CGI Gulf Insights of the Week (159)

ByCGI Gulf Insights of the Week
Monday, 16 September 2019
Published inSeptember 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Oman

Risk Indicator - DB3b
Risk Level - Slight
Ratings Trend - Deteriorating

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. Data to May shows the ﬁscal deﬁcit shrinking below 3% of GDP; this comes after six months of data silence.

Market Overview

Bahrain's bwallet expands to include UK transfers
Bahrain’s first digital mobile wallet, bwallet, now includes money transfers to bank accounts in the United Kingdom. The digital mobile wallet, the first of its kind to provide peer-to-peer money transfer, was launched in 2018 by Arab Financial Services (AFS) in partnership with Batelco. B Chandrasekhar, AFS CEO, said: “We are delighted with the addition of UK to our list of countries to which any mobile user can send funds to family members and friends and look forward to seeing the number of countries further grow in the coming months.” Bwallet is available throughout Bahrain, in retail businesses, cinemas, hotels and F&B, and entertainment outlets. Users can scan a QR code and enjoy quick, secure and easy cashless payments with benefits through their mobile phones. Bwallet users can enjoy no transaction fees when sending money to the UK up until September 30.

Bank savings in the UAE hit record $45.1bn
Savings account balances at UAE banks hit a record of about AED165.8 billion ($45.1 billion) during the first seven months of the year, it has been announced. The 9 percent growth of AED13.8 billion compared to the end of 2018 was revealed by the Central Bank of the UAE. Savings accounts made up 11.4 percent of the total deposits held by UAE banks which amounted to AED1.4 trillion by the end of July, state news agency WAM reported. Savings in UAE dirhams comprised over 60 percent of the total savings, according to CBUAE's statistics. The month of May saw the highest growth in savings (AED8.4 billion) with Q1 witnessing an increase of AED4 billion. UAE national banks hold the lion's share of savings while savings held by UAE-based foreign banks reached AED16.3 billion so far in 2019.

Kuwait Finance House plans $8.8bn deal for Bahraini bank
Kuwait Finance House offered to buy Bahrain’s Ahli United Bank in an all-share deal that’s valued at about $8.8 billion. The Kuwaiti lender plans to issue 1 share for every 2.325581 shares of Ahli United, according to a statement. In January, the banks’ advisers had recommended the same swap ratio. The combined entity will potentially become the Gulf’s sixth-biggest lender with $100 billion in assets, and the deal value was based on the lenders’ closing price on 12 September, 2019. Kuwait Finance House shares have gained 27 percent this year to 707 fils, while AUB shares are up 51 percent to 94.1 US cents. The swap ratio is fair and the merger “will create substantial cost synergies in Bahrain and Kuwait,” Jaap Meijer, the Dubai-based head of research at Arqaam Capital, said by email. He expects a 24.8 percent rise in KFH’s earnings and the combination to boost its return on equity by 2.7 percentage points, driven by the cost synergies, AUB’s better asset quality, higher growth prospects, and strong capital. Lower oil prices over the past five years are forcing Gulf lenders to consolidate for scale and to better compete in a crowded market. Subdued credit growth, competition for deposits, higher cost of funds, and deteriorating asset quality are driving consolidation in the regional banking sector. In Saudi Arabia, National Commercial Bank is in the process of merging with Riyad Bank to create the Gulf’s third-largest lender with $193 billion in assets.

Saudi Aramco may shun direct IPO sales to US funds on legal risk
Saudi Aramco is considering a structure for its initial public offering that would prevent it from marketing the deal directly to fund managers in the US, people with knowledge of the matter said. The state-owned oil giant wants to avoid litigation risks that could result from selling the deal to US-based institutions, according to the people, who asked not to be identified because the information is private. Aramco is consulting with its bankers on the pros and cons of different deal structures, and it hasn’t made any final decision, the people said. Many foreign IPOs rely on the “Rule 144A” structure, which allows overseas companies to market offerings to institutional investors in the US. The method being considered by Aramco is a so-called “Regulation S only” transaction, which would limit it to selling stock to foreign buyers and overseas units of US fund houses, the people said. While that means that Aramco could still market the IPO to big investors like BlackRock and Fidelity Investments via their foreign affiliates, US institutions without overseas subsidiaries would be left out. That would limit the pool of potential buyers for an offering that’s slated to be one of the biggest equity offerings in history. Saudi Crown Prince Mohammed Bin Salman, the architect of the IPO plan, has previously said he expects Aramco to be valued at over $2 trillion. Given those lofty expectations, Aramco will need all the help it can get to seal the deal. It has selected firms including Bank of America Corp, Citigroup, Credit Suisse Group, Goldman Sachs Group, JPMorgan Chase & Co and Morgan Stanley for top roles on the transaction, people with knowledge of the matter said earlier this week.

Dubai FDI on US mission to chase more foreign investment
Dubai FDI, the investment development agency of the Department of Economic Development (DED) in Dubai, is currently on an investment mission to the United States. The delegation plans to visit Houston in the state of Texas and Denver in Colorado by September 14, as a part of Dubai’s Global Mission Program. The delegates will conduct meetings with both government and private sector organizations, in addition to three seminars to discuss investment opportunities in the emirate and promote Dubai as a preferred global destination for foreign direct investment (FDI). The delegation includes Fahad Al Gergawi, CEO of Dubai FDI, Saed Alawadi CEO, Dubai Exports, Saeed Al Mheiri, UAE Consul-General in Houston and also senior executives from companies such as DMCC, Jebel Ali Free Zone Authority (JAFZA), Emirates and Jumeirah Hotels & Resorts. Al Gergawi said: “The mission to the US demonstrates Dubai strong capabilities as an ideal investment hub and gateway for American companies. The contingent from Dubai, which is renowned for its business-friendly environment, will take advantage of the opportunity to strengthen further the investment and trade relations between the UAE and the US.” The planned global investment promotion mission to the two states follows the steady growth of FDI capital inflows from the US to Dubai.

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