Asiamoney Finance in the Middle East Awards
Middle Eastern banks have faced a tough environment over the last year, being forced to deal with the impact of a sharp decline in the oil price on a client base that considers few things to be more important. But the best banks are those that can find a way to stand out from the crowd when times are tough, and the banks below did just that. Asiamoney is pleased to announce its picks for the best banks in the Middle East for 2015.
Best bank in the Middle East
Best bank in Qatar
Qatar National Bank
Qatar National Bank won our top prize in both its domestic market and the wider region for this year, based on strong asset growth, eye-catching profits and an impressive demonstration of the dividends Middle Eastern banks can reap when they look outside their domestic markets for revenues.
Qatar National Bank is, perhaps unsurprisingly, the stand-out bank in its own market. Based on the rather limited public data on the Middle Eastern investment banking market, between January 2011 and August 2015, the bank generated around $25m of investment banking revenue from Qatar, according to Dealogic figures. That is the same as HSBC, more than any other foreign bank, and much more than any of its local market rivals.
The bank's steady grip on its domestic market helped it push its asset base to QR510.525bn ($140bn) at the end of the first half, a growth of 9.65% from the same period in 2014. But another major component of that asset growth — and a major reason why the bank turns heads among investors — is that QNB has not rested on its laurels in a domestic market it dominates. Instead, it is working hard to make the most of opportunities in overseas markets.
The bank, which was established in 1964 and is half-owned by the Qatar Investment Authority, has expanded impressively throughout the Middle East. QNB got permission to open its first branch in Saudi Arabia in September. It has owned a controlling stake in QNB Alahli, the Egyptian private bank, since 2013. It has major holdings in banks in Jordan, Tunisia, Libya, Doha and Syria. But QNB has also made efforts to look beyond the Middle East to other emerging markets.
QNB bought a 23.5% stake in Africa's Ecobank through two rapid transactions last September. That followed the opening of the bank's branches in India and Indonesia, as well as a representative office in China. QNB now operates in 26 countries, including the operations of its subsidiaries and associate institutions. This move to diversify its asset base would be sensible at any time. But after the recent rout in the price of oil, it looks remarkably prescient of executives at the bank.
The QR5.6bn ($1.53bn) of profits that the bank posted in the second half, an increase of just over 10% from the same period in 2014, will have kept the company's investors happy. Fitch Ratings' decision to upgrade the institution from A- to AA- in March will have pleased them even more. But the long-term outlook for a bank that is working hard to look beyond its borders is the factor that looks likely to give those investors benefits in the years to come. It also the factor that swings the needle for QNB to become Asiamoney's pick as best bank in the Middle East for 2015.
Best bank in Bahrain
Ahli United Bank
Ahli United Bank (AUB), which was established by the tie-up of United Bank of Kuwait and Ahli Commercial Bank in 2000, clearly wants to honour its origin story. The bank is explicit about its desire to expand by acquiring or merging with rival lenders, particularly those that have at the very least 10% market share in a target Gulf country.
That plan has served the bank well so far. As well as Bahrain, it already has operations or major shareholdings in Kuwait, Egypt, Iraq, Libya and the United Kingdom. It plans to turn to Saudi Arabia, the United Arab Emirates, Turkey and Switzerland next. This aggressive approach to expanding its business makes AUB a threat to banks throughout the region, and makes it clearly stand out from its domestic competition.
This is perhaps why AUB has been able to attract landmark investors of its own. International Finance Corp, a financing arm of the World Bank, took the option to convert $100m of subordinated debt it held in the bank to equity late last year, which the bank boasted to shareholders was “a vote of confidence in AUB's strong underlying financial and operational fundamentals and positive future outlook.” The move means that IFC now owns 5.2% of the bank.
Best bank in Egypt
Commercial International Bank
Commercial International Bank (CIB) has grown from its formation in 1975 to become the number one private sector bank in Egypt by most metrics. But despite this impressive growth story, the bank has shown that it still has plenty of room to expand further.
