almost 50% of Saudi bond and sukuk issuance, HSBC joint-led the Kingdom of Jordan’s debut five-year Eurobond, at $750 million. It was joint manager of Egypt’s 10- and 30-year $1.5 billion sovereign Eurobond, one of Euromoney’s deals of 2010.

Best equity house

Outside Israel, Middle East equity issuance fell to a new low: little more than $3 billion, after just over $4 billion in the previous 12 months, according to Dealogic. In Israel, equity issuance reached $2.5 billion, from $2.1 billion in the previous 12 months. Israeli issuance in equity therefore constituted almost half of the regional total, compared with only around 10% of the regional total in debt and M&A.

However, Dealogic’s top-ranking international banks in Israeli equity – UBS and Citi – performed less well in equity in the rest of the region. Excluding Israel, Morgan Stanley’s $475 million deal for Omani telecoms firm Nawras was the largest initial public offering of the year.

While it did not bookrun the Nawras deal, JPMorgan, Euromoney’s best equity house, played a leading role in three of the four biggest equity issues outside Israel (the fifth-biggest, Knowledge Economic City in Saudi Arabia, not a JPMorgan deal, flopped in the secondary market). JPMorgan was, firstly, global coordinator and sole bookrunner in Aluminium Bahrain’s $340 million IPO. This included a rare Middle Eastern global depository receipt on the London Stock Exchange, and its shares traded above their issue price in the secondary market. Secondly, the bank was sole bookrunner in the $270 million rights issue by Dubai telecoms firm du, which preceded Nawras as the first regional telecoms issuance for more than a year.

Thirdly, JPMorgan was sole stabilisation agent and joint bookrunner alongside Standard Chartered and RBS in a rare regional equity-linked deal: Emaar’s $450 million convertible bond in September. This was the biggest regional equity deal of the year (outside Israel). Preceding Emaar’s bond, the transaction contributed to the overall market rehabilitation of Dubai government-related entities.

Best M&A house

The volume of Middle East mergers and acquisitions, about $70 billion, was around the same as last year, while the number of deals increased slightly. Goldman Sachs advised on more of the most important deals than any other bank, and that makes it best M&A house in the Middle East. The bank’s completed mandates spanned the Gulf and North Africa, encompassing outbound and intra-regional as well as domestic M&A and deals between private-sector corporates. In buy-outs by sovereign wealth funds, it advised both acquirers and targets.

For example, it advised Abu Dhabi state investment vehicle Mubadala in the acquisition of $500 million in convertible notes in US private-equity group Carlyle. It also advised Kuwait Investment Authority on its $867 million acquisition of a 5% stake in nuclear-power company Areva, majority-owned by the French state.

In another politically sensitive transaction, Goldman Sachs was the main adviser to Ipic in its $5.8 billion acquisition of the 53% stake that Ipic did not own in Spanish oil refiner Cepsa. The buy-out was sealed despite worries about Spanish political opposition to a foreign state-owned firm taking majority ownership of a strategic asset. Goldman Sachs was sole global coordinator of Ipic’s adjoining $4.6 billion euro- and sterling-denominated triple-tranche bond.

Goldman Sachs advised German construction firm Hochtief on a $536 million 10% share capital increase, in which the sole subscriber was Qatar Holding, the strategic and direct investment arm of Qatar Investment Authority (QIA). The transaction helped protect Hochtief from a hostile takeover attempt by Spanish rival ACS. Also in Qatar, Goldman Sachs advised Barwa on its $1.7 billion acquisition of fellow developer Alaqaria (QIA-owned developer Qatari Diar was the largest shareholder in both firms).

In Egypt, Goldman Sachs advised Apache on its purchase of BP’s assets. It advised Orascom on the $1.2 billion sale of its Tunisian telecoms business, as well as advising on Orascom Construction Industries’ $450 million acquisition of two divisions of Dutch chemicals firm DSM.

Best project finance house

In project finance, last year’s Middle East winner, BNP Paribas, was financial adviser and mandated lead arranger on an array of interesting financings that closed during the period. However, Standard Chartered’s best work generally involved bigger deals, of equal if not greater quality, making it this year’s winner.

Standard Chartered was the sole international financial adviser as well as mandated lead arranger, among other roles, in perhaps the most impressive project finance deal closed in the period: Saudi national mining firm Ma’aden’s $8 billion aluminium complex. This is the first project in the world to integrate bauxite mining and aluminium production. The Ma’aden scheme surprised the market with the speed at which it reached financial close, especially when compared with the other landmark financing of the year – Saudi Arabia’s $12 billion Jubail refinery.

