BAB launches the first banking magazine in Bahrain

Edited by George Haddad
The Bahrain Association of Banks (BAB) announces the launch of the first banking magazine in the Kingdom of Bahrain - The Bahrain Banker.
The magazine will include articles, interviews and features demonstrating thought leadership for business today. Key contributors will include Bahrain's senior banking professionals, economists, legal and compliance professionals, senior management from the Central Bank of Bahrain (CBB), as well as specialists on important financial topics such as Islamic banking.

The inaugural edition of The Bahrain Banker will be published at the end of November and distributed at the World Islamic Banking Conference in December. Thereafter, it will be published quarterly, with editions in the spring, summer, autumn and winter.

"We are very proud to launch such a high quality, focused magazine in Bahrain and believe it has a winning formula to engage the banking sectors, members of The Association and all service providers to the sector. It is the right time to launch The Bahrain Banker as we all plan 2010 strategies and rebuild the industry to make it stronger, leaner and more efficient. No other publication like it exists in Bahrain today," said Mayank Malik, Chairman of the BAB and CEO Citibank Bahrain.

"This will not be a trade magazine. It will be thought-provoking, with articles and features contributed by professionals in Bahrain's banking sector. We will, therefore, offer a better quality read than is currently available. We plan to demonstrate the sector's professionalism and maturity, given that the Kingdom of Bahrain has the longest and most advanced history in banking in the region" said Robert Ainey, CEO of the BAB.

The main aim of the magazine is to promote Bahrain's banking sector worldwide in a cost-effective way through alliances with the Economic Development Board as well as other international banking associations. The publication will focus on leaders in the industry to generate a greater awareness, among other things, of Islamic banking - its principles and practices - world-wide. The Bahrain Banker will also discuss key Government initiatives such as Vision 2030, Tamkeen, the reform of the labour market and the role of Mumtalakat.

The BAB has employed an expert team to create this unique publication. The team's editorial coverage will be managed by Abdullah Jonathan Wallace, the former publisher of MEED magazine (Middle East Economic Digest), and Nigel Gibson who previously worked for The Economist newspaper and is author of Al Hilal's The Guide to Islamic Banking & Finance. The design and advertising sales team comes from Metaphor, a boutique agency, which currently handles communications for the BAB.

'The global economy has been through a shattering downturn and one of the challenges facing the banking sector is trust. The Bahrain Banker will strive to build that trust between the Kingdom's banking sector and key local, regional and international partners. Bahrain has many good news stories to tell and we will provide the ideal medium to deliver them,' said Wallace.

The Bahrain Banker is to be distributed through every Bahraini embassy, key Ministries, the Central Bank of Bahrain, the Economic Development Board, the Bahrain Institute of Banking and Finance, as well as overseas banking associations, conferences, airlines and airport lounges and selected retail outlets. We will also offer subscription opportunities for commercial organizations which service the banking sector and professionals who are serious about doing business with the banking industry. Over 5,000 copies will be distributed each quarter.

Global Arab Network

Irregular future for CMBS issuance in the Middle East

Edited by Hannan Taha
New issuances of commercial mortgage-backed securities (CMBS) in Europe, the Middle East and Africa (EMEA) are expected to remain sporadic, says Moody's Investors Service in its H1 2009 Review and H2 Outlook report for the sector. The full year issuance volume has been revised upwards by Moody's to €20 billion, levels still substantially below the volumes seen in 2005 to 2007. Moody's notes that there is some investor demand for credit-tenant-lease CMBS.
"In the first half year of 2009, issuance volumes were well above the full year of 2008 volumes. That was mainly driven by three retained transactions amounting to €11.4 billion compared to the total issuance volume of €14.7 billion for the first half year of 2009 and total issuance volume of €6.3 billion for the full year of 2008," says Alexander Zeidler, a Moody's Assistant Vice President -- Analyst and co-author of the report. Irrespective of the volume increase compared to last year's levels, Moody's notes that most of the CMBS transactions were retained and not placed with investors.

