Best OVERALL BANK
National Bank of Kuwait
Established as the first commercial bank in the Gulf region in 1952, National Bank of Kuwait (NBK) is still embracing new opportunities in the Middle East, and its aggression is reaping rewards. Kuwait's number one bank boasted a 26% return on equity and profits of $221 million for the first half of 2004, an improvement of 11% on a year-on-year comparison.
NBK enjoys strong market share in most activities across the Kuwaiti financial sector. Most impressive is its virtual monopoly in providing banking services to foreign companies in Kuwait. In addition it has a 40% share in Kuwaiti trade finance and letters of credit. In investment banking, NBK advised Kuwait's Mobile Telecommunications Company in its acquisition of Jordan Mobile Telephone Services Company, a $424 million deal ? the biggest transaction of its type in the region. The breadth and quality of NBK's operations make it the best overall bank in the region.
NBK has been in an adventurous mood of late. In April it opened its first Jordanian branch, and in May it reached a deal with Grindlays Qatar Bank whereby NBK will oversee the management of an entity re-branded as International Bank of Qatar. These moves will consolidate the regional presence of NBK, which is already one of the few foreign banks licensed to operate in Saudi Arabia. Beyond the Gulf region, the bank has offices throughout the globe and is scheduled to open a new one in China later this year. The international business accounts for 17% of the bank's gross operating income, as of 2002.
Perhaps the most intriguing opportunity for NBK lies on its doorstep. The bank, along with HSBC and Standard Chartered, is one of the three foreign banks that the Iraqi Central Bank has selected to help guide the Iraqi financial system through its post-war recovery. NBK is also a member of the consortium that is managing the Trade Bank of Iraq.
As it assesses future opportunities, NBK maintains its commitment to prudence and quality, as well as leadership in the Gulf region. With total assets of over $18 billion at the end of 2003 and a healthy presence outside the limited Kuwaiti market, NBK seems well positioned to remain a key regional player.
Chief executive: Ibrahim Dabdoub
Total assets: $18,456 million
Return on equity: 25.67%
Credit ratings: A2 (Moody's); A (S&P); A+ (Fitch)
BEST INVESTMENT BANK
Standard Bank
Standard Bank has a formidable presence in sub-Saharan Africa, where the group's operating companies are big players in 17 countries, including South Africa. Arguably, the group's biggest strength lies in investment banking. Last year, for example, investment banking accounted for 34% of the group's operating profits ? testimony to the division's success.
In recent years, Standard Bank has managed to consolidate its dominance in South Africa's capital markets and deliver some of its expertise to neighbouring countries in the sub-Saharan region. According to Ben Kruger, the managing director of the corporate and investment banking division, the bank takes seriously the task of developing the South African market so that it will soon be ?in line with Australia and Canada, and eventually the US and UK?. The bank, though, is also dedicated to South Africa's less-developed neighbours.
Some of its most notable achievements have occurred in countries to which other banks might have turned a blind eye. From recapitalizing a copper mine in Zambia, which depends on copper exports for its foreign exchange earnings, to providing financing to MTN, Nigeria's largest mobile phone operator, Standard has been deeply involved in the region's progress. Kruger is particularly proud of Standard's role in nurturing Botswana's capital markets. Foreign investors are starting to take notice of Botswana, where foreign exchange turnover is increasing rapidly. Kruger admits that making headway in sub-Saharan Africa ?is not easy, but we see interesting potential?.
Standard Bank's strength and expertise make it a potential partner for the big global banks, and Standard Bank's leaders are open to the idea of a foreign tie-up. Standard Bank could add value not only through its extensive African network but also through its competence in natural-resource markets.
Recently the bank has become active in the Black Economic Empowerment (BEE) initiative, which aims to alleviate racially-based socio-economic problems in South Africa. Standard Bank recognizes the importance of ensuring that BEE does not simply spawn a group of black oligarchs but, rather, that it enriches the entire black population. The bank recently announced that it is selling a 10% stake to a group of black investors under its BEE programme. In addition, Standard Bank will support community organizations in black neighbourhoods.
Standard Bank Group's total assets were $81.4 billion at the end of 2003, while its return on equity was a solid 21.9% last year. Its non-performing loan ratio is relatively low at 2.1%.
