Dubai • European banks, led by HSBC Holdings plc, are reclaiming their dominance of the Persian Gulf’s debt market after withdrawing because of the credit crisis in their home countries.
European lenders arranged 57% of syndicated loans of the top 10 mandated banks in the Middle East and North Africa (MENA), according to data compiled by Bloomberg. That compared to 32% in 2012. Saudi Arabia, which contributed the majority of the top 10 banks last year, dropped out of the ranking, the data show.
“Some European banks are slowly recovering from their funding and liquidity challenges of recent years,” said Khalid Howladar, a senior credit officer at Moody’s Investors Service.
“Credit growth in Europe is still quite weak, and some other emerging markets are still too risky. They are increasing their lending to the relatively stronger economies of the Gulf.”
Regulators forced European banks to shrink their balance sheets, reduce risk and raise capital last year amid the crisis.
As lenders pulled staff from the Gulf Cooperation Council amid a deal drought and pressure to make savings at home, many were reluctant to lend to companies in the region allowing local banks to gain market share. That’s now reversing.
The three-month London interbank offered rate, or Libor, dropped 32 basis points to a two-year low of 0.2594% on Aug 27 from a high of 0.5825% on Jan 3, 2012, according to data compiled by Bloomberg. By contrast, the three-month Saudi interbank offered rate, the rate at which banks in Saudi Arabia lend to each other, has risen 17 basis points to 0.95625% over the same period.
London-based HSBC is the largest underwriter in the MENA region this year, arranging 11 loans worth US$1.7 billion (RM5.57 billion), after falling to fourth place in 2011, according to the data. BNP Paribas SA, which ranked 16th last year, is the second-largest with US$1.1 billion, while Societe Generale SA ranks seventh, up from 19th in 2012.
“European banks, particularly the French, were always strong in areas such as project finance which is a big growth area in the region,” Howladar said. “Now that they are back in the market, they are underwriting more than the other banks.”
Economic confidence in Europe soared to a two-year high in August, according to the European Commission, as the currency bloc’s recovery gathered pace after it exited a record-long recession.
The average yield on debt in the Middle East has risen 118 basis points this year to 4.77% on Aug 30, according to the HSBC/Nasdaq Dubai Middle East US Dollar Sukuk/Bond Index.
Borrowers have raised US$26.4 billion in syndicated loans in the MENA region this year compared to US$31.3 billion in the year-earlier period, according to data compiled by Bloomberg. — Bloomberg