HSBC plans to increase its funding for infrastructure and industrial projects and bulk up its retail bank, as trade with China and other emerging markets helps to boost public finances and incomes rise across the Middle East.
The region's biggest international lender, HSBC said yesterday it expected that project finance deals awarded by governments in the region would total as much as US$92.4 billion (Dh339.3bn) in advisory work, underpinning expansion of a number of its business lines. The bank expects that about half a dozen of the projected deals in the pipeline will materialise.
"That continued growth of infrastructure investments is going to be a key theme in this region," said Simon Cooper, the bank's regional chief executive, at a press conferences in Dubai yesterday. "That's going to develop further, as well as being an enabler of the capital markets."
But Europe's biggest lender by market capitalisation also signalled that it may exit a 70 per cent stake in Dar Es Salaam Investment Bank, an Iraqi lender.
"Iraq is a market that we'll continue to review," Mr Cooper said.
Although Brent crude futures dropped below $100 per barrel last week, oil prices have remained steady throughout much of the past two years, flooding the coffers of Arabian Gulf states and helping them to meet infrastructure spending plans.
The bank expects to increase the number of staff in its consumer banking division to meet the needs of expatriates as incomes rise, said Francesca McDonagh, the bank's regional head of retail banking and wealth management
HSBC also plans to boost the size of its project finance team, currently said to be one of the largest of any bank in the region.
With many international lenders having withdrawn from lending to major projects because of the increased costs brought about by the Basel III capital requirements, those banks big enough to be able to lend or underwrite debt capital markets deals would have an advantage, said Georges Elhedery, the regional head of global markets at HSBC, which was the region's biggest sukuk underwriter last year.
"In 2011, we saw the big exits from the European banks," he said. "This year we've seen a comeback of some American names due to the extra liquidity they have in their home markets."
But it is China that is expected to provide the biggest boost to the bank's operations in the Middle East, Mr Cooper said.
Soaring trade with China, which has grown with the UAE by 16 times during the past decade to $40bn, is fuelling adoption of the Chinese yuan as a trading currency, which the bank hopes to capitalise upon.
HSBC expects that as much as a third of China's trade will be settled in yuan by 2015, up from 3 per cent in 2010, reflecting payments of $2 trillion.