JP Morgan said it expects to keep its market share of investment bank fees in the Middle East steady in 2017 after doubling it last year, topping the rankings on the back of a boom in international bond sales from the region as governments plugged low oil price created deficits with borrowed cash.
The American bank’s bumper year in the Middle East also came with an upsurge in fees from mergers and acquisitions including those from advising on Saudi Arabia’s US$3.5 billion investment in Uber and Qatar National Bank’s €2.7bn (Dh10.52bn) purchase of Finansbank of Turkey from National Bank of Greece.
“The Middle East was always a modest borrower in the world of emerging markets and it’s now taking its fair share because these deficits are there,” said Sjoerd Leenart, the chief executive of the Middle East, Turkey and Africa for JP Morgan.
“The other beneficiary has been mergers and acquisitions because our clients want to diversify. The are looking to buy assets abroad when it comes to wealth funds and investors with a lot of domestic holdings are looking to sell those.”
As a result of that boom in business, the bank’s share of investment bank fees in the region rose to 9.2 per cent of $522.9 million from 4.5 per cent of $530.1m in 2015, according to Dealogic, a data firm that tracks financial transactions. That took JP Morgan to the No 1 place in 2016 on the league table from third place in 2015.
Behind those gains have mostly been a flurry of debt sales. Regional governments have been selling international bonds and sukuk, in the case of Saudi Arabia for the first time, in a bid to plug holes in their budgets caused by lower oil prices. The price of oil shed as much as 70 per cent of its value in the crash that began in the summer of 2014 but has since partially recovered.
The UAE accounted for $14.4bn issued in the second quarter of last year, Qatar $9bn and Oman $5bn, according to a report in September from the Bank for International Settlements.
In April 2016, Abu Dhabi’s Department of Finance sold a $2.5bn tranche of five-year bonds yielding 2.125 per cent and another $2.5bn tranche of 10-year bonds yielding 3.125 per cent. Qatar and Oman also sold bonds last year.
The pièce de résistance came in October when Saudi Arabia came to the market with a $17.5bn debut dollar international bond sale. The debt sale was split into tranches of five, 10 and 30-year bonds. The country sold $5.5bn of the five-year tranche, $5.5bn of the 10-year and $6.5bn of the 30-year, with total demand for the bonds amounting to $67bn.
JP Morgan was the lead manager on those sales from Saudi Arabia, Abu Dhabi and Qatar.
Mr Leenart said that there was continuing momentum in bond sales and that it was working on a number of international bond offerings. Still, the volume of public debt capital market transactions was unlikely to reach the record high $61bn issued in 2016 as governments seek other forms of revenue including the sale of state assets such as Saudi Arabia’s plan to sell a stake in Aramco, the world’s largest oil producer.
mkassem@thenational.ae
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