Mideast investment bank fees reach six-year high as IPOs surge

[DUBAI] Investment-banking fees in the Middle East reached a six-year high in 2014 as a fourfold increase in revenue from share sales outweighed lower income from lending.

Fees rose to US$1.1 billion, the most since 2008, from US$954 million in 2013, according to data compiled by New York-based research firm Freeman & Co this month.

Revenue from arranging initial public offerings soared to US$219 million from US$56 million. Fees in the region peaked in 2007 at US$1.8 billion, the data show.

HSBC Holdings Plc and Goldman Sachs Group Inc were among banks to benefit from share sales in the second half of 2014 after Dubai's benchmark index reached an almost six-year high in May.

Emaar Properties PJSC, the United Arab Emirates' biggest publicly traded developer, sold 15 per cent of its retail unit for US$1.58 billion in September. Meraas Holding, a state- controlled Dubai developer, raised US$690 million from the November IPO of its theme park unit. HSBC worked on both deals.

Fees for banks in 2014 were held back by income from bond sales and loan syndications, which fell 15 per cent and 7 per cent respectively, the Freeman data show. The amount raised in bond sales in the Middle East last year dropped to US$35.6 billion from US$47.6 billion in 2013, according to data compiled by Bloomberg.

European and US banks recaptured some of the market from local lenders whose share of fees declined to 19 per cent last year, down from 26 per cent in 2013 and 34 per cent in 2012, according to the Freeman data.

Banks from those countries are returning to the Persian Gulf after withdrawing during the credit crisis, when regulators at home forced them to shrink their balance sheets, reduce risk and raise capital. As lenders pulled staff from the six Gulf Cooperation Council countries amid a deal drought and pressure to cut costs at home, many were reluctant to lend to companies in the region, allowing local banks to win business.

Oil's plunge in the second half of 2014 to the lowest price in more than five and a half years sparked a selloff across equity markets in the GCC, leading to a slowdown in deals.

Banking fees for January dropped to US$40 million from US$85 million a year earlier, according to the Freeman figures.

BLOOMBERG