The biggest reason for still low open market issuance volumes in H1 2009 was the ongoing concern about the economies and the real estate markets in EMEA. "In H1 2009, the commercial property investment market showed limited activity, the occupational market was weak with reduced tenant demand and banks continued to hold real estate lending activities at very low levels," says Jeroen Heijdeman, a Moody's Analyst and co-author of the report.

The commercial property markets across all European countries and property types experienced continued value declines in the first half year of 2009. The value decline was most pronounced in the UK in the first quarter of 2009, but other main CMBS markets like France and Germany also experienced value deterioration.

The value declines were not only driven by yield widening, but also rental value declines. The trend of widening yields slowed towards the end of the second half year for selected prime commercial properties in the UK that feature strong lease profiles. Moody's expects the trend of declining rental values to continue in H2 2009 and that most EMEA commercial real estate markets will show some improvement in 2010. Moody's expects moderate property value increases from 2011 onwards. A material recovery of commercial property values over the next five years is unlikely, in Moody's view.

The rating agency believes that the focus in H2 2009 will remain on the performance of existing transactions and predicts that the adverse loan performance trend will accelerate, depending on the state of the economy and the availability of capital to refinance commercial real estate loans.

Moody's expects new retained CMBS issuances in H2 2009 and expects continued interests from investors for credit-tenant-lease securitisations as seen towards the end of H1 2009. Looking beyond 2009, Moody's expects that the capital markets will still play an important role in financing commercial real estate. This is needed in order to close the financing gap arising from significant loan refinancing volumes due over the next years while banks are reducing exposure.

The future shape of CMBS transactions will not be decided soon, but investor demand will likely focus on single-loan CMBS and granular CMBS transactions that are less complex.

Global Arab Network

Stable Outlook- Fitch Affirms National Bank of Egypt at 'BB+'

Edited by Jihad Taki

Fitch Ratings has today affirmed the National Bank of Egypt's (NBE) Long-term Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook. NBE's Short-term IDR is affirmed at 'B', the National Long-term rating at 'AA(egy)', and the National Short-term rating at 'F1+(egy)'. The Outlook on the National Long-term rating is Stable. Fitch has simultaneously affirmed the bank's Individual Rating at 'D/E', Support Rating at '3' and Support Rating Floor at 'BB+'.

NBE's Long- and Short-term IDRs and National ratings reflect Fitch's view of the support that would be provided by the Egyptian authorities in case of need, based on the bank's systemic importance, its 100% government ownership, and significant retail deposit franchise. NBE's Individual Rating reflects the strength of the bank's domestic franchise, its stable funding and strong liquidity. It also takes into account NBE's weak performance and still substantial level of non-performing loans, although these are largely legacy NPLs and do not reflect current performance. NBE's capitalisation remains on the low side, although management has stated that the bank recently received a USD400m subordinated government loan that boosted its Tier II capital.

Following the appointment of a new chairman and deputy chairman in 2008, there has been a marked shift in the pace of the bank's restructuring with a number of new appointments made at all levels. There have been improvements in all major divisions, including risk management, and a strengthening of reporting and monitoring systems and controls. The composition of the board was also substantially changed during 2008, during which six of its present eight members were appointed, to broaden the board's business background and to ensure support for NBE's restructuring. The bank is increasingly run on commercial lines with pricing of both assets and liabilities adjusted to market rates which is expected to improve the bank's performance going forward.

NBE continued to report weak profitability in the year to June 2008 and the six months to December 2008. The slight strengthening of net interest and fee income was offset by some losses on the bank's securities portfolio and ongoing loan provisioning charges. In the year to June 2008, NBE booked an exceptionally large provision charge in a bid to boost reserve coverage. The expense was largely funded by the sale of AFS securities, mostly to the bank's wholly-owned subsidiary, Ahly Capital. NBE still has a large proportion of non-performing loans and these increased in the year to June 2008. However, management has stated that virtually all of the increase was due to a reclassification of legacy NPLs that had not previously been recognised. The reclassification occurred as part of a review of NBE's loan book following the improvement in the bank's reporting systems and controls.

