DUBAI, July 5 (Reuters): When the Kenyan government issued a debut US$2.0 billion Eurobond last month, most of the lead arrangers were top Western and African banks. But there was a standout: Qatar's QNB Capital.
After decades during which banks from the wealthy Gulf Arab countries rarely ventured outside their region, they are starting to play major roles in arranging bond deals overseas, competing with long-established international banks.
This is partly because the Gulf banks have grown, allowing them to build up their technical expertise in bonds and making them keen to expand beyond their crowded home markets.
But it is also because the global financial crisis has made the cash-rich Gulf more attractive to overseas bond issuers as a source of investment funds. Gulf banks are seen as the best channels for issuers to attract this money.
QNB Capital, a unit of Qatar National Bank, the Gulf state's biggest lender, is now believed to be a strong contender to arrange Kenya's first Islamic bond issue, which is in the planning stage, bankers said.
QNB "is a big bank in the Middle East and it has been involved in arranging other issues in Africa, especially in North Africa," said Geoffrey Mwau, economic secretary at the Ministry of Finance in Kenya.
"It helps to spread out the investor base by bringing in some from the Middle East, and there are many. They are up and coming."
The trend is still in its infancy. In lists of the top 25 arrangers of bond issues globally by monetary value, no Gulf bank appears, according to Thomson Reuters data.
Even in their home markets, the Gulf banks are still not dominant. Among the 25 most active arrangers of international bonds from Gulf issuers last year, the highest-ranked Gulf institution was National Bank of Abu Dhabi (NBAD) in sixth place, according to Thomson Reuters data. Dubai's Emirates NBD came in seventh.
Only 10 of the 25 banks were from the Gulf; the list featured a wide range of banks from Europe and the United States and Asia, and was headed by HSBC.
The last several years have seen a big change, however. As recently as 2011, the top 25 arrangers did not include any Gulf banks at all. Now, even relatively small Gulf institutions such as Dubai Islamic Bank and Saudi Arabia's Riyad Bank have entered the league tables.
There is evidence that the entry of Gulf banks into the bond arranging business within their region has increased competition and squeezed fees - making it more attractive for the Gulf institutions to seek arranging activity outside their region.
According to estimates by Thomson Reuters and Freeman Consulting, fees for international dollar bonds arranged in the Gulf this year have totalled about 0.22 per cent of the size of the deals, down from roughly 0.58 per cent in 2010.
Rapid, oil-fuelled growth in the Gulf's banking industry over the last few years has helped local banks bulk up to challenge foreign competitors; banking assets in the six-nation Gulf Cooperation Council ballooned to $1.47 trillion in 2012 from $1.09 trillion in 2008, according to a study by QNB.
