Islamic loans reach only $5.4 billion JEDDAH - The Middle East investment banking industry recorded dreary results last year with dramatic declines in fees and deal activity. In the fourth quarter 2009 review of the Middle East investment banking industry by Thomson Reuters, it said the Middle East equity capital markets, peaking in 2008 at more than $36 billion, plummeted 80.61 percent to only $6.89 billion in 2009. With loan activity falling dramatically by more than 80 percent, Middle Eastern issuers and borrowers managed to raise a total of only $17 billion. “These have undoubtedly been tough times worldwide with the investment banking business feeling the effects,” said Basil Moftah, managing director of Thomson Reuters, Middle East and Africa. “As these league tables illustrate, the Middle East investment banking industry saw its fair share of pressure in 2009 and will be looking now for a period of consolidation.” At the height of the 2007 boom, Middle East mergers and acquisitions exceeded $40 billion. In 2009 they fell to less than $13 billion. Mergers and acquisitions plunged 40 percent at $12.7 billion. In the overall Middle East loan ranking, Standard Chartered topped the league with eight deals worth a total of $1.91 billion. Al Rajhi Banking and Investment Corporation, Calyon and Banque Saudi Fransi all ranked first in the Islamic loan ranking with $833.3 million each, due to their work as book runners on the top Islamic loan of 2009 - the Zain Group loan of $2.5 billion. Islamic financed loan activity reached only $5.4 billion in 2009, with Bahrain accounting for 46 percent of issues and the UAE second with 38.5 percent of activity. A detailed breakdown of the Middle East investment banking fee rankings showed HSBC rising from third place last year to first place in 2009 for debt capital markets. Samba Financial were second, with Citi third. Credit Suisse jumped from seventh last year to first in M&A fees in 2009. Morgan Stanley came second followed by Goldman Sachs. Similarly in the equity capital markets' fee rankings, HSBC rose from third place in 2008 to first in 2009, followed by Riyadh Bank and Citi. In the syndicated loan fee league table, Calyon rose from seventh last year to first in 2009, with Standard Chartered and Mitsubishi UFJ Financial second and third. Equity issues also plummeted 81 percent to $6.89 billion. Loans nosedived 81.5 percent to $17.1 billion. However, debt issues skyrocketed 151 percent to $38.3 billion. In mergers and acquisitions with any Middle Eastern involvement, Morgan Stanley topped the rankings, advising on deals worth $16.3 billion. Rothschild came second with $15.42 billion. The top Middle Eastern targeted M&A deal for 2009 was an equity carve-out transaction in which the government of Iran planned to divest its 50 percent interest, plus one share, in Iran Telecommunications to the public for $7.7 billion. The top Middle Eastern acquisition of the year at $9.5 billion was Qatar Investment Authorities' acquisition of an increased stake in Volkswagen. In much-reduced equity issuance, the top three spots in terms of deal activity were taken by Riyadh Bank, HSBC and Qatar National Bank respectively. The largest equity issue of the year was the Gulf Bank follow-on deal worth $1.3 billion. Sovereign, government-related and investment grade corporate issues dominated the Middle East debt capital markets which soared in 2009 to $38.3 billion and were the one bright spot for investment banker fees, which increased compared with 2008. But in the Islamic sector, debt issuance of 38 issues worth $14 billion represented a fall of 44 percent over the previous year. Looking ahead, Moftah said: “As we begin a new year, the road may remain bumpy for a while. For a sustainable return to growth we need to see an increase in investment banking activity with a revival in mergers and acquisitions as well as renewed interest in both initial public offerings and bond issues.” The Middle East investment banking industry review includes rankings of banks and advisors operating in the Middle East based on deal activity and fees and provides an independent assessment of the market. Top Islamic issuer was Malaysia with 31.2 percent of activity, with the United Arab Emirates second with 27.2 percent. Goldman Sachs with five issues worth $3.55 billion topped the overall Middle East debt rankings, while HSBC headed the Islamic financed bond ranking for the year with nine issues worth $1.88 billion. Compared with 2008, data for the Middle East as of Dec. 31, 2009 showed that investment banker and adviser fees dropped 46 percent at $599 million. Overall fees of $599 million paid to investment bankers and advisers in 2009 almost halved compared with 2008, the report said. With the close of 2009, the analysis showed HSBC holding the top spot in Middle Eastern debt and equity capital markets' fee rankings with $13.4 million and $8.1 million respectively. Credit Suisse came first in the mergers and acquisition fee ranking with $27.3 million and Calyon topped the syndicated loan fee ranking with $11.3 million.
