Sunday 30, July 2017 by Nabilah Annuar

A subdued growth

The volume of deals concluded in the first half of 2017 dropped compared to last year nevertheless debt capital markets continue to post steady progress.

An investment banking analysis of the Middle East market in the first half of 2017, conducted by Thomson Reuters have found that investment banking fees have totalled at approximately $462.1 million. Equity and equity-related issuance in the period reached $1 billion, recording a 72 per cent decline year-on-year. The value of announced mergers and acquisitions (M&As) transactions with Middle Eastern involvement reached $20.1 billion, registering an eight per cent increase from the same period last year.

Investment banking fees

Middle Eastern investment banking fees was estimated to have reached $462.1 million over the course of the first six months of 2017. This is 15 per cent less than the value of fees recorded during the same period in 2016.

Underwriting fees for debt capital markets totalled at $136.9 million, up 88 per cent year-on-year and the highest first half total in the region since our records began in 2000. Equity capital markets fees increased 36 per cent to $39.7 million. Fees generated from completed M&A transactions accounted at $98 million, a 20 per cent decrease from last year and the lowest first six month total since 2012. Syndicated lending fees declined 41 per cent year-on-year to $187.6 million, a three year low.

Debt capital markets fees accounted for 30 per cent of the overall Middle Eastern investment banking fee pool, the highest first half share since 2001. Syndicated lending fees accounted for 41 per cent, while completed M&A advisory fees and equity capital markets underwriting fees accounted for 21 per cent and nine per cent, respectively.

HSBC earned the most investment banking fees in the Middle East in the first six months of 2017, a total of $29.2 million for a 6.3 per cent share of the total fee pool. UBS topped the completed M&A fee rankings with 20 per cent of advisory fees, while JP Morgan was first for DCM underwriting. ECM underwriting was led by EFG Hermes with $12.4 million in ECM fees, or a 31 per cent share. Industrial and Commercial Bank of China took the top spot in the Middle Eastern syndicated loans fee ranking.

M&As

The value of announced M&A transactions with Middle Eastern involvement reached $20.1 billion in the first half of 2017, eight per cent more than the value recorded over the corresponding period last year. US chemical maker Tronox’s $2.2 billion acquisition of a Saudi Arabian titanium dioxide business is the largest deal to have been announced thus far, boosting inbound M&A to $6.6 billion, the highest first half total in 11 years.

Domestic and inter-Middle Eastern M&A declined 46 per cent year-on-year to $2.8 billion, while outbound M&A activity dropped 13 per cent to $8.3 billion. Energy and power M&A deals involved by Middle Eastern entities accounted at 41 per cent of by value, while the financial sector dominated by the number of deals made.

Six of the largest ten deals announced in the region thus far were energy deals, the largest being Saudi Aramco’s Saudi Refining unit’s $2.2 billion payment to Royal Dutch Shell in the breakup of their oil refining joint venture Motiva Enterprises.

In terms of value, HSBC topped the chart for financial advisors in M&As having announced deals worth $5.09 billion, this is followed by Morgan Stanley at $3.44 billion and Citi at $2.94 billion.

Equity capital markets

Middle Eastern equity and equity-related issuances totalled at $1 billion in the first six months of 2017, a 72 per cent decline year-on-year and the lowest annual start for issuances in the region since 2004. There were five initial public offerings which raised $603.3 million and accounted for 60 per cent of the region’s equity capital markets (ECM) activity in the first half.

Dubai-based oil and gas production services firm ADES International Holding raised $243.5 million on the London Stock Exchange in May, the region’s largest IPO for the year so far. Follow-on offerings accounted for the remaining 40 per cent of activity.

National Bank of Kuwait was the top bookrunner for ECM deals in the region, with a 24 per cent market share in deals valued at $254.6 million.

Debt capital markets

Boosted by Saudi Arabia’s $9 billion international Islamic bond in April and Kuwait’s $8 billion debut international bond sale in March, Middle Eastern debt issuance reached $57.4 billion in the first half of 2017, 53 per cent more than the proceeds raised during the same period last year and by far the best annual start in the region since records began in 1980.

Saudi Arabia was the most active nation in the Middle East accounting for 21 per cent of activity by value, followed by Kuwait with an 18 per cent market share.

International Islamic debt issuance increased 50 per cent year-on-year to reach $31.4 billion for the year thus far.

JP Morgan is the top bookrunner for debt capital market (DCM) transactions in the region with a market share of 13.4 per cent ($7.67 billion) , while HSBC holdings was the top bookrunner for Sukuk deals, raking in $3.86 billion in deal value, securing a 12.3 per cent market share in the Islamic DCM space.

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