Euromoney Middle East Awards for Excellence, 2014

Euromoney, July 2014

BEST BANK IN THE MIDDLE EAST – Qatar National Bank

This is no longer a straightforward award to give. There are at least five homegrown houses who can make a good case to be the best in the region.

There are two models to consider: the truly regional bank, for whom the clear majority of business takes place outside the home base; and those who have grown across the region from a position of domestic dominance in a major market. In the first category come Arab Bank, headquartered in Jordan, and Ahli United Bank, in Bahrain; in the latter, Korea’s NBK, Qatar National Bank, and to an extent Saudi Arabia’s Al Rajhi and (certainly one to watch for the future as Alex Thursby’s West-East strategy gets underway) National Bank of Abu Dhabi.

There are strong reasons to consider the first two, both of whom have built a model that is regional and cross-border as a foundation, not an afterthought. More than 75% of Arab Bank’s income generation takes place outside Jordan, and almost 60% of AUB’s outside Bahrain – indeed, if offshore Bahrain business (loans booked in Bahrain to non-Bahrain countries) are counted separately, than over 86% of AUB consolidated profit is from outside the home base. Both have had terrific years, too. Arab Bank’s US$501.9 million net profit represented year-on-growth of a phenomenal 43%, while AUB logged a record US$579.4 million, although US$212.9 million of that was from the sale of a stake in a bank in Qatar.

But this year, the regional strength of Qatar National Bank can no longer be ignored. It is by a distance the biggest house in the region on every metric: US$2.6 billion net profit in 2013, up 14% year on year; US$125.9 billion in assets at the end of the first quarter of 2014, US$87.1 billion of loans and US$94.9 billion in deposits, each of them up over 20% year on year, and achieved with an NPL of just 1.6% (which one can’t help but compare to Arab Bank’s 5.6%, a necessary side-effect of so much of that bank’s business being in troubled and unpredictable markets).

It’s true that, although the proportion of QNB’s earnings that come outside Qatar increases by the day, only 28% of profits come from the region. But that 28% is still more, in dollar terms, than the entire group profit of either Ahli United or Arab Bank; QNB can legitimately claim to be the bank that gains the most income from outside its home base. And since QNB’s target is understood to be for MENA to contribute 40% of the bottom line by 2017, those numbers are only going to get bigger.

This was the year in which a great deal of acquisitive activity in 2012 was bedded down and turned productive. The acquisition of 49% of Bank of Commerce & Development, one of Libya’s leading private sector banks, is one example: the bank has 36 branches across Libya. QNB is now the majority stakeholder in Iraq’s Mansour Bank. And it holds the maximum stake it is permitted to – 40% – in Commercial Bank International in the UAE, which employs 700 across the country. With every new deal, a QNB team goes in and sets about a five-year strategic plan for that market, starting with integration in services, product, IT and infrastructure, and eventually absorbing the business into the overall QNB model.

The biggest deal of them all, and the one that clearly underlined QNB’s regional intentions, was the acquisition of the second largest private bank in Egypt, formerly NSGB (SocGen’s Egyptian arm) and now renamed QNB Al Ahli. A big step, this, taking on a market of 85 million people in a country still trying to find its way forward. Acquisitions in the likes of Egypt, Libya and Iraq (or for that matter Tunisia and Syria, where QNB has controlling stakes in banks) are not going to be easy, but they represent a commitment to banking these markets for the long run. There’s a 35% stake in Jordan’s Housing Bank for Trade and Finance too, plus of course QNB’s operations within the Gulf itself. The glaring gap is Saudi, which is also the case for most peers (Arab Bank being an exception), but all told QNB now operates through subsidiaries and associate companies in 26 countries.

The common gripe against QNB is that it has it too easy: half-owned by the Qatar Investment Authority in the world’s wealthiest nation per capita, of course it’s going to make a ton of money, given the near guarantee of government-linked work. Perhaps there’s something in that, but it’s hardly unusual in this respect in the Gulf, and the fact is that the pattern of regional expansion of the last two years has been much more about on-the-ground local involvement than coasting on the back of the state’s infrastructure spending.

There’s no question, though, that this is a great time to be the biggest bank in Qatar; A+ rated QNB clearly benefits from state backing. The bank is taking advantage of the big-spending gumption of its home country and is using its heft to create a regional force.

BEST INVESTMENT BANK IN THE MIDDLE EAST – HSBC

This has been a year to reward the debt capital markets bankers, and in this respect HSBC has been pre-eminent in the region, as the debt award below attests. But there is more to HSBC than its dominant position in debt financing.

In M&A, while not as strong as Goldman Sachs, HSBC has shown ability and variety, backed by a large coverage and execution team with expertise across the full range of industry sectors. Over the last 12 months, examples have included advising Kuwait Petroleum on its acquisition of Shell’s retail assets in Italy, advising Oman Oil an a Eu1.8 billion acquisition of Oxea Group from Advent International, advising Ideal Standard on the divestment of part of its MENA business, mainly in Egypt, and advising Etihad Airways on its acquisition of a 24% stake in Jet Airways. Ideal Standard apart, these are buy-side roles for Middle Eastern enterprises looking out into the world, roles that require both on-the-ground trust and connections in the Middle East and global reach. There are others besides: 10 major M&A transactions involving the Middle East have featured HSBC since 2013.

