CGI Gulf Insights of the Week (79)

ByCGI Gulf Insights of the Week
Monday, 18 March 2019
Published inMarch 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Bahrain
Risk Indicator - DB5b
Risk Level - High

Ratings Trend - Improving

The cabinet has been reshuffled, with new finance and defence ministers put in place in the wake of elections that were won by government loyalists. Saudi Arabia's strong support for Bahrain provides a backstop to the economy. A giant oil and gas find off the west coast offers the promise of vast wealth if it proves commercially viable to extract.

Market Overview

Deutsche Bank and Commerzbank go public on merger talks
Deutsche Bank and Commerzbank confirmed on Sunday they were in talks about a merger, although both cautioned that a deal was far from a foregone conclusion. Germany’s two largest banks issued short statements following separate meetings of their management boards, a person with knowledge of the matter said, indicating a quickening of pace in the merger process. “In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options,” Deutsche said in its statement. Christian Sewing, Deutsche Bank’s chief executive, told employees in a note that Deutsche still aimed “to remain a global bank with a strong capital markets business ... with a global network”.Sewing also said that “experience has shown” that many economic and technical factors could prevent a merger. For its part, Commerzbank described the outcome as open. Formal disclosure of talks appears to boost the chances of concluding a deal floated in 2016 before the banks opted to focus on restructuring and which has since been the subject of renewed speculation. The German government has pushed for a combination given concerns about the health of Deutsche, which has struggled to generate sustainable profits since the 2008 financial crisis. The government, which holds a stake of more than 15 percent in Commerzbank following a bailout, wants a national banking champion to support its export-led economy, best known for cars and machine tools. Berlin also wants to keep Commerzbank’s specialty — the funding of medium-sized companies, the backbone of the economy — in German hands.

Saudi Arabia’s new rules set to raise Islamic tax for some banks
Saudi Arabia set out new rules for the calculation of an Islamic tax on banks that’ll result in them paying between 10 percent to 20 percent of net profit. The General Authority of Zakat & Tax set limits for the taxable asset base of between four times and eight times net profit, according to a statement on its website. That’s equivalent to a corridor of between 10 percent and 20 percent of net income, Bloomberg Intelligence analyst Edmond Christou said. Most of the kingdom’s major banks will end up paying the lower limit, he wrote in a note. Saudi Arabia was in talks with local banks to increase the tax rate to as high as 20 percent of net income, Bloomberg News reported this month, citing people with knowledge of the matter. The tax authority denied it had plans to raise the levy. The current rate is 10 percent after deducting returns on government bonds. Major banks in Saudi Arabia reached settlements worth a combined 16.7 billion riyals ($4.5 billion) with the tax authority in December, ending a dispute over accounts stretching back as far as 2002 in some cases.

Kuwait Airways to seek $350m loan to pay for planes
Kuwait City. Kuwait Airways Corp. is seeking a $350 million loan that will help the Gulf carrier pay for planes, people with knowledge of the deal said. The state-run airline is talking to banks to raise a five-year facility, said the people, asking not to be identified because the information is private. It’ll be used to make early payments for narrow-body jets, they said. Kuwait Airways has 15 Airbus SE A320neo narrow-body planes on order as well as eight A330neos, five A350s plus 10 Boeing 777s. It currently has a fleet of 17 planes, according to information on its website. A spokesman for Kuwait Airways didn’t immediately respond to a request for comment.

Swing traders remain active in banking shares on UAE bourses
Swing traders were active on Sunday buying banking shares from their support level on UAE bourses. Union National Bank closed 0.93per cent higher at Dh5.40 after its shares took support at Dh5.30 on Thursday. Abu Dhabi Commercial Bank ended 1.31 percent higher at Dh9.31. Abu Dhabi Islamic Bank closed 2.31 percent higher at Dh4.40.“Traders may look to buy Union National Bank. We expect recovery towards the recent high at Dh5.60,” Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities said in a note. On the losing side, Aldar Properties closed 1.04 percent lower at Dh1.91. First Abu Dhabi Bank ended 0.97 percent lower at Dh14.36. Etisalat closed 1.07 percent lower at Dh16.70. The Abu Dhabi Securities Exchange general index closed 0.41 percent lower at 4,977.29. The Dubai Financial Market general index closed 0.14 percent higher at 2,577.86. Dubai Islamic Bank closed 0.85 percent higher at Dh4.76. Gulf Finance House closed 1.83 percent lower at Dh0.947. Emirates NBD extended gains for another session, closing 1.46 percent higher at Dh9.7. The bank on Thursday said it plans to do an initial public offering a part of its stake in Network International. “Emirates NBD may recover towards the higher resistance of Dh10.25 in the near term,” Prakash said.

UAE's Adnoc awards 35-year exploration concession in Abu Dhabi to Japan’s Inpex Corporation
The Abu Dhabi National Oil Company (Adnoc) on Sunday signed an agreement awarding the exploration rights for Abu Dhabi Onshore Block 4 to Japan’s Inpex Corporation. A wholly-owned Inpex subsidiary, Jodco Exploration Limited will hold and manage the interest in the concession on behalf of Inpex, Adnoc said in a statement. The award has been endorsed by Abu Dhabi’s Supreme Petroleum Council (SPC) and represents the deep commercial and economic relationship, as well as long-standing energy partnership between the UAE and Japan. Inpex will hold a 100 percent stake in the exploration phase, investing up to Dh646 million ($176 million), including a participation fee, to explore for and appraise oil and gas opportunities in the block that covers an onshore area of 6,116 square kilometers from Abu Dhabi to the boundary with Dubai. Following exploration activities and appraisal of the existing discoveries, Inpex will have the opportunity to develop and produce any commercial discoveries. Adnoc has the option to hold a 60 percent stake in the production phase of the concession.T he agreement, with a term of 35 years, was signed by Dr. Sultan Ahmad Al Jaber, UAE Minister of State and Adnoc Group CEO, and Takayuki Ueda, president, and CEO of Inpex Corporation.

Commodity Tracker

Business Events this Week In UAE

Dubai International Property Show 2019

@ Dubai World Trade Centre
Date: 26 March - 28 March 2019

Business Updates

D&B Business Valuation
D&B Business Valuation Study is a neutral, third party and comprehensive assessment of the prospects of the business entity. As a part of the business assessment process, a comprehensive business valuation report is submitted that cover issues related to nuances of the business. The business valuation report helps investors, banks and financial institutions validate their own research findings and make a more informed decision. The neutral assessment and the analysis conducted on different dimensions also assist the users of the report to understand better the risks inherent and can formulate strategies to mitigate the same.

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CGI Gulf Insights of the Week

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