Emirates NBD PJSC, the United Arab Emirates’ biggest bank by assets, expects to raise more than $12 billion for clients in the remainder of the year, boosting investment banking income as the lender seeks expansion.
The Dubai government-controlled lender has mandates for about 20 bond and loan deals after helping raise $14.6 billion for clients in 23 such transactions so far this year, Giel-Jan Van Der Tol, the lender’s head of wholesale banking, said in an interview yesterday. The deals have an average size of about $500 million and there’s issuer interest from countries where customers invest in Shariah-compliant debt, he said.
The new transactions will raise revenue at the lender’s wholesale banking unit by more than 10 percent over the next 12 month and loan growth by 6 percent, he said. The bank also plans to expand into other countries in East Asia by opening representative offices and branches because of limited growth opportunities in the local market, van der Tol said.
Issuers in the U.A.E., the second-biggest Arab economy, rushed to sell bonds in the first-half to take advantage of record-low yields and global investor demand. The sales helped make Emirates NBD the fifth-biggest arranger of bonds this year in the six-nation Gulf Cooperation Council, which also includes Saudi Arabia and Qatar, up from 15th last year, according to data compiled by Bloomberg.
Bond sales in the GCC surged to a record $42.8 billion last year. Issues have dropped 14 percent this year compared with the year-earlier period after investor concern that the U.S. Federal Reserve will taper its bond buying program boosted yields. The five-year mid-swap rate, a bond pricing benchmark, fell to a more than 20-year low of 0.72 percent in December before rising to 1.74 percent yesterday.
Earnings are rebounding at Emirates NBD as Dubai’s economy improves, aided by a recovery in tourism, trade and real-estate. The bank was among local lenders hurt by Dubai’s property crash, which pushed companies like Dubai World to delay debt payments.
Emirates NBD’s shares fell 1.8 percent to 5.5 dirhams at 1:42 p.m. in Dubai, while the benchmark index was up 0.1 percent. The shares have almost doubled this year compared with a 64 percent increase in the DFM General Index.
This year’s deals have “really helped us in our investment banking capabilities and in generating business in other parts of the world,” van der Tol said. In the local loans market, growth has been driven mainly by mid-size companies, he said.
Deals Emirates NBD helped arrange this year include a $750 million bond for Emirates airlines in February and a $450 million Islamic bond for Saudi Arabia’s Dar Al-Arkan Real Estate Development Co. in May. It also helped manage a $2.55 billion syndicated loan facility for Investment Corp. of Dubai in June.
The bank, which hired Shayne Nelson from Standard Chartered Plc as chief executive officer to succeed Rick Pudner later this year, reported a 40 percent increase in first-half profit to 1.81 billion dirhams ($493 million). Profit at the wholesale bank, which includes income from corporate loans and investment banking fees, jumped 76 percent to 532 million dirhams, it said.
The bank reorganised its wholesale banking division last year and has planned a push into foreign markets, a focus on local emerging companies and a boost of its fee business as key to growth, van der Tol said. The wholesale bank has about 330 employees and it will hire selectively in the areas of transaction banking, factoring and trade finance, he said.
Emirates NBD’s loans rose 6 percent in the six months through June to 231.8 billion dirhams. Overall loans of the U.A.E.’s 51 operating banks, which include HSBC Holdings Plc and Citigroup Inc. increased 4.4 percent over the period to 1.15 trillion dirhams, according to data from the central bank.
Emirates NBD plans to boost revenue from its international business to 20 percent of the total over the next three to five years, from about 5 percent now. Earlier this year, it completed the purchase of French bank BNP Paribas SA’s Egyptian unit in a $500 million deal as part of a plan to expand in North Africa.
“Later this year, you will see our international presence grow further, most likely in the Far East, but not in the form of an acquisition,” van der Tol said.