Additionally, Standard Chartered was original mandated lead arranger, technical bank and security trustee and performed other roles in Saudi Electricity Company’s $2.11 billion Riyadh power plant. In one of Egypt’s biggest project financings ever, the bank was mandated lead arranger and hedging bank for a $3.7 billion new refinery. In Oman, Standard Chartered was mandated lead arranger and hedging bank and performed other roles in the $1.35 billion Barka 3 and Sohar 2 power plants.

HSBC is in pole position for next year’s award, with more than 10 live project-finance advisory mandates at the end of the period. It was also mandated lead arranger on four multi-billion-dollar deals that reached financial close in the year to March 31.

Best risk management house

As one of the biggest and most widespread wholesale banks in the region, HSBC carried out hundreds of risk-advisory deals, with a total turnover of billions of dollars. Its Middle East operation provides pricing in all regional and major international currencies, and it has a structuring desk within the regional treasury team.

HSBC launched new risk structures and products during the year. Among other innovative trades, the bank devised and executed a $500 million hedge for Mubadala in advance of an expected bond issue, and an option hedge for Omani conglomerate Saud Bahwan, to manage more than $1 billion in currency exposure. It also helped Abu Dhabi energy group Taqa profit through the innovative exit of a swap position.

The bank provided currency hedges to Abu Dhabi’s state General Holding Corporation ($600 million), to Sharjah’s Sharif Metals ($360 million) and to UAE money transfer firm UAE Exchange ($1.5 billion). It provided cross-currency swaps of $400 million to Kuwaiti investment group Wafra and to Ipic (£90 million, $147 million) – the latter in a long-term deal to manage its sterling bond issuance.

To manage interest-rate risks, HSBC provided hedges, in Abu Dhabi, to the New Medical Centre ($200 million) and to Shuweihat desalination and power plant; in Sharjah, to the government ($300 million) and to the water and electricity authority ($100 million); to Dubai’s Al Habtoor group ($100 million); to Qatar Telecom ($400 million); and to Egypt’s national oil company ($225 million).

Best flow house

This year’s best flow house, Deutsche Bank, saw volumes increase, particularly in rates, as it expanded its trading operations in Dubai and Riyadh, including setting up a corporate-treasury coverage team focusing on the UAE and Saudi Arabia.

Deutsche Bank executed more than $1 billion of Egyptian treasury-bill trades in the second half of 2010, as investors looked to the country for yield. And it continued to make markets in Egyptian debt and currency, even at the height of Egypt’s political flux in early 2011. It traded an impressive volume of Egyptian credit-default swaps at this time too.

The bank also executed an exceptionally large five-year Saudi credit-default-swap trade and continued to offer Libyan non-deliverable forwards even after the political cataclysm there.

Deutsche Bank trades every major currency in the Middle East and in Euromoney’s 2011 foreign exchange survey its market share in the region was just over 15%. One of its most impressive transactions was a $100 million Omani rial-dollar trade.

In equity, the bank offers access to unusual markets such as Bahrain and Oman and has started marketing Israeli put options as a regional political-risk hedge, carrying out $300 million of these trades. Deutsche Bank increased its regional equity research coverage to 75 stocks, initiating analysis of UAE and Qatari banks, Egyptian property, Israeli oil and gas, chemicals and other sectors. The Saudi Othaim group, Commercial Bank of Qatar and Israel’s Delek Energy all returned 30% or more after buy calls from Deutsche Bank’s research.

Best cash management house

Standard Chartered has bolstered its regional cash-management operation, but it is still disadvantaged in this area by its relatively small (if growing) operation in Saudi Arabia, as well as in Egypt, where it has just a representative office. Citi, meanwhile, remains more focused on the biggest regional clients and multinational corporations.

Like Standard Chartered, HSBC has a much wider client focus. HSBC performs regular cash-management work for more than 6,000 clients in the region. In Saudi Arabia, its part-owned affiliate, Saudi British Bank, is one of the biggest commercial banks in the country. HSBC is also one of the biggest banks in Egypt, where this year it won cash-management mandates for GlaxoSmithKline, China Harbour and others.

By a large margin, HSBC remained number one in the Middle East in Euromoney’s 2010 cash management survey. It took the top spot from Citi in Lebanon in the 2010 survey too. HSBC has continued to bring cash management forward in the Middle East. For example, in a mandate for the Qatari central bank, it is co-ordinating local banks in a project to improve automation of direct debits in Qatar.

The bank launched its own new nostro-clearing product across 26 currencies this year, to help the centralised clearing and settlement of regional financial institutions. It also introduced a new system for cross-border notional pooling in the Middle East.

Gift this article