Q3 to define positives for banking sector

Neven Hendricks, its Chief Operating Officer for the Mena region, says the company got a lot of positive response in the region in spite of the downturn.

“We believe in the region and would continue to do so,” he said in an interview with Emirates Business.

The crisis will make the region emerge much stronger, said Hendricks.  However, positive sentiment would take a little more time to reflect on the results, he said.

For the banking sector, he said: “Lenders will have to pick up provisions in the third quarter and fourth quarter would be pretty square.

“And I think the results from first quarter of 2010 will be significantally different.”

Which sectors in the region do you see growth coming from?

When we say corporate finance services we purposely align ourselves to three sectors. Financial services sector in the region, inspite of what happens globally,  will be important. Next will be real estate, hospitality and leisure sectors. We believe the slowdown in this sector is temporary. We see these sectors taking off in next two three years. Another is Technology, Media and Telecommunications (TMT) sector. These are the sectors we are most bullish on.

Real estate sector took a big hit. When do you see the sector returning back to growth in this region?

In the region per se I see the sector taking off again, showing some moderate growth in later part of 2010. Particularly, with the infrastructure development taking place in Saudi Arabia and also some projects taking place in Qatar. In the UAE, Abu Dhabi will drive growth in the sector next year. I believe in early 2011, you will probably see some growth in the Dubai real estate sector.

Distressed property sale was up by about 50 per cent in the second quarter as indicated by recent reports.  Where do you see it heading?

One thing is clear. Globally economies are interdependent. So the region is not immune to happenings across the world. What has been encouraging is the positive signs that are slowly coming from the US and Europe. I think on similar lines,  you will see recovery taking place in the region perhaps in the first or second quarter of 2010.

How do you see the financial sector responding to the global crisis?

Currently the financial services sector has been responding well in the US. I think there is a feel good factor as well. When things are bad, the markets always reflect worst than what is. Now everyone has come to conclusion that there is life after crisis. People have started to invest again. They do realise there is future and the world has not disappeared. In the region also, a lot of investors have been holding back to call the bottom. I don’t fundamentally believe that anyone can call the exact bottom. But if we have not reached the bottom yet, we are pretty close to it. The slowdown of the US and Europe have been far slower. French and German economies too have been showing positive signs. All that has been coming to the region also.

Do you see any positive movement in banking sector of the region, which had heavy provisions in second quarter?

I would like to wait for  third quarter. I don’t think all the losses and the provisions have been booked. I think they will have to pick up provisions in Q3, fourth quarter would be pretty square. And I think things would improve. The results from Q1 of 2010 will be significantally different.

What I do see is far more active participation of Central Bank in supervising the financial sector. Globally, central banks have taken several measures in supervising banks to avoid another crisis.

What are your expansion plans in this region?

We are very committed to this region. The fact that when other firms have been contracting, especially in corporate finance, we have built a team. We have gone out and actively boosted the team from 45 people in early 2008 to 120 today. We are currently putting resources in Riyadh, have put resources in Qatar in Doha, Kuwait and Abu Dhabi. We believe in the region and would continue to do so.

In spite of the global downturn we have had an enormous positive response from the region. We are involved in number of high profile engagements, primarily in the re-structuring, reorganising area, but they are quite encouraging. We see the private sector taking off.  There has not been much deal making. On projects consulting, had the developers in the region used some expertise before the crisis, they may have found themselves in a different situation they are in today.

What are the positive outcomes of the crisis?

I think the financial services sector will never be the same here. I think they would step up risk and compliance considerably. That’s where we fall apart, globally.

Have the companies grown more conscious about adhering to best practices?

Yes. We have seen companies really serious about disclosures and best practices. But it started to happen before the crash. There is always a realisation that we need to do things properly. It is not a reason of the crash.

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