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BNP to Standard Chartered Toppled as Deals Go Local

July 3 (Bloomberg) -- International banks retreating from the Middle East cleared the way for Arab lenders to take over as the region’s biggest dealmakers in the first half.

Saudi Arabia’s Samba Capital replaced HSBC Holdings Plc as the region’s top syndicated loan arranger in the period, while Standard Chartered Plc dropped to 17th place from second and BNP Paribas SA slid to 19th from third, according to data compiled by Bloomberg. Banks based in the Gulf Cooperation Council nations provided 77 percent of the loans, their biggest share since Bloomberg began compiling the data in 1999.

While pressure from regulators has forced international banks to sell assets and boost capital reserves, local lenders in the oil-rich region, flush with cash, have driven borrowing rates to the lowest in more than seven years and hired loan arrangers. That’s putting them on a level footing with international banks, said Chris Sutcliffe, head of loan syndication for Standard Chartered in the Middle East, North Africa and Pakistan.

“Local competitors have become more aggressive,” Sutcliffe said in a telephone interview yesterday from Dubai. “This means borrowers are in a position to have banks aggressively bid on pricing and terms and conditions, and many international banks choose to opt out in this environment.”

Low Rates

National Bank of Abu Dhabi PJSC jumped to third place, behind HSBC, after recruiting Jonathan Macdonald, the former head of loan syndication for Europe and Asia-Pacific at Barclays Plc, a person with knowledge of the appointment said in May. Abu Dhabi’s First Gulf Bank PJSC, ranking No. 4, recruited Steve Perry last year from Standard Chartered to head its debt markets business.

Banks in the Gulf region are passing on their own record-low funding costs. EIBOR, the interest rate U.A.E. banks use to lend to each other, was at 0.72 percent today, its lowest since at least September 2006, when Bloomberg began compiling the data.

“It’s all to do with pricing and availability,” said Redmond Ramsdale, director of financial institutions at Fitch Ratings Ltd. in Dubai. “Most GCC banks are back in the growth phase having improved their balance sheets, particularly having improved capital, increased loan loss reserves, increased liquid assets and reduced legacy problem assets.”

Companies in the Middle East and North Africa paid an average of 148 basis points more than benchmark rates for loans this year, less than half the 325 basis points in 2013, according to data compiled by Bloomberg.

HSBC Rebound

A $700 million syndicated facility for Unatrac Holding Ltd., a Caterpillar Inc. dealer, signed yesterday pushed HSBC back to No. 1 overall this year. HSBC and BNP Paribas declined to comment.

“There’s no denying local banks are growing their businesses, looking to take senior positions and arrange more deals, and have been hiring experienced people,” Simon Meldrum, a London-based director of Central and Eastern Europe, Middle East and Africa loan syndication at Royal Bank of Scotland Group Plc, said in a phone interview yesterday. “It’s not correct to say Europeans are pulling back due to lack of risk appetite. However, they’re finding it harder to compete on certain elements of deals, such as longer tenors, amounts or credit profiles.”

Exiting U.A.E.

Barclays agreed in April to sell its retail banking business in the United Arab Emirates to Abu Dhabi Islamic Bank PJSC for 650 million dirhams ($177 million), joining Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc in exiting consumer and commercial-banking businesses in the country. HSBC bought Lloyds operations for $769 million in 2012, while Abu Dhabi Commercial Bank PJSC acquired RBS retail banking assets in 2010.

Syndicated lending in the Middle East North Africa region dropped about 20 percent to $20.9 billion in the first half from a year earlier, according to data compiled by Bloomberg.

Lending “in the U.A.E., which is usually the biggest contributor to the region’s syndicated loan market, is down about 70 to 75 percent in the first half,” Standard Chartered’s Sutcliffe said.

A crackdown on illegal workers in Saudi Arabia has also slowed the market there over the last six months, according to Murad Ansari, an analyst at EFG-Hermes Holding SAE in Riyadh. The surge in government spending in 2009 and 2010 has started to slow, he said by telephone on July 1.

Samba Lead

“The Saudi government is also taking a leading role and funding some of the big infrastructure projects so borrowers don’t have to turn to banks as much as before,” Ansari said.

Samba Financial Group arranged seven loans totaling $1.4 billion to jump to first place from 11th in the year-earlier period, according to data compiled by Bloomberg. Citigroup Inc. sold its 20 percent stake in the lender formerly known as Saudi American Bank to the state Public Investment Fund for $760 million in 2004.

Samba didn’t respond to telephone calls and e-mails seeking comment.

While local banks will probably continue to dominate the loan market for the rest of the year, that may change in 2015 as borrowers in the region refinance debt and infrastructure spending increases, Standard Chartered’s Sutcliffe said.

Dubai will spend more than $8 billion on roads, a railway extension and new buildings as it prepares to host the Expo 2020 global trade fair. Abu Dhabi is building a new port, attractions including the Louvre and Guggenheim museums, and expanding its airport to diversify away from oil.

“We’ll see more volumes in the market from mid-2015,” Sutcliffe said. “You’ll see more competition for dollar borrowing and an uptick in pricing.”

To contact the reporters on this story: Stefania Bianchi in Dubai at; Stephen Morris in London at

To contact the editors responsible for this story: Gavin Serkin at Dylan Griffiths

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