HSBC has not been dominant in equity capital markets over the last year, but then again, neither has anybody else; it has been an environment that has favoured debt rather than equity financing. HSBC did work on two of the few deals around in the region, the listing of Al Noor Hospitals and the IPO of the largest power deal in Oman in 2013, for Sembcorp Salalah. But behind the scenes, HSBC’s equity strength becomes more apparent: its on-the-ground research capabilities in the Middle East are peerless among international banks, it covers more than 130 stocks, was the first international bank to offer clients access to the Saudi exchange, and is considered the leading equity broker for blue chips in the region.

On top of that, HSBC’s expertise in other areas is relevant here. It is widely considered the best project finance house in the region, closing deals such as the US$19.3 billion Sadara Chemical financing, a US$825 million refinancing for the UAE’s Shuweihat S2, and the Ras Abu Fontas independent water project in Qatar during our review period. A host of other projects are underway, from the UAE’s Nawah nuclear project to the improvement of Oman’s Sohar refinery, wind farms in Morocco and a wastewater project in Kuwait. Rivals knock HSBC for being chiefly about lending, but many of these are complicated financings involving the capital markets. And while transaction services are covered in another category, HSBC’s strength in all areas of banking – cash management, trade, securities services, flow businesses – all support the strength and breadth of its overall investment bank.

BEST DEBT CAPITAL MARKET HOUSE IN THE MIDDLE EAST

HSBC

A look at the league tables shows that there is only one possible winner for this award: data produced for Euromoney by Dealogic shows HSBC with a deal value of US$26.93 billion during our review period when the closest competitor logged $12.9 billion. Through those 29 deals, HSBC was on 60% of all relevant financings in the region.

But, as always, the league tables only tell part of the story. Just as big a reason for HSBC’s recognition is the fact that it is in every kind of debt financing one can find in the region: vanilla bonds, sukuk, structured project bonds, corporate hybrids and Basel 3 compliant bank capital.

So, if it’s size or Islamic benchmarks you’re looking for, you would probably highlight Saudi Arabia’s SEC with its US$1.5 billion 10 year and $1.5 billion 30 year sukuk, the largest global sukuk from Saudi Arabia and the largest Islamic offering in a RegS/144A format. If it’s innovation, you might look to Ruwais Power and its US$825 million 2036 issue, the first project bond in the region this year. Bank capital excellence is shown by Saudi Arabia’s NCB, a SAR5 billion tier II subordinated sukuk that represented the largest ever sub debt instrument from a MENA financial; or the US$1 billion perpetual tier 1 from Emirates NBD, the first of its kind from a Gulf bank.

The ability to attract repeat business is demonstrated by issues such as Qatar National Bank’s US$1 billion seven-year Reg S bond and US$1.5 billion dual-tranche fixed and floating rate issue, meaning that HSBC has been a joint lead on four consecutive QNB deals; or First Gulf Bank, whose US$500 million bond in November was also the fourth straight to feature HSBC.

And for new markets, one might highlight the Majid Al Futtaim US$500 million hybrid perpetual, the first ever internationally placed corporate hybrid issue from the MENA region; or the maiden issue from telco Ooredoo, a US$1.25 billion sukuk in December.

HSBC-led deals are supported by a strong and entrenched team, and tend to boast diversified and high quality orderbooks that are well subscribed without leaving money on the table. HSBC is a clear leader in regional DCM.

BEST EQUITY CAPITAL MARKETS HOUSE IN THE MIDDLE EAST: BARCLAYS CAPITAL

This was not a vintage year for Middle East ECM; there was scarcely a handful of IPOs to speak of. If IPOs were the only metric, then Deutsche, which handled three, would be our leader, but our definition of this award involves convertible bonds too, and when those are considered Barclays emerges as the bank with the widest variety of involvement during our review period.

Barclays did get on two of the region’s few IPOs in our review period, serving as joint global coordinator on the £179 million London IPO of Gulf Marine Services, the Abu Dhabi-based operator of support vessels, as well as on the US$121 million IPO from Israel’s Varonis. Also in Israel it handled Caesarstone’s US$196 million follow-on.

But it was more on the convertible side that the bank was eyecatching. In May 2013, it was a lead on an important US$500 million convertible for National Bank of Abu Dhabi, the first convertible into equity from the Middle East since September 2010. In September it was a bookrunner on a Eu339 million convertible for OCI, alongside a Eu100 million equity placement for the same issuer, deals which helped the group to execute its US$10.5 billion acquisition of Orascom Construction Industries; Barclays has also handled several other advisory and financing mandates for OCI, which put it in good stead when these mandates came to be awarded. Elsewhere, Barclays has been mandated on three transactions in 12 months for Investcorp.

The OCI deal is probably the standout: anything involved Egypt is challenging, and it was executed in less than three weeks in uncertain market conditions. It now appears to be a one-off, since the Egyptian Financial services Authority has changed its rules since the deal was done.

