ENBD Capital reports 27% rise in H1 revenues

Emirates NBD Capital saw a 27 per cent increase in revenues in the first half of this year compared to the same period last year and is boosting its fee-based and restructuring advisory businesses to sustain the growth.

The investment-banking arm of the Gulf’s largest bank by assets is also on track to carrying out three IPOs in the first quarter next year, a top official from the company said.

“We are 27 per cent ahead in the first half of this year than the previous year. In comparison however, last year was a difficult year. Now you are seeing green shoots,” Suresh Kumar, Emirates NBD Capital, CEO said.

He said investment banks are going back to basics and are now sticking on fee-based business rather than on proprietary investments. Shuaa Capital, for one, has moved to exit most of its direct investments and instead focus on fee generating business, which it aims to triple over the next three years.

“Most of the investment banks in the region made money from either proprietary trading or proprietary investments and less from fee income but now it’s turning the other way around,” he said.

Because the equity and debt issuance remains dry – albeit with a few issues – Emirates NBD Capital has opted to change its strategy and
strengthen its advisory business.

“Public markets in the region do not have significant amount of transactions whether it’s IPO, debt issues or bond issues,” Kumar
explains. “Some of the issuers go and raise the money outside the region where we don’t really have the strength. So we have to ramp up our advisory skills sets in the restructuring of balance sheet for corporates and consolidation within the sector.”

The hefty refinancing needs of the GCC, and the UAE in particular, could mean a huge business opportunity for the bank. According to ratings agency Moody's unrated corporates from the six Gulf countries have over $67bn billion of total debt outstanding while the total for rated corporates is $145bn, of which over 28 per cent is short-term
debt, maturing in 2012. Dubai and Abu Dhabi-based entities account for majority of this debt, with investment holding companies and real estate developers as the most exposed sectors.

Kumar said investment bankers can give an un-biased diagnosis on how to treat problems associated with restructuring. “You first have to understand why there are difficulties,” he said. “If the difficulties are not caused by economic circumstances but by other reasons, then maybe you have a lot of non-core assets so you may have to sell them.
That is where restructuring and remedial management comes in.”

While waiting for the first IPO to come out of the UAE, the firm is actively working with issuers who plan to IPO as soon as the market recovers. Kumar said the firm is advising three companies that plan to list on the UAE stock exchanges early next year.

Emirates 24l7 first reported in December that the bank received three IPO mandates with a plan to go to market in the second quarter of 2010.

But they were postponed because of the lack of market liquidity.

“Q1 next year looks doable,” Kumar said. “In IPO business it’s understandable that no one wants to be the first one to go public in a bear market. There is always a hesitancy to build confidence. A lot of works are being done. The timing will very much depend on the market sentiment. You see, even a good thing can get shaken up.”

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