French lender Natixis Corporate and Investment Banking expects double-digit growth in its Middle East and Asia business this year and next, despite the uncertainty driven by the Iran war and contracting economies.
The lender, which has grown in double digits over the past five years in the region, has not been deterred by the geopolitical headwinds. It plans to hire more bankers across the business in markets such as the UAE and Saudi Arabia, said Bruno Le Saint, chief executive of Natixis CIB for Asia Pacific and Middle East.
“In the overall region, we want to grow in double digits on average. This is what we've been doing over the past years and going forward we'll keep that pace,” he told The National. “It means that, overall, we hope to be close to 20 per cent in the next two to four years, but it also depends on how quickly we grow the rest of the business.”
For the broader Middle East, Natixis CIB expects its business to grow by at least 10 per cent next year, despite the economic challenges caused by the war. The UAE and Saudi Arabia are the two largest regional markets for the French lender.
Part of Groupe BPCE, the eurozone's fourth-largest banking group, Natixis CIB is expanding its footprint in the UAE, where it operates from the Dubai International Financial Centre. The Paris-based company has 80 personnel working out of Dubai and it plans to bring more resources, “expanding our workforce and our capabilities on the ground", Mr Le Saint said.
“I think it's important because, in the context of the current situation, I don't think there have been many international banks growing staff in this region,” he said.
It also plans to further boost its presence in Saudi Arabia, where Natixis CIB operates through its banking subsidiary, Natixis Saudi Arabia Investment Company.
“We want to keep growing this,” Mr Le Saint said. “We still think that we are underinvested in Saudi Arabia.”
The kingdom's Vision 2030 agenda also aligns well with Natixis CIB’s core financing and investment banking expertise in sectors including telecoms, energy, infrastructure, metals and mining.
The bank is also considering expansion into Turkey, "which is also a big economy in the region", Mr Le Saint said of Natixis CIB’s expansion beyond the Arab world. “How do we grow there? It's under exploration for now, but these are the questions we are asking ourselves.”
The company currently provides services to clients in markets including Oman and Turkey in the region and covers Central Asia from its Dubai hub.
Word of caution
The Iran war, which began on February 28, has led to increased economic uncertainty across the Middle East. Despite a halt in all-out hostilities since early April, several attempts to reach a permanent deal to end the conflict have failed.
The World Bank said this week that Gulf economies would contract by an average of 4.3 per cent this year, a downward revision of 5.7 percentage points from its forecast in April. The International Monetary Fund also expects oil-rich economies in the region to contract this year, before enjoying a strong recovery next year – subject to shipping operations returning to normal, managing director Kristalina Georgieva said.
But Mr Le Saint said he was “quite confident” about Natixis CIB’s growth prospects in the Middle East.
“I still think that, even though some economies in the region, from a GDP perspective, are contracting, we have not yet reached our natural market share,” he said. “It's more difficult to reach our natural market share in a market that is contracting, but when we see that our franchise and our expertise fit well with the needs of the client, especially in the current situation, I still think that we can keep growing at this pace.”
That projection, however, could change if the Iran war does not end soon, he added. “Of course, if the conflict stays for the next two to three years, what I say might at some point be revisited. But for the foreseeable future, for the next year, I'm very optimistic that we will be growing 10 per cent at least."
“We are expanding, we are investing, so we are capturing market share at a time where not everyone has full attention on growing the business here, which I think is quite exciting.”
Market impact
Although Natixis remains bullish about the long-term economic environment of the Middle East, as well as the bank’s own growth prospects, it has seen a slowdown in the regional debt capital market this year. The volume of deals so far has dropped by about 10 per cent, but the market is “relatively resilient”, Mr Le Saint said.
The slowdown is not due to the lack of access to liquidity, but is instead caused by borrowers who "don't want to access it now because they see the yield and the rates are too high”, he said.
Borrowers can wait and have several options to raise funds, as well as their own liquidity. “Chinese banks are coming back in the region and are investing massively, especially to support probably, the need to source and help the flow of energy to China,” he said.
“I don't think that our clients are in any stress to find liquidity. Many of them are just waiting to see better conditions or to tap a new pool of liquidity."
Combined platform
Natixis CIB, which is celebrating its 20th anniversary, combined its Asia and Middle East operations at the beginning of last year. The lender offers structured financing solutions, large-scale project funding, leverage and acquisition finance, funding for event-driven transactions as well as trade and structured financing.
It primarily focuses on sectors including infrastructure, energy, transport, metals and mining, and technology and aviation.
“They are global sectors where you've got investors, capital seekers and capital providers from [all parts] of the world. We connect the dots,” Mr Le Saint said.
The bank also offers advisory, investment banking and corporate banking, as well as capital markets services.
Bigger contribution
Currently, the Asia and Middle East platform accounts for more than 15 per cent of Natixis CIB’s overall business and “we want to grow that to 20 per cent and perhaps more", Mr Le Saint said.
By combing the geographies, the bank is better placed to capture opportunities arising from the growing business and trade links between them, he said.
“It also makes sense because our Asia Pacific set-up today, compared to what it was 20 years ago or even 10 years ago, is much more established and comprehensive so now we can offer our Middle East clients access to this market,” Mr Le Saint said.
Natixis CIB’s clients in Asia also have access to funding pools in oil-rich countries in the Middle East, he added. “There is geopolitical and economic rationale, but there is also a business rationale."