BEST M&A HOUSE IN THE MIDDLE EAST: GOLDMAN SACHS

Goldman Sachs built a commanding lead in regional M&A in our review period, handling a greater volume of transactions than any competitor.

It was on the biggest deals, the landmark deals, and the cross-border deals that mattered. Goldman was an advisor to the joint steering committee that was formed for the US$3.2 billion merger of Aldar Properties and Sorouh Real Estate, which reached financial close in June 2013 to become the largest real estate merger in the MENA region and the first merger of two public listed companies in Abu Dhabi. It was the sole financial advisor to HM MOS on its purchase of Millennium Offshore Services Superholdings, to create a fleet of offshore service vessels for oil and gas. HM MOS is backed by some of the biggest names in the region, including a Gulf sovereign wealth fund, MENA regional family offices and a number of high net wroth individuals.

In cross-border deals, one standout was the acquisition of Coastal Energy Company, an international E&P company in Thailand and Malaysia, by CEPSA, an integrated energy company owned by Abu Dhabi’s International Petroleum Investment Company. Goldman advised the buyers on this US$2.2 billion deal. Another was the Qatar Foundation Endowment’s $1.26 billion purchase of a 5% stake in Bharti Airtel, a landmark transaction in Gulf sovereign wealth terms, since it was executed not by Qatar Holdings or the QIA but by this relatively new sovereign entity. Goldman advised QFE, the sort of mandate that needs entrenched connections at the highest level.

Others included Apache Corp’s sale of its 33% stake in its Egyptian oil and gas business to Sinopec for $3.1 billion, and IPIC’s acquisition of 13.2% of Oil Search, this time on the target side. Goldman’s deal book showed regional variety and a mastery of complex transactions.

BEST TRANSACTION SERVICES HOUSE IN THE MIDDLE EAST: STANDARD CHARTERED

The big three global-stroke-local houses of Citi, HSBC and Standard Chartered excel in transactional services in the Middle East, with Deutsche and BNP Paribas alongside them; for the moment, the combination of global capability and on-the-ground presence keeps this award in international rather than local hands.

Many of them can make a valid claim for this award, but this year we look to Standard Chartered, which is demonstrably growing business in the region and has shown admirable loyalty to some of the more volatile places within it. Stanchart is still active, through local branches and business commitment, in Iraq; likewise Egypt, Bahrain and Pakistan. Doing so has won it friends who will hopefully remember them in more settled times.

Like its peers, Stanchart offers efficient, comprehensive and often innovative services in trade finance and cash management in the Middle East, with a keen eye on the requirements of Islamic finance (Standard Chartered Saadiq was Euromoney’s best international Islamic finance bank in our March edition awards, an increasingly useful role to have.)

Stanchart says that its MENA region – or in the bank’s own parlance, MENAP, including Pakistan – has seen its SWIFT volumes grow from 6.6% of the market in 2012 to 7% in 2014 to date, and notes a healthy proportion of the bank’s overall client base using it for international trade. 45% of its clients route the majority of their import LCs volume through Stanchart, 64% do so for export LCs, and similar chunks of the client base do the same for guarantees and other trade financing requirements.

Differentiators at this level are country presence and innovation. The Islamic field gives fertile ground for trying new things, and at StanChart a recent example is the development of an Islamic version of a structured warehouse financing. An example of a company helped by this is Al Bahra Cables, which says the facility allows it to grow its working capital in a Shariah-compliant way.

Outside of the Islamic sphere, a priority has been a new liquidity management product enabling clients to optimize returns, increase visibility and control, and improve operational efficiency through a combination of sweeping, pooling and interest optimization measures. The product works cross-border and in multiple currencies. Client testimonials from customers in Dubai express very positive results.

Other solutions include StanChart’s Velocity of Cash programme, a paper disbursement service allowing clients to process secured onsite cheques without a cut-off time; round-the-clock book transfer; a vendors pre-payment programme; the Straight2Bank platform allowing end to end trade finance transactions to be automated through an undertaking called a Bank Payment Obligation; and multi-import finance solutions. Similar products exist at StanChart’s competitors too, but client testimonials suggest widespread satisfaction not just with the product set but the way it is implemented.

COUNTRY AWARDS

BEST BANK IN BAHRAIN – AHLI UNITED

The Bahrain award is one of the easier ones in the region to decide upon; it is the leader on almost any metric. Its US$579.4 million net profit for the 2013 financial year, or US$366.5 million after allowing for a one-off exceptional gain, was a record and a 25.7% improvement on the previous year, as well as being the biggest profit in the country’s banking industry. Total assets grew 9.3% to US$32.65 billion; loans, 8.3%, customer deposits, 17.4%. NPLs are a healthy 2.4% and total provisions for those NPLs 149.4%, while the bank’s capital adequacy ratio now stands at 16.2%. Most of these metrics lead the industry.

Ahli United puts its recent success – good numbers, prudently achieved – down to focused liability management, cost discipline, and improved productivity.

