The deal-making pie in the Gulf region is still expanding and Barclays Bank’s re-entry into Saudi Arabia after an 11-year hiatus does not mean it trails US competitors, its president has said.
Barclays has been operating in the region for the past five decades and its latest foray into the kingdom underlines that “we are a fully relevant investment bank”, Stephen Dainton, also Barclays' head of investment bank management, told The National on the sidelines of Abu Dhabi Finance Week.
The British bank is committed to the Saudi market for the long-haul, he said. As a global non-US investment bank that is geographically diverse with a materially relevant corporate banking suit, it is also well versed with the competition. Barclays has a substantial wealth business and an investment banking practice that is global across mergers and acquisitions, as well as equities and debt capital markets, he said.
“When you think about the competitive set, there is really one firm that can compete across all those vectors against the five large US firms,” Mr Dainton said. “We think that in each of those areas, whether it's in product or geography, we have a substantial advantage that allows us to compete with those US folks.”
Barclays is investing considerable resources to grab a larger share of deals in the region. In October, the lender received a provisional licence from Saudi Arabia’s Capital Market Authority, paving the way for the bank to commence investment banking and global markets activities in the kingdom.
As part of its “broader Middle East growth strategy”, the bank also secured premises in the King Abdullah Financial District to launch its regional headquarters in Riyadh next year.
“Expanding our capabilities in the kingdom is a significant milestone for us as we continue to grow our regional footprint in key markets,” C S Venkatakrishnan, Barclays group chief executive, said at the time.
Pre-Vision 2030 exit
Barclays requested the cancellation of its securities business in Saudi Arabia in June 2014, amid a strategic global pull back under the then chief executive Antony Jenkins, to focus on core markets after the financial crisis.
It was before Crown Prince Mohammed Bin Salman had launched his Vision 2030 economic overhaul. The overarching transformation programme launched in April 2016 aimed at boosting the kingdom’s non-oil sectors led to investment banking deals galore for Saudi, regional and international banks.
Lenders already present in the market invested heavily in consolidating their position and others rushed to the kingdom to be a part of the growth story.
Saudi Arabia, which launched ambitious schemes such as the $500-billion futuristic city of Neom and the Red Sea project, has since scaled back those goals.
Opec’s biggest oil producer last year said it was rationalising spending on some of the giga projects. It is now reassessing the commercial and economic value of some of the schemes as it looks for more foreign direct investment (FDI) into the ongoing projects.
But despite the cut in spending, Mr Dainton is confident the deal-flow will maintain momentum even beyond the 2030 Vision realisation deadline.
“Look at the development and innovation in the kingdom. It has been extraordinary and will continue to be extraordinary,” he said. Saudi Arabia, he added, is among the largest recipients of FDI and it not only continues to be on its 2030 plan, it is “planning on a plan beyond that”.
Pipeline of deals
While Barclays is following the “appropriate protocols with the regulatory authorities” to launch its franchise in Saudi Arabia as well as its investment banking services, it remains focused on the pipeline of potential deals.
“If you look at the IPO [initial public offering] pipeline in Saudi Arabia, for example, that expands to over 100 corporations,” Mr Dainton said. The capital market formation in Saudi Arabia and the broader region that has taken place over the past 10 years is “beginning to crystallise” and with ample liquidity and mature equity markets, companies are increasingly seeking equitisation opportunities.
Saudi Arabia's Tadawul stock market was the destination for 31 of the 40 IPOs in the Gulf in the first 11 months of the year, making it the most active market for listings in the broader Europe, Middle East and Africa region by far.
However, it is the lowest tally since 2021 and the combined proceeds of $5.81 billion – until November this year – is much lower than $12.88 billion raised in 2024 from 52 listings, according to an S&P Global Market Intelligence report released this month.
Mr Dainton said the slowdown is cyclical in nature as market growth is never leaner and the ample availability of private credit has also enabled companies to stay private for longer.
“But I do think that you've seen a lot of interest here … [and] you have the international investing community looking at this region, understanding the dramatic changes that have taken place,” he said.
The debt market, on the other hand, has boomed this year, with issuances in the Gulf hitting $226.1 billion until November 11, the highest annual total since at least 2020, surpassing the previous record of $136.3 billion set last year, S&P Global Market data showed.
M&A will also continue to grow in the Middle East, particularly in Saudi Arabia and the UAE, driven by large corporate entities as well as sovereign wealth funds that are looking to reorganise their domestic holdings and diversifying their assets base, Mr Dainton said.
“I think you'll see good organic M&A and that's also a part of the maturation of the capital cycle,” he said. "The UAE is in not a dissimilar position as it's also diversifying its wealth. In fact, in the UAE ... the maturation of the wealth funds is extraordinary, the complexity, the sophistication, the talent that they are using inside those funds is really extraordinary."
