Contact Information: Contact: Eric Gregoire +1 617 854 4570
Investment Banks Can Capture Growth in the Middle East With Local Offerings, BCG Report Says
| Source: The Boston Consulting Group
NEW YORK, NY--(Marketwire - September 4, 2007) - Global investment banks can find attractive
opportunities for growth in the Middle East, but must navigate turbulent
waters to build a strong presence, according to The Boston Consulting
Group's latest quarterly "Investment Banking and Capital Markets" report.
The report examines growth opportunities in the Gulf Cooperation Council
(GCC) countries -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the
United Arab Emirates. Corporate and investment banking revenues in the
region exceeded $3 billion in 2006, with the United Arab Emirates and Saudi
Arabia accounting for more than 80 percent of the total.
Fixed-income products, including project finance and Islamic finance, are
particularly attractive, given the capital requirements of large projects
and the strengths of global players. "The debt-structuring skills of global
banks are highly valued, especially for large, complex deals," says Achim
Schwetlick, coauthor of the report. "In contrast, local banks have been
slow to penetrate the bond-issuance market. They face difficulties
attracting talent and have a long-standing aversion to debt financing."
The region's growth opportunities are not without their challenges. Despite
economic diversification, many countries remain heavily dependent on oil
revenue. In addition, local talent pools for investment banks are limited,
and regulatory transparency varies by country.
"Investment banks will need to adapt their operating models to suit the
region," adds Schwetlick, a partner in BCG's New York office. "They should
customize products to meet local needs -- perhaps by developing
sharia-compliant offerings -- and establish a local presence to build
credibility. Players can serve most GCC countries from the United Arab
Emirates, but Qatar and Saudi Arabia are becoming increasingly important."
The report, which provides an overview of industry performance, found that
pretax profit margins for leading players declined 2.2 percentage points in
the second quarter, while revenues were 4.3 percent lower, as the collapse
of the subprime market began to affect the broader market. Sales and
trading revenues declined 8.9 percent, but corporate finance and advisory
revenues grew by 15.9 percent.
The report's performance index tracks the profits of ten leading
investment banks -- Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank,
Goldman Sachs, JPMorgan Chase, Lehman Brothers, Merrill Lynch, Morgan
Stanley, and UBS.
To receive a copy of the report or to schedule an interview with one of the
authors, please contact Eric Gregoire at +1 617 854 4570 or
gregoire.eric@bcg.com.
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