An interesting illustration of confidence came with a decision by the IFC, which had invested $125 million in new equity in the bank in April 2011 through mandatorily convertible preference shares, to accelerate that conversion into common shares two years early in 2013, giving the IFC a 2.9% shareholding in the bank. AUB also stands out in having a higher rating agency than the sovereign, something that rating agency rules generally don’t permit; S&P, which has AUB at BBB+ when Bahrain itself is BBB, apparently did so in recognition of the bank’s regional diversified business model.

Ahli United was also a strong candidate for the regional best bank award, with the majority of its earnings coming from outside Bahrain and with a clear focus on cross-border work.

BEST BANK IN EGYPT – CIB

Times have obviously been very difficult in Egypt, but CIB has continued to grow consistently over the last three years – to grow impressively, in fact. Consolidated net income grew 35% year on year to EGP3 billion; revenue, at EGP 6.98 billion, was up 31%; customer deposits climbed 23% to EGP 78 billion; and the bank logged ROAE of 26.5%. Also, it’s not as if all of these were simply rebounds from a conflict-deflated low base: most of those numbers went up impressively in 2012 too.

Deciding upon the best bank in Egypt first requires one to compare public and private sector banks, and while CIB from the private sector wins the award, the public sector is not without merit: Banque du Caire in particular enjoyed an impressive year. But CIB, much the biggest and most profitable of the private sector banks, is the one that demonstrates not only growth but innovation and strategy. Growth numbers like CIB’s might raise red flags, but there is evidence of prudent risk management too: NPLs at 3.96% are hardly the best in the region, but for a post-revolutionary nation still finding its feet as a young and turbulent democracy it’s really not bad at all. There is evidence of smart provisioning too, with loan loss provisions covering NPLs 1.6 times at the end of 2013 and a loan loss provision expense of EGP915 million taken during the year in case recovery in Egypt’s battered economy takes longer still to come.

At the same time, though, the bank has sought to look to a better future, opening 17 new branches in 2013 and renovating others. In truth, despite its growth in consumer banking, it is better known as a corporate bank, and the counterparty of choice for most of Egypt’s major corporations through its history. A major initiative in 2013 was an expansion of the bank’s global transaction services platform; now 89% of the bank’s trade services transactions take place online. Another new initiative was the establishment of a dedicated sustainability development department, designed with growing environmental awareness in Egypt in mind.

BEST BANK IN IRAN

Parsian Bank

Iran’s banking sector is positioning itself for a brighter future when sanctions are removed and banks can engage more freely with the rest of the world again. There are plenty of them ready to do so: several big state-owned houses and at least 17 private banks.

We opted for one of the private houses for this award, since they tend to bring a more entrepreneurial, risk-aware approach to banking, and Parsian Bank is pretty much the biggest of them. Almost all of its key indicators are strong and moving very much in the right direction: net profit was up 24% year on year, while deposits and loans also grew encouragingly. As of December 2013 the bank boasted return on equity of 20.17%, return on assets of 1.29%, and a tier one ratio of 12.19%.

The number that’s missing is NPLs, and this is the blight on the Iranian banking system: officially more than 15% of all assets, and possibly as much as 40%. Nobody is immune and it’s unlikely Parsian is either, given its connections with the troubled automotive industry. The best clue comes from its 2013 annual report, which showed provision for doubtful debts of US$145.3 million; pre-tax profit, by comparison, was $736.5 million (incidentally both of these numbers are, in dollar terms, probably out of date, predating a considerable devaluation in the Iranian rial since; nevertheless, they’re in proportion.)

Still, Parsian shows a model and vigour that can grow it out of whatever those bad loans are, with the largest private banking share of customer deposits, and a sense of momentum and innovation across business lines. From creating the first interactive voice response phone banking system with Persian speech recognition in Iran, to revamping credit approval systems and rolling out a loyalty programme, there is a feeling of progress here that will stand it in good stead when Iran is welcomed back to the world investment community.

BEST BANK IN ISRAEL: Bank Hapoalim

Bank Hapoalim remains the clear leader in Israeli banking, and it has stayed there in part through a concentration on going back to basics. It does the simple things well, and dominates the market in each of them: 33% of Israel’s retail customers, 36% of its corporate lending volumes, 48% of its credit cards and 33% of its loans to SMEs. Thanks to this dominance, it is also the most profitable bank in Israel, logging NIS2.58 billion in 2013 with a 9.3% return on equity.

A new three-year plan kicked off in 2013, and one of the key priorities was a focus on the small business segment. The SME market share is the one that has grown most dramatically in recent years: Hapoalim controlled 26% of that market in 2009, 33% today. Alongside this, the bank continues to launch new offerings in retail banking, such as a new personal financial planning service last year, and the broader corporate division, which has been working on improving the quality of the credit portfolio.

Israeli Arabs; ultra-orthodox individuals; technology companies; small businesses. They seem unlikely bedfellows, but each has been an area of focus at Hapoalim over the last year, showing the bank’s ability to spot a clear, if sometimes niche, opportunity.

BEST INVESTMENT BANK IN ISRAEL – Barclays

Debt deals from Israel during our review period were dominated by Israel Electric Corp, which raised $1.1 billion in a dual-tranche bond in June and then tapped another $300 million from it in July; and the State of Israel, which raised an upsized Eu1.5 billion deal in January. Barclays and Citi were the names in common on all three deals.