Chief executive: Jacko Maree
Total assets: $81,384 million
Return on equity: 21.9%
Credit ratings: Baa2 (Moody's); BBB (S&P); BBB (Fitch)
Best PROJECT FINANCE BANK
Arab Banking Corporation
Arab Banking Corporation (ABC) is the largest bank in Bahrain, which itself is emerging as a major financial centre. Already the leading arranger and underwriter of loans in the Middle East and North Africa, the bank recently underwent a strategic overhaul that was intended to help it focus on its operations in the Arab world. The divestment of some of its far-flung international subsidiaries has generated $455 million in profit, which will strengthen the bank's position as a leader in project finance in the region.
ABC has participated in several of the region's landmark deals of the past two years. The bank, for example, was a lead arranger for a $700 million loan to the Oryx GTL project, an innovative gas-to-liquids plant run by Qatar Petroleum Corporation and Sasol, a South African energy firm.
Last year, ABC's Jordanian subsidiary helped arrange a $169.5 million commercial loan to finance the construction of the Kherbet al-Samra Wastewater Treatment Plant. This project represents the first successful public-private partnership initiative in Jordan, and it will produce a facility that will treat 80% of Jordan's wastewater.
This May, ABC helped arrange a $240 million loan for the Oman Polypropylene Project ? demonstrating once again the bank's project finance capabilities throughout the Middle East.
One of the bank's biggest strengths is its leadership in financing the airline industry. Recently, it used an Islamic equity fund to facilitate British Airways' acquisition of three Airbus A320s. Malaysian Airlines also turned to the bank to help finance a Boeing 777-200ER last year.
The bank's Bahrain business unit, which handles ABC's wholesale and commercial banking in the Arab world, recorded a net profit of $17.3 million in 2003, after posting a loss in 2002. This performance is particularly impressive considering that 2003 saw conflict and economic uncertainty in the Middle East.
Nearly 80% of the Arab Banking Corporation's equity belongs to the Abu Dhabi Investment Authority, the Kuwait Investment Authority and the Central Bank of Libya. The remaining shares belong to
private investors.Arab Banking Corporation (ABC) is the largest bank in Bahrain, which itself is emerging as a major financial centre. Already the leading arranger and underwriter of loans in the Middle East and North Africa, the bank recently underwent a strategic overhaul that was intended to help it focus on its operations in the Arab world. The divestment of some of its far-flung international subsidiaries has generated $455 million in profit, which will strengthen the bank's position as a leader in project finance in the region.
ABC has participated in several of the region's landmark deals of the past two years. The bank, for example, was a lead arranger for a $700 million loan to the Oryx GTL project, an innovative gas-to-liquids plant run by Qatar Petroleum Corporation and Sasol, a South African energy firm.
Last year, ABC's Jordanian subsidiary helped arrange a $169.5 million commercial loan to finance the construction of the Kherbet al-Samra Wastewater Treatment Plant. This project represents the first successful public-private partnership initiative in Jordan, and it will produce a facility that will treat 80% of Jordan's wastewater.
This May, ABC helped arrange a $240 million loan for the Oman Polypropylene Project ? demonstrating once again the bank's project finance capabilities throughout the Middle East.
One of the bank's biggest strengths is its leadership in financing the airline industry. Recently, it used an Islamic equity fund to facilitate British Airways' acquisition of three Airbus A320s. Malaysian Airlines also turned to the bank to help finance a Boeing 777-200ER last year.
The bank's Bahrain business unit, which handles ABC's wholesale and commercial banking in the Arab world, recorded a net profit of $17.3 million in 2003, after posting a loss in 2002. This performance is particularly impressive considering that 2003 saw conflict and economic uncertainty in the Middle East.
Nearly 80% of the Arab Banking Corporation's equity belongs to the Abu Dhabi Investment Authority, the Kuwait Investment Authority and the Central Bank of Libya. The remaining shares belong to
private investors.
Chief executive: Ghazi Abdul Jawad
Total assets: $30,068 million
Return on equity: 7.1%
Credit ratings: Baa3 (Moody's); BBB- (S&P); BBB- (Fitch)
Best TRADE FINANCE BANK
Riyad Bank
Saudi Arabia's third biggest bank by assets, Riyad Bank has a 13.5% market share in the Kingdom.
