GCC lenders start to play major roles in arranging bond deals overseas, competing with long-established international banks.
When the Kenyan government issued a debut
After decades during which banks from the wealthy Gulf Arab countries rarely ventured outside their region, they are starting to play major roles in arranging bond deals overseas, competing with long-established international banks.
This is partly because Gulf banks have grown, allowing them to build up their technical expertise in bonds and making them keen to expand beyond their crowded home markets.
But it is also because the global financial crisis has made the cash-rich Gulf more attractive to overseas bond issuers as a source of investment funds. Gulf banks are seen as the best channels for issuers to attract this money.
QNB "is a big bank in the
"It helps to spread out the investor base by bringing in some from the
The trend is still in its infancy. In lists of the top 25 arrangers of bond issues globally by monetary value, no Gulf bank appears, according to
Even in their home markets, Gulf banks are still not dominant. Among the 25 most active arrangers of international bonds from Gulf issuers last year, the highest-ranked Gulf institution was
Only 10 of the 25 banks were from the Gulf; the list featured a wide range of banks from
The last several years have seen a big change, however. As recently as 2011, the top 25 arrangers did not include any Gulf banks at all. Now, even relatively small Gulf institutions such as
There is evidence that the entry of Gulf banks into the bond arranging business within their region has increased competition and squeezed fees — making it more attractive for the Gulf institutions to seek arranging activity outside their region.
According to estimates by
Rapid, oil-fuelled growth in the Gulf's banking industry over the last few years has helped local banks bulk up to challenge foreign competitors; banking assets in the six-nation GCC ballooned to
This has helped Gulf banks to hire some high-profile talent from international institutions over the past year.
The global financial crisis supported the trend, by forcing many Western banks to downsize their Gulf operations as they focused on repairing balance sheets back home. Similarly, the introduction of tighter global capital rules in Basel III banking standards over the next few years may help Gulf banks; they are flush with capital, while many Western banks may face higher costs.
Meanwhile, the last three years of high oil prices have seen a surge in the amount of money which Gulf Arab states have available to invest abroad. One indicator of this, the Saudi Arabian central bank's net foreign reserves, has jumped 52 per cent since
At a time of economic instability, this makes Gulf investors highly sought after by many bond issuers around the world. The fact that many Gulf funds are Islamic partly explains the increasing interest around the world in issuing sukuk, or Islamic bonds;
Gulf banks, many of them with close links to their governments, are often the best way of reaching top investors in the region such as sovereign wealth funds. When
In fact, sukuk are emerging as a key area in which Gulf banks can expand internationally. Although several foreign banks such as
Banks from the Gulf are also looking at
"The Gulf fixed income business is increasingly crowded and the fee income is shrinking. That aside, there are opportunities elsewhere where we can leverage our existing relationships and make inroads in markets outside the GCC," said
"We are actively pitching for bond and sukuk mandates in
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