Both banks also appeared on the most significant equity deals in Israel during the year: Barclays on the $195.8 million CaesarStone follow-on, and smaller deals for Magic Software Enterprises, Mazor Robotics and Sapiens International; and Citi on raisings for Israel Discount Bank and Protalix BioTherapeutics.

The clincher, then, is M&A, where Barclays was an advisor to the target on two of the three biggest deals in the country during our review period: the takeover of Cial Industries, a manufacturing and high technology group, by Access Industries from the US; and the purchase of Given Imaging, a company that has developed a wireless imaging system for the gastrointestinal tract, by Covidien.

BEST BANK IN JORDAN – Arab Bank

There is far more to Arab Bank than its home base, but no matter how much it has grown internationally – and these days more than 75 per cent of revenues come from overseas, leveraging 600 branches in 30 countries, making it arguably the one truly regional homegrown bank – it has not neglected Jordan itself.

Among banks operating in Jordan, Arab Bank is the biggest in terms of total assets (21% of the market), deposits (21.5%) and direct credit facilities (15.8%). Quite apart from size, its financial performance has been consistently impressive. Though this is only reported at a group level, net profit was US$501.9 million at the end of 2013, an extraordinary 43% growth. Shareholders are among the happiest at this performance, with dividends hitting 37% in 2013. And this has been achieved with a capital adequacy ratio of a healthy 15.15%.

Alongside more mainstream areas of banking, Arab Bank is impressive in project finance, including the recent financing of the 117MW Tafliah Wind Farm project in Jordan alongside the IFC. It’s helping the Ministry of Energy and Mineral Resources to develop solar energy plants in Jordan, and working with multilaterals to promote sustainable energy use – both a CSR position and good business.

In core businesses, consumer banking is growing, with a revamp of the Elite programme for high net worth customers in Jordan this year, alongside the Arabi Premium program for mid-income executives and entrepreneurs, an initiative that was developed in Jordan and has since been rolled out across the Middle East. In corporate banking, progress has been made on an e-banking offering to integrate cash management and trade finance platforms.

BEST BANK IN KUWAIT – National Bank of Kuwait

NBK may have lost its crown as the best bank in the Middle East, but it is still the clear leader in Kuwait itself, despite growing competition. It is the biggest both by assets and market cap; it has the largest market share in most disciplines of banking; it is the most profitable, often accounting for half of the entire banking sector profitability in Kuwait; and it also leads in asset quality. Net profits hit US$844 million in 2013, and total assets US$66 billion.

In corporate banking, NBK accounts for about a quarter of the market, and although there have been few headline deals in a recovering Kuwaiti economy lately, it consistently appears on the most significant transactions. Examples include a financing agreement for the expansion of the Al Amiri Hospital, funding for a gas turbines project at the Al-Zour Power Station, and Kuwait’s Boat Harbor Project. Other important transactions over the last year include financing for Jazeera Airways’ fleet expansion, a role as the only local bank on the IWPP project, the first ever PPP project in Kuwait, and a coordinator and MLA role on the US$300 million VIVA deal. NBK also leads the market in trade finance and stands to benefit from Kuwait’s development plan, a four-year programme expected to lead to many projects.

On the consumer side, NBK is 40% of the market through 64 branches and, like most successful banks in the region, is focusing increasingly on higher wealth clients. NBK Private Banking grew assets under management steadily through 2013.

BEST INVESTMENT BANK IN KUWAIT – Markaz

Markaz, the investment banking and asset management group, looks very different to most other financial institutions in Kuwait. Its research is among the best in the region, and although there have been slim pickings for financing in Kuwait this year, the firm has managed to involve itself in a range of transactions.

Examples in capital markets advisory have included capital raisings and a listing; restructuring advisory roles have covered real estate companies and local creditors; transaction advisories have covered foreign companies working on projects in Kuwait and credit groups enforcing debt in the country, as well as a disposal of assets for a regional real estate company and an advisory role on the sale of a hospital project; and valuation and strategy advisory positions for companies including Agility Warehousing Company, several real estate groups and one of Kuwait’s leading insurers.

BEST BANK IN LEBANON

Bank Blom

There are two obvious candidates for the best bank award in Lebanon. Bank Audi is the biggest, with the widest business outside of Lebanon; but Blom shows the best metrics.  This year its net income, at $352.8 million, was bigger than Audi’s despite a smaller asset base, and it also has the best return on equity (16.75%) and return on assets (1.38%) figures in the industry. Moreover, while Blom’s net income grew 5.8% in 2013, it shrank considerably at Audi and, to a lesser extent, at Byblos, another competitor.

You don’t go to Blom for stellar loan and deposit growth – unlike Audi, which saw 41% loan growth in 2013 – but for good management and impressive stock performance. Blom’s market share in loans and deposits actually declined in 2013, to Audi’s benefit, but set against that, Blom has better liquidity and is the only bank to have increased tier one capital over 2013.

