Good fee outlook for Mideast investment banks
Posted on 08 July 2010 with 1 comment from readers
One man’s debt is another’s opportunity. This is certainly the case for investment bankers organizing the refinancing of more than an estimated $100 billion in the region over the next couple of years.
Actually business is already improving for the region’s investment banks. The Thomson Reuters survey of fee income for these banks shows a strong pick up in debt capital market, equity market and loan syndication business during the first half of the year.
Rising fee income
Income from mergers and acqusitions fell slightly in the first half but is also a big opportunity going forward. Fees totalled $173 million for M&A with Credit Suisse on top at $15 million. Still a bit small for investment bankers but on the right trend.
After the recent real estate crashes in many cities there is a rush to consolidate assets, and real estate represented 38 per cent of M&A activity worth $4.4 billion. Qatar is the most active player with Credit Suisse advising on its purchase of Harrods in London.
Gradually investment bankers are expected to leave their heavily taxed bases in London and relocate to the Gulf where the business is now located. For Gulf sovereign wealth funds in particular are expected to be major clients going forward.
Even a double dip recession, and another big stock sell-off would not necessarily stop this process as it will create more interesting acquisition opportunities. Indeed, some buying now might wish that they had been a little more patient.
Following the money
Investment banks will likely follow the money to the Gulf States. It seems extraordinary that clients are expected to come to London and even New York. At the same time the traditional networking and security of these locations is becoming less of a consideration, while the income and capital gains taxes paid by bankers are more burdensome.
Perhaps the day is not so far away when the Dubai International Financial Centre will be full of investment bankers from all over the world. Certainly this year the continual stream of new nameplates on the doors of the DIFC is a contrast to the generally depressed condition of global banking.
But if you look down the Thomson Reuters’ list of fee income the big players are all the international banks – HSBC, Standard Chartered, Citi, Credit Suisse, Morgan Stanley, JP Morgan and Deutsche Bank. Only the National Bank of Abu Dhabi gets a look in. Time for a few local mergers perhaps?
1 Comment posted by readers:
Citigroup just won 13 awards from Euromoney including ‘Banker of the Year’ for Vikram S. Pandit, the CEO of, too big to let fail, Citigroup.
Got money to RISK from your oil well? Citigroup is only $4.03 a share today. I own none because I’m chicken, but IF the economy can avoid a double dip, a big if, you could tripple your money in four years. In good times, this worldwide bank could become a license to print money. Pandit is a genius, and I doubt that he is going anywhere. If he can turn Citi around he can become a very rich celebrity without having to give concerts to sold out stadiums. If you have money that you can afford to lose, this stock is a once in a lifetime opportunity to make an absolute killing. It is almost another Apple before the ipod, although not quite that good. That Steve Jobs is someone unique in his creative ability. He is more than just smart.
Then again, Citi could go back down to $1.03 a share. (Wouldn’t you have liked to have bought it back then?) If it does with Pandit running it, we will all be in serious trouble because we will probably be in another Great Depression, or worse.