x Abu Dhabi, UAETuesday 23 January 2018

Asian banks fill the void as Europe exits

As European banks retreat from the Middle East, companies in need of capital are finding lenders from China, Korea, Singapore and Japan coming to their aid.

Asian banks have staked their claim on the Middle East as European lenders withdraw.

European lenders have cut their credit lines to the Middle East to shore up capital to meet regulatory requirements at home and protect against the euro-zone sovereign-debt crisis, and continue to lighten their lending books.

But the gap is quickly being plugged by lenders from China, Korea, Singapore and Japan, which are attempting to develop a bigger presence in the Middle East.

"It's very clear that European banks have pulled back," said Jonathan Morris, the Emirates chief executive of Standard Chartered, which is based in London. "The short-term implications are manageable, but longer-term there's a structural gap."

For companies aiming to issue bonds or obtain loans, Asian lenders are now more active, he said.

"Who's coming to these transactions is not the European banks, it's the Koreans, the Chinese and the Japanese," he said.

Large European banks could shrink their combined balance sheet by up to US$2.6 trillion (Dh9.55tn) by the end of next year, representing about 7 per cent of total assets, according to estimates from the IMF. As European lenders such as BNP Paribas and Crédit Agricole slide down the league tables as transactions dry up, deals among Asian lenders have grown.

So far this year, banks including Japan's Mitsubishi UFJ, Mizuho and Sumitomo Mitsui, Export-Import Bank of Korea and Singapore's DBS have arranged $1.1bn of syndicated loans in the Middle East, out of a total of $8.9bn, according to Bloomberg News data.

During the same period last year, Asian banks raised a fraction - $186.1m - of the total $7.1bn raised. Nomura, a Japanese investment bank, has become more active recently, increasing its participation in the Saudi Arabian stock market and advising Mannai Group and EFG-Hermes on a buyout of Damas International.

"We have seen a pickup in volume on the advisory side of the business," said John Baker, the managing director of Nomura Middle East.

"We see increasing interest in Middle East - Asian investment, and we believe Nomura is well placed to advise our clients in this area, given our Asian heritage."

Industrial and Commercial Bank of China reported a pre-tax profit for its Middle East operations of $32 million for last year, more than double the previous year.