The bank is particularly strong in retail banking, which has been at the centre of chief executive Talal Al-Qudaibi's growth strategy. Helping to accelerate this growth has been the bank's investment in information technology. In addition, branch refurbishments and product line expansions have increased the bank's appeal to its customers.
In 2003 the bank's assets increased by 6.4% to $19.1 billion, and its net income grew by 12%. Impressively, in the first half of 2004, it has grown its loan portfolio by 20%, while in the past three years, it has cut its percentage of non-performing loans in half, to a mere 2.2% of gross loans.
The bank is one of the few that offer mortgages in Saudi Arabia, despite the absence of a proper legal framework. It also has a strong Islamic banking business; 40% of its customer deposits bear no interest, so its cost of funds is low.
The bulk of Riyad Bank's asset base is invested in securities, and in particular Saudi-government bonds. Among Saudi banks, it has the largest portfolio of trading securities, especially mutual funds, and so its earnings stream is susceptible to both interest rate movements and equity markets fluctuations.
Moreover, by virtue of its dependence on the overall Saudi economic environment, the bank remains vulnerable to oil price fluctuations. A closer relationship with a powerful foreign bank might help to offset this vulnerability.
As it plans for the future, the bank aims to cut costs by continuing to emphasize investment in information technology. It also has strong links in the corporate community that it can continue to develop.
Another tactic that the bank is using to achieve growth is extensive staff and management training to increase productivity and expertise. Moody's cites this training strategy as key evidence of the bank's
potential. Undoubtedly, increased expertise among bank management and staff makes Riyad Bank an attractive partner for foreign institutions.
Founded in 1957, Riyad Bank operated under the trusteeship of the Saudi Arabian Monetary Agency until 1995. Now, Saudi-government institutions own a slight majority of Riyad Bank shares; the rest belong to Saudi nationals. Only two other banks in the Kingdom are fully Saudi-owned.
Its international offices in London, Houston and Singapore support the bank's local network of nearly 200 branches.
Chief executive: Talal Al-Qudaibi
Total assets: $19,094 million
Return on equity: 19.03%
Credit ratings: Baa2 (Moody's); A- (S&P); A- (Fitch)
MOST IMPROVED BANK
Arab National Bank
With a big 53% increase in net profit during the first half of 2004, Arab National Bank (ANB) has established itself as one of the leading financial institutions in the Middle East. ANB has undergone a transformation since 1998 that has vastly improved its efficiency and honed its focus on customers.
As Saudi Arabia's seventh-largest bank, ANB boasts 9% of the Kingdom's banking market and had $13.1 billion in assets at the end of 2003.
Perhaps ANB's greatest asset is its technological savvy. The bank's internet-banking business, known as Alarabi-eBank, was launched in 2000 as the first operation of its kind in the Arab world and remains a regional leader, offering internet services in both
Arabic and English.
ANB has also introduced a series of customer-friendly products. For example, the Al-Mubarak card, first offered in 2002, is a Sharia-compliant credit card, and Al Arabi Mobile is a messaging service that allows customers to interact with ANB via text messages on their mobile phones. These conscientious efforts to expand the bank's core retail banking business have helped net income to grow at an annual rate of over 20% for the past several years, including 31% growth in 2003, and have prompted Moody's and
others to raise ANB's ratings.
Nevertheless, ANB does face certain challenges. Its operating costs are high, and its fortunes depend largely on oil prices. Indeed, its resounding success in recent months is partly a function of the current environment in Saudi Arabia, which is enjoying a stock market boom and which offers banks plenty of room for growth. However, as long as the Saudi economy remains healthy, the bank should manage to consolidate its position.
Another of the bank's strengths is its relationship with Jordan's Arab Bank, whose Saudi operations ANB took over in 1979. Arab Bank still owns 40% of ANB, although they no longer have a direct managerial relationship. Still, ANB has a strong regional partner that could provide support if ANB ran into trouble.
ANB has over 100 branches in the Kingdom and London. It also has nearly 2,000 employees, of whom three out of four are Saudi nationals.
Chief executive: Nemeh Sabbagh
Total assets: $13,138 million
Return on equity: 19.3%
Credit ratings: Baa2 (Moody's); BBB (S&P); BBB+ (Fitch)