A case in point is CIB's lending growth. While the Egyptian economy grew by only 2.2% in 2014, according to World Bank figures, the bank managed a net lending growth of 16.6% compared to the previous year. It has continued that momentum in the first half of 2015, managing to boost lending by another 11.9% since the end of last year to bring loans to E£54.5bn. CIB's deposit growth is even more eye-catching: the bank's deposit base grew by 26% last year, and has continued moving upwards this year.
These figures will be given a further boost when the bank's acquisition of Citi's Egyptian private bank portfolio goes through. CIB won regulatory approval to acquire the US bank's retail portfolio and credit card business in the country, and is now in the process of integrating it into its portfolio. CIB has already achieved enough that acquisition will not have a seismic impact, but it will certainly help the bank continue its impressive growth story in the future.
Best bank in Jordan
Arab Bank is a mammoth institution, operating over 600 branches across the world and having a presence in London, Singapore, Dubai, Paris, Sydney and other large financial markets. But the bank's home base is Jordan, and in that market it dwarfs all others.
The bank reported a net profit of $422.9m in the first half of the year, a growth of 2% compared to the same period in 2014. Arab Bank said at the same time that its deposits had grown to $34.8bn in the second half, around $400m higher than the year before. That means the lenders' deposits are about the same size as the entire gross domestic product of Jordan.
It will not surprise many that this institution will be declared the best bank in Jordan. It would perhaps not raise many eyebrows if it was simply declared the bank in Jordan. But for its aggressive expansion and keen eye for diversification, it deserves the accolades.
Best bank in Kuwait
National Bank of Kuwait
National Bank of Kuwait is the clear national champion in its domestic market, and has managed to stay at or near the top of the investment banking league tables in its domestic market for more than a decade.
The bank has made smart moves to expand its grip on the domestic market, including buying a majority stake in Boubyan Bank, a smaller rival which had managed to steer itself back from a rocky period under the leadership of a former NBK executive.
The bank also showed its savvy to a wider audience this year, when it bolstered its capital base with a $700m additional tier one deal that represented the lender's first international issue since 2002. That deal will have helped reassure investors that the bank is preparing for the future. But they could be forgiven for wanting to dwell on the past a little longer — NBK posted a 12.8% year-on-year profit growth in the second half.
Best bank in Lebanon
Bank Audi managed the biggest profit growth and loan growth out of the three biggest banks in Lebanon during the first half of the year, continuing the momentum it had built up after an eye-catching performance last year.
The lender managed to post a 14.7% rise in profits last year, despite a sluggish performance in the Lebanese economy. It carried on the strong performance in the first half, managing to push profits to $202m, an increase of 7% from the year before.
This resilience is clearly by design. Bank Audi holds $42.3bn of assets, but around 47% are from entities outside its home market. The bank is, in fact, more of a regional player than a truly Lebanese focused-bank. It has learned that it is best to diversify, especially in a region as volatile as the Middle East, and continues to play to focus its assets and energies on higher growth countries.
If there is one thing that links the banks on this list, it is that the vast majority have shown they can prosper during the bad times and the good. Bank Audi is a shining example.
Best bank in Oman
Bank Muscat is undoubtedly the big fish in Oman's banking system, having more than $27bn of assets and operating 148 branches. But like other banks on this list, it has done well to fight the complacency that can too often follow such success.
Bank Muscat has forged achievements in the investment bank and the retail bank over the last 12 years. It was financial adviser and lead manager on the OMR56.3m IPO of Phoenix Power Company in June, and acted as the sole lead on a OMR350m ($905m) term loan for energy company Orpic, the biggest deal yet closed in the local market.
The bank also signed a bancassurance agreement with AXA Gulf to start offering life insurance to its customers, the first time a bank and an insurance company had teamed up in that segment of Oman's insurance market. In a nod to the increasing importance of technology to retaining clients, Bank Muscat also opened the first electronic branch in September in the Oman Avenues Mall.
