International banks retreating from the Middle East cleared the way for Arab lenders to take over as the region’s biggest dealmakers in the first half.
Saudi Arabia’s Samba Capital replaced HSBC Holdings as the region’s top syndicated loan arranger in the period, while Standard Chartered dropped to 17th place from second and BNP Paribas slid to 19th from third, according to data compiled by Bloomberg. Banks based in the Gulf Cooperation Council nations provided 77 per cent of the loans, their biggest share since Bloomberg began compiling the data in 1999.
While pressure from regulators has forced international banks to sell assets and boost capital reserves, local lenders in the oil-rich region, flush with cash, have driven borrowing rates to the lowest in more than seven years and hired loan arrangers. That’s putting them on a level footing with international banks, said Chris Sutcliffe, head of loan syndication for Standard Chartered in the Middle East, North Africa and Pakistan.
“Local competitors have become more aggressive,” Mr Sutcliffe said in a telephone interview on Wednesday from Dubai. “This means borrowers are in a position to have banks aggressively bid on pricing and terms and conditions, and many international banks choose to opt out in this environment.”
National Bank of Abu Dhabi jumped to third place, behind HSBC, after recruiting Jonathan Macdonald, the former head of loan syndication for Europe and Asia-Pacific at Barclays, a person with knowledge of the appointment said in May. Abu Dhabi’s First Gulf Bank, ranking fourth, recruited Steve Perry last year from Standard Chartered to head its debt markets business.
Banks in the Gulf region are passing on their own record-low funding costs. EIBOR, the interest rate UAE banks use to lend to each other, was at 0.72 per cent on July 2, its lowest since at least September 2006, when Bloomberg began compiling the data.
“It’s all to do with pricing and availability,” said Redmond Ramsdale, director of financial institutions at Fitch Ratings in Dubai. “Most GCC banks are back in the growth phase having improved their balance sheets, particularly having improved capital, increased loan loss reserves, increased liquid assets and reduced legacy problem assets.”
Companies in the Middle East and North Africa paid an average of 148 basis points more than benchmark rates for loans this year, less than half the 325 basis points in 2013, according to data compiled by Bloomberg.
A US$700 million syndicated facility for Unatrac Holding, a Caterpillar dealer, signed on Wednesday pushed HSBC back to No. 1 overall this year. HSBC and BNP Paribas declined to comment.
“There’s no denying local banks are growing their businesses, looking to take senior positions and arrange more deals, and have been hiring experienced people,” Simon Meldrum, a London-based director of Central and Eastern Europe, Middle East and Africa loan syndication at Royal Bank of Scotland Group, said in a phone interview yesterday. “It’s not correct to say Europeans are pulling back due to lack of risk appetite. However, they’re finding it harder to compete on certain elements of deals, such as longer tenors, amounts or credit profiles.”
Barclays agreed in April to sell its retail banking business in the United Arab Emirates to Abu Dhabi Islamic Bank for Dh650m, joining Royal Bank of Scotland Group and Lloyds Banking Group in exiting consumer and commercial-banking businesses in the country. HSBC bought Lloyds operations for $769m in 2012, while Abu Dhabi Commercial Bank PJSC acquired RBS retail banking assets in 2010.
Syndicated lending in the Middle East North Africa region dropped about 20 per cent to $20.9 billion in the first half from a year earlier, according to data compiled by Bloomberg.
Much of the drop is due to a crackdown on illegal workers in Saudi Arabia, which has slowed the market over the last six months, according to Murad Ansari, an analyst at EFG-Hermes Holding in the kingdom. The surge in government spending in 2009 and 2010 has also started to slow, he said.
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