CGI Gulf Insights of the Week (138)

ByCGI Gulf Insights of the Week
Monday, 17 February 2020
Published inFebruary 2020

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Oman

Risk Indicator - DB4d
Risk Level - Moderate
Ratings Trend - Stable

Oman saw strong demand for its USD3bn bond in late July, this came despite downgrades but amidst brief indications of an easing deficit. The ports of Sohar and Salalah are emerging as regionally-competitive infrastructure facilities, soon to be joined by Al Duqm. The government is targeting high-end tourism as an area for growth.

Market Overview

Irregularities found Habib Bank's UAE operations

A Middle East operation of Pakistan’s largest bank displayed “significant irregularities” in dealings with politically exposed clients and screening some transactions, according to an inspection by the South Asian nation’s central bank that took place more than a year after the lender was shut out of the US financial system. The findings are contained in a State Bank of Pakistan report, finalized in the first half of 2019, on Habib Bank Ltd.’s operations in the United Arab Emirates. The inspection was conducted after the Financial Action Task Force, a global watchdog for illicit financial activities, put Pakistan on its monitoring list. FATF is due to review whether to downgrade Pakistan a step further, to its blacklist, at a meeting in Paris that started on Sunday. That would have serious consequences for the nation’s economy and its bailout program with the International Monetary Fund. The critical nature of the findings, which haven’t previously been reported, offers further evidence of the sorts of weak controls FATF has been looking at more broadly in its assessment of Pakistan, though the central bank’s final inspection report also notes some remedial measures taken by the bank. After Pakistan was put on the FATF monitoring list in June 2018, it pledged to improve the observance of global anti-money laundering and counter-terrorism financing controls.

DP World to delist from Nasdaq Dubai, return to private ownership

Dubai's DP World will de-list from Nasdaq Dubai and return to private ownership, in a move the company says will allow it to focus on its mid-and-long term strategy of changing from a ports operator to an end-to-end logistics provider and freeing it from the short-term return demands of the public market. On Monday, it was announced that DP World parent company Port and Free Zone World has offered to acquire the 19.55 percent of its shares listed on Nasdaq Dubai. “The DP World Board has concluded that the disadvantages of maintaining a public listing outweigh the benefits,” said Yuvraj Narayan, the group chief financial, strategy and business officer of DP World. “Delisting from Nasdaq Dubai is in the best interest of the company, enabling it to execute its medium to long-term strategy.” In a statement, DP World said that Port and Free Zone World’s board of director and the independent directors of DP World agreed to a cash offer to the shares, which will be acquired at $16.75, a 29 percent premium on the market closing price of $13 on Sunday. “DP World is focused on the transformation of the group and takes a long-term view of investment returns and value creation,” Narayan added.

Saudi Arabia, Russia discuss $10bn joint investment programmes
Saudi Arabia and Russia have held talks over potential joint investment programmes worth more than $10 billion. The Russian Direct Investment Fund (RDIF), the country's sovereign wealth fund, and representatives of major Russian companies led the first business mission of the Russia-Saudi Economic Council to the kingdom this week. The workshops as part of the mission were dedicated to strengthening bilateral investment cooperation and discussing joint projects in several areas including oil and gas, petrochemicals, construction, and energy. Kirill Dmitriev, CEO, RDIF, said: “Projects with a potential joint investment of more than $10bn in total were discussed during the workshops. Russia and Saudi Arabia are implementing large-scale national development programs that are of considerable investment interest to the business communities of our countries. “We intend to continue the discussion during a reciprocal visit of representatives of Saudi businesses to Moscow, which is expected in the spring. We will discuss projects in high technology, medicine, construction, and agriculture.”

First Abu Dhabi turns to sterling in return to the bond market

First Abu Dhabi Bank sold the Middle East’s biggest sterling-denominated bond in almost a decade as post-Brexit expectations of a cut in interest rates squeeze borrowing costs in the British currency. The largest lender in the United Arab Emirates offered a three-year 450 million-pound ($583 million) note at a yield premium of 98 basis points over UK gilts, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The deal attracted around 1.25 billion pounds of orders by midday in London, the person said. Since the beginning of the year, borrowers have sold a record 37 billion pounds of new debt, lured by falling funding costs. Speculation that the Bank of England will support the economy through post-Brexit uncertainty has driven yields on high-grade corporate debt in the currency 27 basis points lower during 2020 to 1.85%, double the decline in the euro market. The Abu Dhabi bank’s new sterling bond will be the biggest syndicated deal in the currency out of the Middle East since a 550 million pound note sold by International Petroleum Investment Co. in 2011. Barclays Plc, First Abu Dhabi Bank PJSC, HSBC Holdings Plc, and Nomura Holdings Inc arranged the bond sale.

Abu Dhabi bank said to seek $136m savings by cutting jobs

Abu Dhabi Islamic Bank is seeking to save about AED500 million ($136 million) by cutting jobs and closing branches as sluggish economic growth weighs on the finance industry. The state-controlled lender plans to shut some local and international branches, according to people with knowledge of the matter who asked not to be identified because the matter is private. The bank has operations in Egypt, Iraq, Saudi Arabia, and the UK. A spokesman for the bank declined to comment. The cutbacks come as ADIB announced a growth of 4 percent in net profit for 2019 to AED2.6 billion while group net revenues increased by 2.5 percent to AED5.9 billion. ADIB joins competitors such as First Abu Dhabi Bank and Emirates NBD in cutting jobs. The UAE economy is coming under pressure from regional geopolitical tensions and weak domestic demand. In Dubai, business growth stalled, while jobs disappeared at the fastest pace in at least a decade in the latest sign of strain on the Middle East’s commercial hub. Consolidation between some of the country’s biggest lenders has also led to thousands of job losses. Abu Dhabi, home to 6 percent of global oil reserves, has stepped up efforts to create leaner and more competitive financial institutions.

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