NBE is wholly-owned by the Egyptian government. It offers a wide range of retail, wholesale and investment banking services through its extensive domestic branch network. NBE is still Egypt's largest bank by assets by far, accounting for about a quarter of the system's total. Funding is one of NBE's main strengths and reflects the bank's extensive domestic franchise. It is funded by its large deposit base, almost three quarters of which are retail deposits.

Global Arab Network

Abu Dhabi Economic Vision 2030 - Project financing into growth sectors

Edited By Rami Al-Ali
International banking and financial institutions will be introduced to numerous investment prospects within Abu Dhabi's diverse economy during the 2009 Abu Dhabi Conference to be held from November 10 to 12, 2009 at the Emirates Palace Hotel in Abu Dhabi. Organised by the Abu Dhabi Department of Economic Development (DED) in coordination with MEED Events, the Conference will serve as a business networking platform complementing Abu Dhabi Economic Vision 2030, a series of continuous reform programmes aimed at diversifying the Emirate's economic base.
Prominent figures within diverse economic sectors will lead discussions and debates on project finance challenges, opportunities and strategies across key sectors such as oil and gas, power and water, real estate, aviation, transport, tourism, financial services and manufacturing during Abu Dhabi Conference 2009.

"Abu Dhabi's long-term success strategy involves a comprehensive vision of a diverse economy outside its core energy sector. Developments into infrastructure and industrial projects are key to Abu Dhabi's economic diversification and will be underpinned by its development of the already strong energy sector by introducing gas production. This kind of business environment offers various investment opportunities to financial service providers," said Edmund O'Sullivan, Chairman, MEED Events.

"Abu Dhabi conference will be an opportunity to highlight our strategic economic priorities, and to emphasize on the economic direction of the Emirate within the vision 2030. It will send a clear message about the resilience of our economy, in the context of prudent business as usual", according to Mohamed Omar Abdulla, Undersecretary, Abu Dhabi Department of Economic Development.

Abu Dhabi Conference 2009 will feature various panel sessions, presentations, discussions, interactive debates and informal meetings with over 50 speakers who will provide valuable insights on business trends and strategies .aiming at enhancing the performance of critical business sectors such as domestic banking, a fundamental component of Economic Vision 2030. Experts will review the state of Abu Dhabi's banking and finance industry as well as local investment strategies already in place to transform the emirate into a regional financial services hub benefiting from international standards and best practices .,.

"We welcome the additional help of the regional and international financial services sector in further diversifying Abu Dhabi's economic activities. This present period of correction has allowed our industries to redirect their business vision and reorganise for further growth. Abu Dhabi Conference 2009 will provide an excellent vehicle for the emirate's potential partners to determine the right investments and the right approaches to securing them," added Rashed Al Baloushi, Deputy CEO, Abu Dhabi Securities Exchange.

"The global financial community recognizes that the downturn has also opened up opportunities in more resilient economies such as the UAE. We are joining this conference because we are impressed by Abu Dhabi's diversified approach to growth and would like to gain a strategic position in its lucrative projects sector," concluded Moriyuki Aida, Chief Representative, Japan Bank for International Cooperation.

The 2008 edition of the Conference welcomed over 350 prominent regional and international government and business personalities while more than 400 attendees are expected this year, around 65 per cent of who will be senior-level executives. This year's Conference will comprise six specialized networking events, two interactive master classes, and a new VIP breakfast meeting.