It would probably come as little surprise to many executives in Oman that Bank Muscat was able to pick up this award. They have learned not to underestimate the bank when it comes to searching for opportunities in its local market.
Best bank in Palestine
Bank of Palestine
It should come as little surprise that this award should go to a bank whose very name seems to demand it. There are 16 banks operating in Palestine, running 258 branches between them. But Bank of Palestine alone represents about a fifth of the banking sector in the country.
Bank of Palestine was founded in 1960 with just $400,000 of assets; by the second half of this year it had $2.6bn of assets, which is almost as much as Palestine's gross domestic product. But it is not just a sizeable institution: it is also a profitable one. The bank made $22.77m of net income in the second half of the year, an improvement of 19.9% from the year before.
Bank of Palestine launched its own electronic payment network, PalPay, two years ago, and it is steadily increasing in usage. There were almost 10m transactions processed over PalPay during 2014. The bank's brokerage subsidiary, Al-Wasata Securities, is another important potential growth area. The securities firm has around $400m of assets under management, and represents about 27% of the trading volume coming from Palestine.
The institution has seen its costs rise thanks to the implementation of a deposit insurance law in 2013 that the Palestinian Monetary Authority signed after working alongside the World Bank. But by reassuring some small account holders, it has also swelled deposits. The bank's deposits stood at $2.14bn at the end of the first half, some 22.8% higher than they were in 2013.
Best bank in Saudi Arabia
Banque Saudi Fransi
Banque Saudi Fransi is not the biggest bank in Saudi Arabia, having assets that are dwarfed by some of its rivals. But the smaller players are often the most nimble — and that proved to be the case in the impressive performance of the bank this year.
BSF managed to post profits of over SAR2bn ($533m) in the first half, showing a return of 18.7% that proved much higher than its local rivals were able to achieve. This was based in part, managing director Patrice Couvegnes said at the time, on the bank's transition to become more focused on client relationships. But the consequence will have helped its relationship with investors: the profits enabled the bank to boost dividends to 5%.
Sparse investment banking volumes in the Middle East — at least publicly announced ones — mean long-term comparisons are essential. From January 2011 until the end of August 2015, BSF had earned $54m from an 8.4% share of the investment banking sector, according to Dealogic data. But it had also earned $6m from the Kuwaiti market. That may appear small by global standards, but it was enough to put the bank at the top of the Kuwait investment banking league table during that period.
The bank has shown that, although that it may not be a behemoth in its local market, it is still able to step overseas when the opportunities arise. That has no doubt helped its increasing focus on relationship banking. It will also help the bank keep up its strong performance in the years to come.
Best bank in the UAE
National Bank of Abu Dhabi
National Bank of Abu Dhabi (NBAD) is a relative bond powerhouse in the region — and despite its scale, it is still managing to unlock potentially lucrative sources of new business. NBAD is, alongside its close rival Emirates NBD, one of the few Middle Eastern banks that can compete with foreign institutions when it comes to bringing the region's corporations to the offshore markets.
But although this offshore presence is impressive, especially since only a handful of Middle Eastern banks win deals listed outside the region, NBAD may have its next big stage of growth closer to home. It became the first bank to win a securities lending licence and borrowing licence in the United Arab Emirates markets, potentially opening up a wellspring of business from the bank's high net worth clients in the region.
The bank, which has an asset base of around $107bn, is also making the most of the growing interest in Islamic bonds. By the end of August, NBAD was on top of the league table for Islamic bond bookrunners in the Middle East, after closing five deals worth $725m, according to Dealogic. It was the second biggest bookrunner last year, having managed to help issuers raise $1.57bn.
NBAD did not manage to grow profits much in the first half of this year, showing investors a net profit increase of just 1.1% compared to same period last year. But it is the bank's impressive bond franchise, its ability to open up new sources of revenue and its determination to prove that big does not always mean slow that makes NBAD a worthy award winner this year.