At a consumer level, a particular area of success has been in the cars business, including a touch pre-paid VISA credit card linking talk time to spending, with a model the bank claims is unique not just in Lebanon but worldwide. Also in 2013 a new cobranded MasterCard was launched with the Beirut Traders Association, Lebanon’s biggest business association. In other areas, small and medium business lending has been a priority, and its investment banking arm, Blominvest, has launched a new Arab mutual fund, a new discretionary portfolio management service, and signed a partnership with Parisian private equity group Quilvest.

BEST BANK IN OMAN

Bank Muscat

Bank Muscat is, by almost any metric, the biggest and strongest in Oman: its net profit was bigger than its five main rivals combined, it has more than three times the assets of its nearest rival, and by far the biggest loan book and customer deposit base. It also had the best return on assets ratio as of December 2013, and while one or two may have bettered it for return on equity, capital adequacy ratio or NPL ratio (12.6%, 26.5% and 2.6% respectively in Bank Muscat’s case), the difference in scale between it and its rivals simply cannot be overlooked. It has 37% of the country’s banking assets, 37% of its loans and 33% of its deposits.

Be that as it may, the bank’s motto is “Let’s Do More”, and it continues to strengthen, opening new branches, improving technology and focusing on cross-selling in 2013. During the course of the year it bought the point of sale acquiring business from HSBC Oman, improving its electronic payment infrastructure; it launched a cobranded credit card with Oman Air and improved its already pioneering mobile banking application. New mortgage and marriage loan products appeared, and a dedicated Retail Enterprises department was launched in order to support small businesses.

Aside from retail and entrepreneurs, there is good business in project and structured finance in Oman, assisting the oil and gas, petrochemicals, shipping, power and real estate sectors in the country. Bank Muscat was on five major syndicated financing programmes as mandated lead arranger during 2013, while the investment banking arm completed $6 billion of debt and equity advisory transactions. Highlights were a $3.5 billion equity financial advisory role for an oil and gas major, a $990 million pre-IPO capital structuring mandate for an Omani utility, and the bank’s first debt raising in Saudi Arabia. It handled senior debt for Octal Petrochemicals, an IPO for Al Madina and convertibles for Renaissance Services.

BEST BANK IN THE PALESTINIAN TERRITORIES

Bank of Palestine

Bank of Palestine continues to thrive in difficult circumstances, and to provide confidence that a Palestinian country in a two-state solution would be well-banked and capable of healthy business growth.

Over 50 years old now, Bank of Palestine was the first and the largest Palestinian bank and now operates from 50 branches in the West Bank and Gaza; it has 600,000 customers, and holds a 23% market share of deposits and loans. A universal bank, it is active anywhere that Palestinians are active, and since that is a famously entrepreneurial diaspora, there is plenty to do.

A long-standing priority, very much fitting the Palestinian model of building business out of modest beginnings, is the SME and microfinance sector, both of which are covered by dedicated units with the bank. Multilaterals, admiring this, have become involved; a recent example was the IFC joining it in developing a women’s banking programme within the SME/micro area to address high female unemployment and to empower women to take part in Palestinian economic life.

In bigger-ticket areas, BOP has worked on the larger project finance syndications that pass through the Territories, notably Wataniya Mobile Palestine and the Movenpick Hotel in Ramallah. Recognizing the wealth that has left Palestine but that still wishes to engage with the country, the Diaspora Department addresses the seven million Palestinians outside the Territories and offers them the banking, brokerage and business advisory services they need. This has led to some far-flung rep offices, with licensing underway in Dubai and Santiago, Chile.

A powerful institution in local terms, it accounts for 15% of the entire Palestine Exchange market cap and is a vital blue chip there. Recognizing its dominance, it is held to account on social and environmental responsibility, another area where the IFC has become involved, helping to galvanise risk management and governance systems.

Beyond its broader significance, numbers are good: US$53 million pre-tax profit in 2013, up 6.15% year on year, and a 17.14% climb in the asset base to US$2.35 billion. There was some slippage in earnings per share and return on equity, but a 16% ROE figure, achieved with an NPL ratio of 2.2%, was still encouraging for shareholders.

BEST BANK IN QATAR

Qatar National Bank

The depth of the Qatar banking industry continues to improve, but realistically there is still only one place this award can go: Qatar National Bank is by far the largest financial institution in the country, with more than 45% of the nation’s banking sector assets.

While a steadily greater proportion of assets and profits are coming from overseas (see regional award), Qatar remains the engine room from which QNB’s outstanding results are driven. In the first quarter of 2014 alone, QNB made a US$668 million net profit, more than only a handful of other banks managed in the whole of 2013; QNB’s 2013 figure was a peerless US$2.6 billion net profit. The asset book is US$125.9 billion and has grown 21% in a year, partly through acquisition; similarly the loan book is up 22% (to US$87.1 billion) and deposits up 23% (to US$94.9 billion). Within this region-leading asset base, very little of it is delinquent, with a 1.6% NPL ratio and a 126% coverage ratio, alongside a Basel II CAR of 16.3%.

Half-owned by the Qatar Investment Authority and half by the private sector, it’s true that Qatar gets a great free kick from its state ownership and the work that comes its way as a consequence, but it’s not fair to say that’s all it can do. It is by any measure a comprehensive commercial and retail bank.

