JP Morgan has witnessed an enormous surge that has grown its business in the oil-rich economies in the Middle Eastern tertiary based on Surge in Debt Issuances, M&A deals, and as well as stellar growth in the brokerage business.
Undeterred by a slowdown in Middle East economies, JP Morgan, the biggest US lender by assets, has witnessed long-term growth for its business in the region, with the sovereigns and corporates that continue to issue debt, attract investment and drive mergers and acquisitions deals.
The lender that has the largest share of the world investment banking market doesn’t attempt to alter its business strategy in the hydrocarbon-rich economies facing headwinds on the rear of oil value volatility and softening of world growth, Sjoerd Leenart, global head of corporate banking & regional head, Central & Eastern Europe, Middle East tertiary and Africa at JP Morgan, stated.
“If we tend to react to a five-year economic cycle, then we will ne’er build a business. We tend to verify decades essentially. For the subsequent few decades, this region goes to be improbably vital,” Mr. Leenart told The National in an interview in United Arab Emirate’s capital.
“There also are loads of various elements to our business and that they don’t all behave identical means, and they all don’t seem to be gross domestic product [gross domestic product]-related.”
This year to date, it is the best JP Morgan has had during a decade, each in terms of its investment banking revenues and improvement in its market position within the region, and therefore the lender is “quite hopeful that subsequent year is another one,” Mr. Leenart stated.
“We are during a position, that we have a tendency to ne’er had [in the region],” he noted.
Investment banks face declining revenues because the world economy wobbles within the wake of thickening trade wars. The quantity of fees earned by investment banks has fallen by concerning 9 percent year-on-year within the previous twelve months to August 22 to $62.9 billion (Dh231.1bn), in line with Deals Intelligence.
Moody’s Investors Service in August modified its outlook for world investment banks to stable from positive, citing prospects of lower consumer activity.
However, JP Morgan that accounts for a 6.6 percent share of all investment banking fees earned till August has endowed heavily in scaling up its position within the geographical area, wherever oil-rich nations try and diversify their economies, gap up to new avenues of business for world banks like JP Morgan.
The loaner has engineered a team of over two hundred personnel within the region, particularly during its presence in the Kingdom of Saudi Arabia – the Arab world’s biggest economy – because it follows the Vision 2030 agenda.
Crown prince Mohammed Bin Salman’s overarching economic overhaul vision includes radical changes within the scope of business for the kingdom’s sovereign wealth fund, Public Investment Fund, half privatization of state-owned entities, as well as Saudi Aramco and liberalization of the country’s capital market to draw in foreign direct investment.
Saudi Arabia’s Tadawul securities market that was a reasonably closed exchange till a couple of years ago, has enforced structural and restrictive reforms and with success, became a part of the FTSE and MSCI indexes, attracting $22bn of inflows. JP Morgan was the second-biggest dealer of Saudi equities in August, in line with Tadawul’s information.
“In the Kingdom of Saudi Arabia, we’ve got undoubtedly scaled up, as a result of it, not sole traders and middle workplace and back-office
, its sales also,” he said. “We have additionally engineered a native custody business that is growing in no time attributable to of these FDI inflows.”
There is still space to grow as Saudi Arabia’s daily mercantilism volume is round about $900 million, whereas, for many different markets, it’s within the $50m range. Concerning eighty to ninety percent of the $25bn that entered regional markets this year is endowed by passive investors, chasing the benchmark indexes.
“Active investors don’t seem to be speeding in. They’re viewing in the markets closely, however not coming back substantively,” Mr. Leenart notes.
Apart from the brokerage businesses, debt issuances – each by corporates and sovereigns within the region – besides, equity capital markets deals and mergers and acquisition mandates, shave helped shore up JP Morgan’s business within the geographical area.
Sovereigns, significantly the GCC states, have approached the international debt capital markets to plug their budget deficits and widen their funding base within the wake of three-year oil value shock. Abu Dhabi that accounts for concerning half-dozen percent of the world’s evidenced oil reserves, last month raised $10bn.
Bahrain, last month, additionally raised $2bn through a combination of bonds and Sukuk deals. Kingdom of Saudi Arabia is claimed to be considering plans to faucet the debt market later this year, in line with media reports.
Corporates have additionally enjoyed the low charge per unit regime and diversified their fund sources by sound the loan and bond markets.
Orders for Saudi Aramco’s debut international bonds flat-top $100bn, the best vote of market confidence for the oil giant; JP Morgan was among the banks on the deal. Adnoc is another state-owned company that is considering bond plans, its chief money handler aforementioned earlier this month.
“I suppose funding can continue [in the region] as we tend to in all probability will have concerning $80bn of debt [issuance] volumes this year,” Mr. Leenart also stated. “M&A, each arriving and outgoing, can still keep them busy. Each having equally huge flows.”
The UAE, Saudi, and Egypt are the three biggest markets for JP Morgan, he said.
“UAE could be a market wherever we’ve got sturdy corporations, and there’s a giant specializes in heralding FDI $2bn here, $5bn there. They need it to be done staggeringly well on its front,” he stated.
The value of mergers and acquisitions within the geographical area and the geographic area has reached $120.6 within the 1st nine months of the year, up by a 160 percent on identical amount last year, in line with information by Refinitiv.
The most significant deals to date this year are the $69bn acquisition of Sabic by Saudi Aramco, Kuwait Finance House’s $7.6bn purchase of Ahli United Bank, and Adnoc’s $4bn sale of pipeline assets to United States investment corporations KKR and BlackRock.
“If you verify the equity deals, we’ve got been concerned in most of them [in the region]. The debt, we’ve got a large share, and in M&A, we have a tendency to be the number one bank within the region,” he said, adding that the business next year, are in step with this year. “So in total, we tend to see the identical style of deal flow in 2020, that we’ve got seen in 2019, blackball any major political science or the other shock,” Mr. Leenart stated.