Mena's first quarter Investment banking fees climb 11% boosted by M&A deals

Investment banks have earned a total of $188.8m in fees during the first three months of 2020, Refinitiv says

Jabal Omar Development listed on Tadawul stock exchange reported loss for the first quarter amid coronavirus pandemic. AFP

Fees earned by investment banks operating in the Middle East and North Africa climbed 11 per cent year-on-year in the first quarter of 2020, helped by a triple-digit surge in mergers and acquisitions as well as equity underwriting fees.

Total fees earned until the end of March this year climbed to $188.8 million (Dh692.9m), according to Middle East Investment Banking Review by financial data firm Refinitiv.

Advisory fees earned from completed M&A deals generated $58.4m, up 266 per cent year-on-year and marking the highest first quarter total recorded since 2017. Equity capital markets underwriting fees more than tripled to reach $15.9m during the first quarter of the year, Refinitiv said on Thursday.

Fees earned through bond underwriting in the region, however, declined 47 per cent to a four-year low of $45.4m. Syndicated lending fees increased 9 per cent to $69.1m during the first three months of 2020.

“The financial and industrial sectors each accounted for 25 per cent of total investment banking fees earned in the region during the first quarter of 2020 and almost half of all fees were generated by companies located in the UAE,” according to Refinitiv data.

Investment bank Jefferies earned the most fees during the quarter, a total of $27.8m or a 14.7 per cent share of the total fee pool, it added.

International investment banking giants are competing with local and regional players to increase their market share as the hydrocarbon rich countries in the Middle East try to diversify their economies. Foreign direct investment and partial sale of state-controlled entities are high on their agenda, especially for sovereigns in the six-member GCC. Saudi Arabia, the biggest Arab economy, listed oil giant Saudi Aramco on Tadawul Stock Exchange last year and has a pipeline of assets it plans to partly privatise.

The value of mergers and acquisition deals in the region reached $14.8 billion during the first three months of 2020. However, deal value was down 85 per cent from the same period in 2019 after Saudi Aramco purchased a 70 per cent stake in Saudi Basic Industries Corporation in a $69.1bn deal.

Monthly M&A values also climbed for a third consecutive month, with deal value reaching $6.1bn in March, the highest monthly total in 11 months. Austrian oil giant OMV's $4.7bn bid in March to increase its stake in plastics maker Borealis was the largest M&A deal of the quarter.

Deals in the industrial sector accounted for 43 per cent of Mena 's M&A activity in the first quarter. The UAE remained the most targeted destination, followed by Egypt, Refinitiv said.

Mena equity and equity-related issuance climbed to $782.9m during the first quarter, more than four-times the value recorded a year earlier, despite a 50 per cent slump in the number of deals. Saudi Arabia’s private healthcare operator, Sulaiman Al Habib Medical Group’s initial public offering was the only IPO in the first quarter that raised $699.7m.

In the region's debt capital markets, issuers raised a total of $19.5bn during the first quarter of 2020, registering a 40 per cent year-on-year decline in value. Saudi Arabia and Qatar were among the issuers with $9.9bn and $5bn in bond proceeds, respectively.