CGI Gulf Insights of the Week (84)

ByCGI Gulf Insights of the Week
Monday, 25 February 2019
Published inFebruary 2019

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CRIF GULF WEEKLY INSIGHTS

Country Risk Update - Kuwait

Risk Indicator - DB3d
Risk Level - Slight

Ratings Trend - Stable

Kuwait is cutting its oil output in 2019 as part of a new OPEC-led deal to support flagging prices. Business opportunities should increase as the government targets a more diverse economy with its national development plan. A pending resolution of the Divided Zone dispute with Saudi Arabia will boost oil production capacity.

Market Overview

MENA’s Sovereign Commercial Borrowing To Surge by 25% In 2019
MENA’s sovereign long-term commercial borrowing is expected to increase by 25% or $27 billion from domestic and international commercial sources to reach about $136 billion in 2019, after falling 38% in 2018 to $109 billion, according to S&P Global Ratings’ new report. Saudi Arabia—MENA’s largest economy—is expected to be the largest borrower in 2019 among the 13 rated MENA sovereigns, with $29 billion, which is 22% of gross commercial long-term borrowing in the region as a whole. The kingdom is followed by Egypt with $28 billion 20% of the total, then Lebanon with 14% of the total, while Iraq will continue to have the largest share of bi- and multilateral debt in 2018 with 40% of the total. The rating agency expects Kuwait, Egypt, and Iraq to significantly increase their gross commercial long-term borrowing in 2019 compared with 2018. Nearly 44% of MENA sovereigns' $136 billion of gross borrowing this year will go towards refinancing maturing long-term debt, resulting in an estimated net borrowing requirement of $76 billion. Adding amounts owed to bi- and multilateral institutions, total debt will reach about $892 billion, a year-on-year increase of $85 billion, or 11%. On the other side, the report stated that outstanding short-term commercial debt (original tenor of less than one year) will rise to $169 billion by the end of this year.

ADNOC Inks $4 Billion Pipeline Agreement With BlackRock And KKR
The Abu Dhabi National Oil Company (ADNOC) said that it has entered into a landmark $4 billion midstream pipeline infrastructure partnership with KKR and BlackRock. As per the agreement, a newly formed entity called ADNOC Oil Pipelines will lease ADNOC’s interest in 18 pipelines, transporting stabilized crude oil and condensate across ADNOC’s offshore and onshore upstream concessions, for a 23-year period. The entity will, in turn, receive a tariff payable by ADNOC, for its share of volume of crude and condensate that flows through the pipelines, backed by minimum volume commitments. The collection of 18 pipelines that are being leased by ADNOC Oil Pipelines has a total length of over 750km, and a total aggregate capacity of approximately 13,000 Mbblpd (gross). According to ADNOC, funds managed by BlackRock and KKR will form a consortium to collectively hold a 40% interest in the entity, while ADNOC will hold the remaining 60% majority stake. Sovereignty over the pipelines and management of pipeline operations remain with ADNOC. "This transaction will result in upfront proceeds of approximately $4 billion to ADNOC and is expected to close in Q3 2019, subject to customary closing conditions and all regulatory approval.” The transaction follows several other recent value creation initiatives including ADNOC’s debut capital markets transaction, the issuance of the Abu Dhabi Crude Oil Pipeline (ADCOP) bond and the IPO of ADNOC Distribution.

UAE's Sharjah Islamic Bank approves 8% dividend as profits rise to Dh510 million
Sharjah Islamic Bank (SIB) on 24 February 2019, approved a distribution of eight percent cash dividends to its shareholders at its annual general meeting (AGM). The AGM was chaired by, Abdul Rahman Al Owais, chairman of the Board of Directors, and attended by the board members and the executive management. The bank had reported net profits of Dh510.4 million in 2018, as compared to Dh477.7 million in 2017, “Despite the competition in the UAE banking sector, Sharjah Islamic Bank’s revenues and net profits have continued to grow remarkably in 2018. This is in line with the strategic objectives set by the board of directors, which has been a driving force of the economic development of the country,” said Al Owais. In addition to the distribution of the cash dividend, the meeting also discussed the balance sheet, which showcased strong performance and improved financial position of the bank, with total assets increasing 17 percent to Dh44.7 billion by the end of 2018 compared to Dh38.3 billion in 2017. Customer deposits increased by 18.5 percent or Dh4.1 billion to a total of Dh26.4 billion compared with Dh22.3 billion at the end of 2017.

UAE waives Dh361 million loans of over 3,000 Emiratis
The Debt Settlement Fund has announced that Dh361 million worth of loans of 3,310 Emiratis has been waived off in cooperation with 13 banks. Jaber Mohammad Ganem Al Suwaidi, general-director of the Crown Prince Court of Abu Dhabi and chairman of the Supreme Committee of the Debt Settlement Fund, said that the gesture is part of the UAE leadership’s keenness to ensure a decent life for all Emiratis and the highest possible level of social stability. The national banks that waived the debts included Abu Dhabi Islamic Bank, Abu Dhabi Commercial Bank, Emirates NBD, First Abu Dhabi Bank, Dubai Islamic Bank, RAKBANK, Al Hilal Bank, Union National Bank, Noor Bank, Emirates Islamic, Commercial Bank of Dubai, Sharjah Islamic Bank, and Arab Bank for Investment & Foreign Trade (Al Masraf). Al Suwaidi noted that the initiative is especially important as it coincides with the ‘Year of Tolerance’ announced by President His Highness Shaikh Khalifa Bin Zayed Al Nahyan, pointing out that it aims to make tolerance a sustainable institutional work expressed through practical initiatives. He also expressed his thanks and appreciation to all banks that contributed to this initiative, praising the exemption provided to the defaulters and their active participation in achieving the objectives of the fund.

France fines Swiss bank UBS record €3.7b in tax fraud case
A Paris court on 20 February 2019, fined Swiss banking giant UBS €3.7 billion ($4.2 billion; Dh15.37 billion) for encouraging customers to commit tax fraud, a record in France where public opinion has grown vocal for crackdowns on tax dodging. Lawyers for the bank, which was convicted of illegally soliciting rich clients abroad and helping them to hide billions from French tax authorities, said they would appeal the landmark ruling. Court president Christine Mee said the bank was guilty of “exceptionally serious” misdeeds “whose origins are to be found in a structured, systemic and age-old organization”. UBS, the world’s largest private bank, had tried to negotiate a settlement to avoid the potentially embarrassing court showdown but failed to agree on a fine with prosecutors. As well as the landmark fine for UBS, the bank’s French subsidiary was fined €15 million for complicity. And the court also awarded the French state, itself a plaintiff in the case, €800 million in damages, half the €1.6 billion sought by prosecutors. The decision came as authorities across Europe have cracked down on tax evasion and dubious banking practices in the wake of the 2008 global financial crisis.

Commodity Tracker

Business Events this Week In UAE

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