Russell Haworth, Managing Director Middle East & Africa at Thomson Reuters
Thomson Reuters today released its first half 2011 investment banking analysis for the Middle East region, which revealed equity capital markets (ECM) issuance reached US$8.3 billion during the first half of 2011, an 81% increase compared to the first half of 2010 when the volume reached US$4.6 billion.
The review examines the performance of the Middle East investment banking industry in the region’s debt and equity capital markets, both conventional and Islamic. It includes dedicated regional rankings of banks and advisors operating in the Middle East based on their deals and fees.
Russell Haworth, Managing Director Middle East & Africa at Thomson Reuters, commented: “These figures show that it has been a tough year so far throughout the region for investment banks, with banker fees comparable with 2004 levels. However confidence is returning to the market as regional economies continue to recover despite the Arab Spring, and the 81% increase in ECM issuance is indicative of that.”
In a snapshot of the current state of the industry during the first half of 2011, the analysis of the Middle East drawn from Thomson Reuters data shows that compared with the same period in 2010:
Investment banker and adviser fees at US$197 million - down 46%
Mergers and acquisitions reached US$7 billion - down 40%
Equity capital issuance at US$8.3 billion – up 81%
Debt issuance at US$11.2 billion – down 16%
Investment banking fees in the Middle East reached US$197 million during the first half of 2011, which was a 46% decline compared with the same period a year earlier, when fees were calculated at US$367.8 million. Mergers and Acquisitions (M&A) fees totaled US$74.1 million during the first half, accounting for 39% of the overall fee pool.
Debt Capital Markets (DCM) fee activity in the Middle East fell 31% over the first half of 2010 to reach US$50 million during the first half of 2011. Fees from syndicated lending and equity capital markets totaled US$20.4 million and US$53.3 million, respectively.
HSBC holds the top spot in the Middle Eastern DCM fee ranking for the first half 2011 with US$7.8 million. Morgan Stanley topped the completed M&A rankings during first half 2011 with US$5.5 million. Bank of America Merrill Lynch controlled nearly 20% of equity capital markets fees in the Middle East during the first half of 2011, up from 4.7% during the same time last year.
According to the review, Middle Eastern targeted M&A activity reached US$7 billion, a 40% decrease compared to the first half of 2010 when activity totaled US$11.7 billion. Real estate is the most targeted industry in the Middle East with US$2.3 billion, 33% of the activity down from US$4.5 billion during the first half of 2010.
The United Arab Emirates is the most active Middle Eastern country, based on target, with US$3.7 billion for 53% of annual activity. BNP Paribas topped the Any Middle Eastern Involvement M&A ranking with US$10.1 billion, with Goldman Sachs in second place with US$9.3 billion. Citi and Credit Agricole topped the Middle Eastern target M&A ranking with US$950.2 million.
The two top Any Middle East Involvement M&A transactions involved Middle Eastern investment funds investing in Spanish Energy & Power targets, with IPIC’s US$7.4 billion investment in CEPSA and Qatar Holding Luxembourg’s US$2.7 billion investment in Iberdrola SA.
Equity capital markets issuance reached US$8.3 billion during the first half of 2011, an 81% increase compared to the first half of 2010 when volume reached US$4.6 billion. Follow-ons accounted for 67% of quarterly activity, while the top Middle Eastern ECM transaction was US$3.5 billion follow-on from Qatar National Bank (QNB).
Financials was the most active industry in the Middle East during the first half of 2011 with 83% of this activity. The real estate and energy and power sectors together accounted for 17% of ECM activity during the first half. Al Rajhi Banking & Investment topped the Middle Eastern equity capital markets rankings, as sole-lead bookrunners for Saudi-based Jabal Omar Development’s US$688 million follow-on offering.
Middle Eastern debt issuance reached US$11.2 billion during the first half of 2011, down 16% from the first half of 2010. Investment grade corporate debt accounted for 71% of all Middle Eastern DCM activity during the first half.
Islamic debt issuance reached US$11.5 billion from 24 issues up 85% when compared to first half 2010 levels (US$6.2 billion).
The second quarter of 2011 was the busiest three-month period for Islamic bond financing since the second quarter of 2008. The top Islamic issuer is Malaysia with 80% of the activity. Issuers in the financials, energy & power and real estate sectors accounted for all of the DCM issuance in the Middle East during the half.
HSBC took the top spot in the Middle Eastern bond ranking during the first half of 2011 with eight issues, which raised US$1.8 billion, while CIMB Group and HSBC Holdings control nearly 50% of the Islamic bond market during the first half of 2011.