Nevertheless, what a gift it is to be Qatari state-backed in this environment. Analysts say the project awards related to the 2022 World Cup that were awarded in Qatar during 2013 should really start feeding into QNB’s credit growth in 2014-15, which, given QNB’s more than 70% market share in public sector lending and the vast size of its balance sheet, should be a bounty it gets by far the biggest share of. Analysts also suggest QNB can cut funding costs at the same time, so the future for this bank may be even better.

BEST INVESTMENT BANK IN QATAR

QInvest

By early 2014, it was possible to take a look at QInvest’s model with some sense of clarity about where it is going and how it is doing it. Under new leadership led by former Goldman Sachs executive Tamim Hamad Al-Kawari and new investment banking head Michael Katounas, QInvest today is streamlined along three lines: investment banking, principal investment and asset management, all with an Islamic finance tilt.

In February the first results fully reflecting the change of strategy appeared, demonstrating a 40% increase in revenue, a return to profitability and a considerable drop in headcount. It is appearing on interesting deals, and not all of them are in Qatar: indeed, the standouts in the last 12 months have been elsewhere, such as sukuks for the Turkish sovereign and for Ooredoo.

QInvest is an interesting organization to try to categorize, since it is partly Qatar state-owned, in that Qatar Islamic Bank is the largest shareholder, but it is ultimately a private sector institution and is quite determined to be seen as one. Nevertheless, having the QIA as a neighbor doesn’t hurt, and it’s clear that a large part of the business will be based in a gateway role, either facilitating the entry of foreign capital into Qatar or helping local institutions venture outwards.

QInvest’s approach to principal investment – less private equity, more financing – is still shifting, and the asset management arm is some way short of a full contribution to the business, so for the moment it’s investment banking that drives things; early evidence shows a nimble and versatile business.

BEST BANK IN SAUDI ARABIA

Al Rajhi

The world’s biggest Islamic bank continues to lead the field in Saudi Arabian banking by doing the simple things right and with prudence.

First quarter results showed a net profit of SR1.7 billion, up 10% on the previous quarter, which in turn had concluded a full-year profit of SR7.44 billion for 2013. Total assets at the end of the first quarter were SR288 billion, which is, by comparison, about the same size as the entire GDP of neighbouring Oman. (The deposit base, at SR239 billion, is merely the size of the Libyan economy.)

The key to serving Saudi Arabia’s considerable individual wealth is through reach; it has 500 branches to get to its target market, all of them domestic, which in itself is the biggest branch network in the Middle East.

But not all of Al Rajhi’s business is straightforward. Al Rajhi Capital, with its brokerage, asset management and investment banking arms, is one of the most powerful groups of its kind in the region; its Islamic fund management arm alone passed US$6 billion under management during our review period, with mutual fund assets growing 34% in the year to September 2013. The Saudi mutual fund industry grew 18% over the same period, which tells you two things: one, that this is a very good growth business to be in, and two, that Al Rajhi is beating the market on asset gathering anyway. The investment banking division is frequently involved in some of the most interesting Islamic transactions in the region.

BEST INVESTMENT BANK IN SAUDI ARABIA

HSBC Saudi Arabia

HSBC Saudi Arabia dominates the country’s debt capital markets, with just over double the deal volume of its nearest rival in Dealogic data on our review period; it was involved in a shade under 70% of all transactions by volume.

Many of them were important deals, too. There were debuts for Saudi flagships the National Commercial Bank and Marafiq, the power and water utility company, raising SAR7.5 billion between them; the first Basel III-compliant subordinated tier two sukuk from the region, for Saudi British Bank; a landmark SAR1.7 billion hybrid for Almarai, the first perpetual equity-accounted corporate hybrid sukuk in the region; the huge SAR15.2 billion sukuk for the General Authority of Civil Aviation (HSBC had also sold led its SAR15 billion predecessor in 2012); another jumbo deal, a SAR4.5 billion sukuk for Saudi Electricity; and a landmark corporate syndicated loan for Tasnee, the national industrialization company.

While debt capital markets were where most of the action was in our review period, HSBC was active elsewhere too. In M&A, it advised on the merger of Saudi International Petrochemical and Sahara Petrochemical, advising Sipchem; this US$19 billion deal will be the largest ever M&A in Saudi Arabia, as well as being the first public merger of equals in the country.

And in project and export finance, HSBC is a leader. At the time of writing it was involved in four continuing deals: the Ma’aden Wa’ad Al Shamal Phosphate Company, Petrorabigh II, the SEC Duba 1 IPP, and two mandates for Saudi Aramco related to its integrated gas combined cycle and air separation unit plants. That’s on top of five separate deals that closed in our review period, all of them large and significant. Granted, HSBC didn’t shoot out the lights in ECM, but there were hardly any such deals to work on all year.

BEST BANK IN UAE

National Bank of Abu Dhabi

Exciting things are happening at National Bank of Abu Dhabi, under the leadership of former ANZ man Alex Thursby. The eye-catching stuff – the plan to build out franchises internationally through the West-East Corridor that links Asia, Africa and the Middle East – is still largely for the future, but in the meantime a great deal of progress is underway in the UAE.

