x Abu Dhabi, UAESunday 21 January 2018

Investment banking enjoys a better year

Investment bankers had a better year of dealmaking in 2012 than they have had for some time. But where were the fees?

A good year in investment banking is not what it used to be.

Investment bankers in the Middle East had the best year for mergers and acquisitions since 2008 last year amid a record year for sukuk sales.

But fees have failed to keep up and are less than half that of 2008 across all business lines, according to data from Thomson Reuters.

"Certainly, the margins are coming in a lot," said one banker at a regional investment bank, who asked not to be identified. "But 2012 was better than 2011."

M&A deals more than doubled last year, from US$9.8 billion (Dh35.99bn) in 2011 to $20bn, but fees rose at a slower rate. Total fees on such deals increased by 22.5 per cent compared with a year earlier to $157.9 million.

Fees from debt capital markets totalled $93.8m, a year-on-year increase of 25.5 per cent, compared to syndicated lending fees of $184.9m, up 10.2 per cent.

That is in spite of debt capital markets in the region having one of their best years on record, driven by a boom in sales of Islamic bonds.

Even so, the volume of deals on offer is low compared to pre-crisis levels, leading many banks to lower fees to grab a slice of the pie.

The exuberance that brought dozens of banks to the Dubai International Financial Centre prior to the collapse of Lehman Brothers has given way to job losses and staff reassignments over the past few years, as regulatory tightening limited the profitability of investment banking and deals dried up.

Deutsche Bank, Nomura and Morgan Stanley have all axed or relocated staff in the region, while Credit Suisse moved its Dubai investment banking operations to Qatar, which led deal activity in the Middle East last year.

But hiring in the financial sector shows tentative signs of a recovery. A third of UAE companies polled by Robert Half, the specialised financial recruitment firm, said they would be hiring permanent accounting and finance professionals during the first half of this year.

An easing of the Basel III capital standards, announced last week, may also free up resources for banks and result in the return of staff who had been moved back to Europe, bankers said.