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JPMorgan expects Middle East deal flow to make up for lower fees

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An increasing use of bond markets to plug funding gaps, Saudi Aramco’s planned initial public offering and a rising number of mergers and acquisitions are helping banks boost fee income.

Thursday 03, October 2019

JPMorgan Chase & Co. expects ‘a lot of opportunities’ in the Middle East for banks with the right scale as the region taps bond markets and plans the biggest-ever share sale, report Bloomberg.

Sjoerd Leenart, the US bank’s Global Head of Corporate Banking, said that investment banking fees in the Middle East are lower than in countries like the US, but when you have enough deals you can still run a very good business by operating across different segments.

This deal flow is helped offset slowing regional economic growth since 2014 when the decline in oil prices forced governments to slash spending.

“The Middle East is transforming as it has never done before, there are opportunities for banks to help companies grow, optimise their setups, whether it’s fund-raising in the equity or debt markets or whether it’s through M&A,” said Leenart.

More than a dozen banks in the Middle East have merged or are in talks to combine, including National Commercial Bank, Saudi Arabia’s biggest.

JPMorgan is one of the global coordinators for Saudi Aramco’s planned share sale and is also the fourth-biggest arranger of bond sales in the Middle East and North Africa.

Bond sales from the Middle East and North Africa have climbed 11 per cent this year to $92.7 billion amid declining yields. They may surpass the record $101 billion hit in 2017.

Leenart said that MENA bond sales will continue to grow because they are very attractive pricing-wise. Middle East issuers are the ‘high-grade part of the developing market’ and offer a substantial yield pick-up compared to the zero-rate bonds from Europe and elsewhere.

JPMorgan’s Middle East business has grown 25 per cent in the last five years and the region’s contribution to the bank’s global business is more than what its revenue would suggest, said Leenart, who doubles as the Regional Head of Central and Eastern Europe, Middle East and Africa.

 

TAGS : JPMorgan Chase & Co., Saudi Aramco IPO, M&A

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