Deutsche Bank Sees Record Year for Its Saudi Arabian Unitby
German lender continuing to invest in Saudi Arabian business
Local CEO sees opportunity next year even with slump in crude
Deutsche Bank AG expects its best-ever performance in Saudi Arabia this year even as oil slumps and the country’s economic growth slows, according to Jamal Al Kishi, chief executive officer of the lender’s local unit.
“2015 has been a record year for us in Saudi Arabia, mostly driven by structured financing and M&A work,” Al Kishi, head of Deutsche Securities Saudi Arabia, said in an interview in Riyadh, declining to give financial details. “For Deutsche Bank, the business in Saudi Arabia is one of the largest contributors to the Middle East and Africa sub-region, and we see that reflected in the continued investment and commitment here.”
The Frankfurt-based lender was among banks that arranged a 2 billion riyal ($530 million) bond for Riyadh’s Arab National Bank in September and participated in a $10 billion loan for oil producer Saudi Aramco in March. It’s also advising Aramco on a potential acquisition of some marketing, retail and refining assets from China National Petroleum Corp., people with knowledge of the matter said in October.
Deutsche Bank, which employs about 80 people in Saudi Arabia, is the fourth-biggest earner of investment banking fees in the Middle East this year, up from fifth a year earlier, according to New York-based research firm Freeman & Co. The bank, which ranks behind HSBC Holdings Plc, Goldman Sachs & Co. and Barclays Plc, has made $35.9 million from arranging bonds, syndicated loans, M&A and equity capital market deals. Freeman doesn’t break out data for Saudi Arabia.
A drop in the price of oil - Saudi Arabia’s principal form of revenue - is leading the country to report its first budget deficit since 2009, while economic growth is expected to slow to 2.5 percent next year, from 3 percent in 2015, according to the median estimate of 12 economists compiled by Bloomberg. Despite that, deal activity remains active as state-owned companies seek investments abroad and to raise capital.
“The opportunity here is great and really the international banks here are only just scratching the surface,” Al Kishi said. “We definitely see a lot more opportunity in Saudi Arabia even with the oil price where it is.”
Such bullishness may mean Deutsche Bank’s business in Saudi Arabia will escape cost-cutting measures being considered by co-chief executive officer John Cryan. His plans involve eliminating the dividend for two years, pulling out of businesses in 10 countries and shrinking headcount by about a quarter to revive profit and reverse a share slump.
Globally, Deutsche Bank’s advisory business saw revenue jump 20 percent to 471 million euros ($515 million) in the first nine months from a year earlier, company filings show. That made it the smallest source of earnings at the firm’s investment banking and trading unit, which saw revenue rise 14 percent to 12.1 billion euros in the nine months through September, according to the filings.
Ashok Aram, who heads Deutsche Bank in the Middle East and Africa, will expand his role to take charge of Europe as the Frankfurt-based lender reduces its global coverage to five regions from seven, co-CEO Juergen Fitschen said Oct. 29. The bank has 14 offices in the Middle East and Africa, with Dubai serving as the regional hub, according to information on the bank’s website.