The Abu Dhabi Conference 2009 will be supported by the Department of Economic Development - Abu Dhabi, with Abu Dhabi Water & Electricity Authority (ADWEA) as Associate Sponsor; HSBC as Gold Sponsor; Emirates International Investment Company (EIIC) and Metito as Silver Sponsors; Orient Planet as PR Partner and CNBC as Official Arabic Broadcaster. In addition, supporting organisations include British Embassy UKTI, American Business Group and Royal Institution of Chartered Surveyors.

Global Arab Network

* Capital Intelligence affirms the ratings of Saudi Arabia's Al Rajhi Corporation ARB

Edited by George Haddad
Capital Intelligence (CI), the international credit rating agency, announced that it has affirmedthe ratings of Saudi Arabia's Al Rajhi Banking & Investment Corporation (ARB). The long-term foreign currency rating of A+, the short-term foreign currency rating of A1 and the financial strength rating of A+ are all unchanged, as is the support rating of 2. All ratings carry a Stable outlook.

ARB, whose principal owner is the Al-Rajhi family (44%), and 46% of whose shares are held by the general public, is Saudi Arabia's third-largest bank by total assets with a market share of about 13%. It ranks second by capital funds, and continually ranks as the kingdom's most profitable bank. For many years ARB was Saudi Arabia's only fully Shari'a-compliant bank, but others have joined it in the past decade.

Historically a retail bank, the Bank is currently expanding its corporate business. By virtue of its strong retail base, it has one of Saudi Arabia's least concentrated balance sheets, on both the asset and the liability sides. The expansion of its corporate business has not resulted in neglect of its retail business, which continues to grow, and which the Bank is supporting by means of a renewed branch expansion programme.

Strong capital ratios include a robust CAR, which helps to offset an otherwise tight liquidity profile. While some changes in SAMA's method of calculation of CAR have limited the opportunity for ARB to grow that figure, it remains the highest among Saudi banks. The liquidity position has improved in 2009, and any concerns about it are further mitigated by the size, breadth and stability of its retail deposit base.

By virtue of write-offs, recoveries, and large loss provisioning against its Islamic Financing Facilities (IFFs) in 2008, the Bank greatly improved its asset quality, which had weakened in 2007. Both the absolute amount and the share of non-performing IFFs were reduced substantially and coverage increased almost to a factor of two. While exposure to financially troubled Saudi corporates is estimated to be minimal, the possibility exists that the need to provide for that exposure could affect the Bank's 2009 earnings. However, it is CI's estimation that the Bank's strong earnings power and capital position would make that provision easily manageable.

ARB's ongoing reputation is that of Saudi Arabia's most profitable bank, with an ROAA well ahead of that of its nearest competitor. Profitability is driven by a high investment income differential as a result of the Bank's large pool of non-interest bearing deposits.

ARB's control of expenses has continued, but despite that control it has managed to improve the visual appeal of its sizeable branch network and to add such attractions as VIP rooms for HNW clients at many branches.

ARB was established in 1987, as the successor to a family-owned money-changing operation which had existed since the 1930's. Since the accession of the current CEO to the position vacated by his father, the Bank has expanded technology, conducted a revamping of its branch operations and rapidly expanded its corporate banking operations.

Global Arab Network

*HSBC Bank Middle East - Financial strength rating downgraded

Edited by George Haddad
Moody's Investors Service has today downgraded the bank financial strength rating (BFSR) of HSBC Bank Middle East Limited (HBME) to C from C+ and its long-term local currency debt rating and foreign currency deposit and debt ratings to Aa3 from Aa2. The rating outlook is now stable. Today's rating action concludes the rating review initiated on 17 March 2009.

HBME is a wholly owned subsidiary of HSBC Holdings plc, registered in the Channel Islands, with operations in the Middle East. The new BFSR of C maps to a Baseline Credit Assessment of A3. The three-notch uplift from this Baseline Credit Assessment to the Aa3 long-term debt and deposit ratings reflects Moody's continued assessment of a very high probability of support for HMBE from its parent in case of need.

