Societe Generale SA (GLE), France’s second-largest bank, is seeking to boost lending in the Middle East as part of renewed expansion plans in the region after the sovereign debt crisis prompted it to scale back two years ago.
“We’re now starting from a clean sheet of paper,” Richad Soundardjee, who became the bank’s chief regional officer for the Middle East in September, said in a Jan. 13 interview in Dubai. The bank has the “available liquidity and an appetite to accompany our clients in their projects,” he said.
Societe Generale, which posted an almost six-fold increase in third-quarter profit in November, sold assets and cut hundreds of jobs in investment banking to comply with stricter capital rules designed to avoid a repetition of the financial crisis. European banks, including those from France and Belgium, sold some of their Gulf loans to Arab banks in 2011 and 2012 to help repair balance sheets amid the debt crisis.
The Paris-based lender is targeting growth in project and export finance and will also seek to win market share using its experience in advising on energy and infrastructure deals in Europe, according to Soundardjee. The bank also plans to boost its debt capital markets and Islamic finance businesses.
The six-nation Gulf Cooperation Council, which includes the largest Arab economies of Saudi Arabia and the United Arab Emirates, is spending hundreds of billions of dollars to build chemicals and power plants and roads as its members seek to diversify their economies. The spending is spurring demand for financial advice, bonds and lending in the region, which produces about 33 percent of the world’s oil.
Societe Generale helped raise $1 billion for clients last year, being ranked 12th among syndicated loan arrangers in the Middle East and North Africa, a list led by HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN), according to data compiled by Bloomberg. A $3.9 billion loan for Emirates Aluminium Co. in the U.A.E. and a $2 billion revolving credit facility for Abu Dhabi investor Mubadala Development Co. were among the deals it helped arrange. It also helped manage a $750 million bond sale of Emirates NBD PJSC (EMIRATES), Dubai’s biggest bank.
“Project finance advisory is on top of my list, in terms of opportunity, because again there is a very good match in terms of where our expertise is and what the region needs,” Soundardjee said. “Another area which is growing and which we want to develop further is export finance,” he said.
Syndicated loans in the Middle East and North Africa rose 13.4 percent in 2013, rebounding from a three-year low, to $47.6 billion, according to data compiled by Bloomberg. Lending, which is being helped by record-low interest rates, may rise further in 2014 as loans are cheaper than bonds and banks are flush with cash, Royal Bank of Scotland Group Plc said in December.
Societe Generale agreed to sell its 77.2 percent stake in its Egyptian retail bank to Qatar National Bank SAQ, the Persian Gulf country’s biggest lender, for $1.97 billion in Dec. 2012. Later that month, BNP Paribas SA (BNP), France’s biggest bank, also announced the sale of its Egyptian unit to Dubai’s biggest lender, Emirates NBD PJSC, in a $500 million deal.
GCC bond sales are likely to increase in 2014 after falling 4.1 percent to $41.1 billion last year, Soundardjee said.
“Given that we are coming from a year where activity was pretty subdued, I would definitely expect more this year,” he said. “Some issuers had decided to wait a bit so I think there is a backlog of issuance that might come to the market in the first half of this year.”
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