Thursby talks in terms of three pillars for the bank’s evolution, but the first one is the home market: developing commercial and retail businesses in the UAE and the Gulf. This will be the near-term priority. Private banking is being given increasing attention, the wholesale bank is growing, every opportunity in trade flows with Asia and Africa is being taken, there is new investment in rates capacity, a new cash management system is on its way and branches in the UAE are being modernized. Alongside all this is the natural corporate and institutional dealflow that comes when one is owned by the Abu Dhabi state.

While the transformation takes place, NBAD’s numbers are looking increasingly impressive. Net profits, at AED4.73 billion, were up 9.3% year on year; total assets reached AED325.1 billion at the end of 2013, up 8.1% year on year; customer loans grew 11.7% to AED183.8 billion; and total capital adequacy under Basel II (which is what the UAE central bank runs on) was 18.2%, or 16.5% for tier one. There are bigger banks in the country, notably last year’s winner, Emirates NBD, but none give quite the same sense of good management and solid asset quality that NBAD does.

BEST DCM HOUSE IN UAE

HSBC

HSBC, which flat-out dominated DCM all over the Middle East, actually had a much closer race in the UAE during our review period than elsewhere in the region; Standard Chartered had a similarly strong year. But HSBC not only handled the most deals, but demonstrated impressive breadth.

In fact, hardly any of its deals could be said to be ordinary. Its US$500 million issue for Majid Al Futtaim was the first ever international corporate hybrid from the Middle East, a perpetual non-call five deal that was hardly mainstream yet brought in a US$4 billion order book from 325 investors. The US$350 million issue from Topaz Marine was only the third high yield issue from a Middle East issuer, yet also pulled in a strong order book that topped US$2.2 billion.

The Shuweihat 2 power station issue was a rare example of a project bond in the MENA region. An A$400 million deal for National Bank of Abu Dhabi showed geographical reach by taking a UAE bank to the Australian dollar markets. There was Islamic expertise in a US$500 million sukuk for Al Hilal Bank, and another of the same size for Sharjah Islamic; there was scale and bank capital experience in a US$1 billion issue, a perpetual tier 1, for Emirates NBD; and the size of the financial sector client base was illustrated by deals for First Gulf Bank and Commercial Bank of Dubai.

BEST M&A HOUSE IN UAE

Goldman Sachs

Goldman has dominated regional M&A as HSBC has dominated debt over the past 12 months, and it handled three key deals in the UAE during our review period.

One was the heavyweight: the merger of Aldar Properties and Sorouh Real Estate, the largest real estate merger to date in the MENA region, creating the third largest publicly listed real estate company in the Middle East. A friendly merger of equals looks straightforward, but in fact this was the first merger of its kind between two listed Abu Dhabi companies. It creates a powerful institution with a strong balance sheet, lower risk profile, and a position of leadership across a number of different real estate sectors.

Another was an outbound deal, when CEPSA and its owner, Abu Dhabi’s International Petroleum Investment Company, bought Toronto and AIM-listed, Thai and Malaysia-based E&P company Coastal Energy for $2.2 billion. Goldman was on the CEPSA/IPIC buyer end of the deal, further diversifying the Emirate’s global energy asset base.

The third involved the sale of Millennium Offshore Services Superholdings to HM MOS International. On the seller side this time, the Goldman role required being abreast of an A-grade principal investor list including a sovereign wealth fund, several MENA regional family offices and a clutch of Middle Eastern high net worth individuals.

Best Bank in Iran

Parsian Bank

Iran’s banking sector is positioning itself for a brighter future when sanctions are removed and banks can engage more freely with the rest of the world again. There are plenty of them ready to do so: several big state-owned houses and at least 17 private banks.

We opted for one of the private houses for this award, since they tend to bring a more entrepreneurial, risk-aware approach to banking, and Parsian Bank is pretty much the biggest of them. Almost all of its key indicators are strong and moving very much in the right direction: net profit was up 24% year on year, while deposits and loans also grew encouragingly. As of December 2013 the bank boasted return on equity of 20.17%, return on assets of 1.29%, and a tier one ratio of 12.19%.

The number that’s missing is NPLs, and this is the blight on the Iranian banking system: officially more than 15% of all assets, and possibly as much as 40%. Nobody is immune and it’s unlikely Parsian is either, given its connections with the troubled automotive industry. The best clue comes from its 2013 annual report, which showed provision for doubtful debts of US$145.3 million; pre-tax profit, by comparison, was $736.5 million (incidentally both of these numbers are, in dollar terms, probably out of date, predating a considerable devaluation in the Iranian rial since; nevertheless, they’re in proportion.)

Still, Parsian shows a model and vigour that can grow it out of whatever those bad loans are, with the largest private banking share of customer deposits, and a sense of momentum and innovation across business lines. From creating the first interactive voice response phone banking system with Persian speech recognition in Iran, to revamping credit approval systems and rolling out a loyalty programme, there is a feeling of progress here that will stand it in good stead when Iran is welcomed back to the world investment community.