Today's downgrade reflects Moody's expectation that HBME will encounter pressure on its asset quality and profitability in the countries in which it operates and especially in the United Arab Emirates, which accounts for the majority (around 70%) of the bank's operations. They also take into consideration the recent deterioration in HBME's loan book, both in its corporate loans and in its weakening retail banking exposures. Moody's has also stress-tested the loan book for further delinquencies over the next 12-18 months.

"Our stress tests show that HBME's BFSR of C should be able to withstand the deteriorating credit cycle. No further downgrades of this rating from the C level are therefore expected over the next 12-18 months except in the event of continued large corporate defaults that could cause higher-than-anticipated rises in the bank's non-performing loans and loan loss provision expenses," says John Tofarides, Analyst at Moody's Middle East and lead analyst for HBME.

Following today's downgrades, the ratings of HSBC Bank Middle East Limited are as follows:

The bank's short-term local currency and foreign currency debt and deposit ratings remain unchanged at Prime-1.

The ratings of HSBC Bank Middle East Limited (UAE Branch) were also downgraded to the following:

- Global local currency deposit ratings: Aa3

- Foreign currency deposit ratings: Aa3

The bank's short-term local currency and foreign currency deposit ratings remain unchanged at Prime-1.

The last rating action on HSBC Bank Middle East Limited was on 17 March 2009, when Moody's placed its BFSR and long-term ratings -- as well as the long-term ratings of its UAE branch -- on review for possible downgrade.

Global Arab Network

Gas price drops to its lowest in seven years

Tamsin Carlisle
US natural gas prices have fallen to their lowest in seven years as storage facilities fill up ahead of the winter heating season.
A government report signalling lacklustre demand from the housing industry for manufactured goods also helped push the futures contract for September gas as low as US$3.05 per million British thermal units (Btu) on the New York Mercantile Exchange (NYMEX) on Wednesday, a level last seen in August 2002.

NYMEX gas futures have fallen 45 per cent this year, even as crude has rallied. They are about 77 per cent off the peak of roughly $13.50 per million Btu reached in July of last year and could fall further, analysts said.

“The bearishness for gas has increased because there’s nowhere left to put it,” Tom Orr, the director of research at Weeden and Company in Connecticut, told Bloomberg.

“Brimming storage remains a problem,” Michael Fitzpatrick, a vice president for energy at MF Global in New York, said in a research note. The amount of gas stored in underground caverns in the US had surpassed 3 trillion cubic feet, a level not usually reached until late September, he added.

Jim Hackett, the chief executive of Anadarko Petroleum, which is one of the largest US gas producers, predicted storage facilities would be full this autumn, forcing some producers to shut down wells.

A surge in output from large gas shale deposits and falling demand for gas for industry and power generation have combined to create a glut of the fuel in the US.

That is likely to mute the commodity’s response to any imminent threat to Gulf of Mexico gas installations from hurricanes.

Hurricane Bill, the first of the Atlantic season, is forecast to become a major hurricane with winds of up to 180kph as it heads towards the US from the eastern Caribbean.

But meteorologists in the National Hurricane Center in Miami were not expecting it to enter the Gulf of Mexico.

With ample storage, investors have not felt the need to buy gas as a hedge against supply disruptions.

“It will take a huge disturbance to get natural gas to take off,” Cameron Horwitz, an analyst at Sun Trust Robinson Humphrey in Miami, told Bloomberg, adding that storage levels were 600 billion cu ft higher than a year ago. “That’s a lot of gas to burn off.”

Wednesday's NYMEX gas price was equivalent to a crude oil price of about $18.30 per barrel.

In New York yesterday, crude fell back below $69 per barrel, after climbing above $70 following the release of industry data suggesting a bigger than expected drop in US oil stockpiles.

Global Arab Network

Tamsin Carlisle, Copyright The National, this article first appeared in The National on (August 19. 2009 ).