32200
Foreign Lenders Stealing the Show in (P)GCC
World Economy

Foreign Lenders Stealing the Show in (P)GCC

Foreign banks are regaining lost ground in the Persian Gulf Arab states’ financial sector, stealing a march on local lenders as they grapple with job cuts and a liquidity squeeze caused by the plunging oil price.
Japanese, French and US banks are looking to pick up business in the region as the oil price slump pushes domestic players to curb the flow of cheap loans which, until recently, had secured them a dominant position in the market, Reuters reported.
The shift marks a change in fortune for Persian Gulf Arab banks, which in the years following the global financial crisis had poached staff and aggressively filled gaps left by international lenders as they retreated to tackle problems at home.
“The recent changes in liquidity and pricing have probably leveled the playing field more equally between the local and international banks,” said Simon Eedle, group regional head of the Middle East at Natixis, noting the market was much changed from six months ago.
Leading the charge of foreign lenders are Japan’s megabanks: Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group.
Flush with the proceeds of their government’s “Abenomics” quantitative easing program, all three are hiring staff and increasing business lines as they look to deploy funds.
“We believe that current market conditions will create a number of business opportunities for us if we use our strengths effectively,” remarked Hidefumi Takeuchi, regional head of the Middle East, North Africa and Central Asia at Mizuho Financial Group.
Japan’s export credit agencies – Japan Bank for International Cooperation and Nippon Export and Investment Insurance – have helped support the lenders’ in-roads, with Japanese contractors securing big wins in Persian Gulf Arab infrastructure projects and bringing with them cash from their home financial institutions.
That puts Japanese lenders in prime position for advisory roles on these huge deals. The adviser on the $5.2 billion Liwa plastics project in Oman is SMFG.

 Non-Equity Funding
Local banks dominated Persian Gulf Arab loan markets in recent years due to the low cost of funds from government oil deposits which provide around 10 to 35% of banks’ non-equity funding in the six-nation Persian Gulf Arab states (Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman), according to rating agency Moody’s.
While this drove loan interest rates to uneconomical levels for foreign lenders, the oil price fall has severely impacted the amount of liquidity local banks could lend and the rate at which they do.
Highlighting this problem is the UAE’s three-month Emirates Interbank Offered Rate, at a record low as recently as February but trading at a 31-month high last week.
The squeeze is already starting to be felt: First Gulf Bank, the UAE’s third-largest bank by assets and one of the most expansive names during the boom, laid off around 100 staff last month.
Local banks are also going from being lenders to borrowers, with unprecedented activity in the financial institutions loan market as the year closes and banks seek to lock in funding before US interest rates increase.

Short URL : http://goo.gl/fPoUPu
  1. http://goo.gl/SWzETk
  • http://goo.gl/OE1M0i
  • http://goo.gl/1Pysiz
  • http://goo.gl/GiDaVU
  • http://goo.gl/aKZtX3

You can also read ...

 An overwhelming 86% of Germans believe their economy is doing well, up from 75% last year.
Conditions for investors around the world are getting worse....
Britons have been borrowing heavily through personal loans and credit cards over the last 18 months.
Consumer borrowing grew at almost 10% in August, official...
Tax Reform  Can Boost  US Economy
The American electorate is more than ready for Washington...
South Korea’s jobless rate has risen steadily in recent years.
South Korea’s unemployment rate has risen steadily in the past...
Greece Remains Under Supervision
Greece will remain under supervision after it exits its...
Jordan Economy Continues to Grow
While the public sector continues to play a prominent role in...
Pak GDP Growth Predicted at 10% Over 10 Years
Researchers from Harvard University’s center for international...
China Rust Belt Opens Doors
Trucks carrying hi-tech car components rumble in and out the...

Trending

Googleplus