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Rise Of The Gulf As A Loan Market For Africa

Rise Of The Gulf As A Loan Market For Africa

From GulfBusiness. Story by

An $85 million loan taken out by a Ugandan bank this year points to an emerging trend in international capital markets: the rise of the Gulf as a syndicated loan market for Africa and Asia.

Stanbic Bank Uganda originally intended to raise $75 million through the 18-month deal in January, but expanded that because of strong interest from banks wanting a slice of the business.

The list of participating banks eventually included Dubai’s Emirates NBD, which was sole co-ordinator and bookrunner, mandated lead arranger Al Ahli Bank Kuwait , and Qatar’s Al Khalij Commercial Bank and Commercial Bank of Qatar as lead arrangers, as well as Western heavyweight Standard Chartered.

“The Gulf banks have not faced the same regulatory and capital constraints that European banks have faced, so they are able to provide liquidity to African banks,” said Patrick Mweheire, chief executive of Stanbic Bank Uganda.

Several years ago, Gulf banks largely participated as junior partners in international syndicated loans; they rarely took most of the key management roles in syndications or dominated them by volume of money provided.

Over the last six months, several deals have suggested that picture is changing, for a wide variety of reasons – not all of them under the control of the Gulf banks.

When ICBC Financial Leasing, a wholly owned unit of Industrial and Commercial Bank of China, raised a $500 million, three-year loan last November, eight of the 10 banks involved were from the Gulf. There were three mandated lead arrangers and bookrunners: Emirates NBD, Qatar National Bank and ICBC itself.

South African bank FirstRand raised $235 million in a two-year loan last week; the entire deal was syndicated to nine Gulf lenders, with Emirates NBD the sole arranger.

…The rise of the Gulf banks as syndicated lenders is partly a natural result of their growth over the last several years. They have opened opened branches and offices in Asia and Africa to take advantage of rapidly expanding trade and investment ties between those areas and the Gulf.

“We have seen more trade flows with the region and want to further strengthen our exposure and footprint,” said Sam Moss, head of investor relations at FirstRand.

She said she hoped it would eventually become possible for African banks to take out loans with longer maturities than two years in the Gulf, as deals became more frequent.

The Gulf is potentially attractive as a loan market because many banks are awash in spare funds. Although oil export revenues have plunged since last year, governments have managed their assets to ensure that total deposits in the banking system have continued to grow, so liquidity has not tightened.

At the same time, most Gulf banks have built up comfortable capital cushions, so they have scope to lend. This contrasts with many Western banks, which face cost-cutting and regulatory pressures to improve capital adequacy in their home markets.

…“Lending to these borrowers has doubled already in 2015 from last year,” said one Dubai-based syndicator, speaking on condition of anonymity because of commercial sensitivities. “I expect lending to double again in the next year.”

Read more at GulfBusiness.