Finance

HSBC predicts slowdown in revenue in Middle East

HSBC is planning to lay off up to three percent of its 12,000-strong workforce in the Middle East and North Africa as it seeks to cut costs. HSBC Holdings Plc’s Middle East unit expects a “short-term” slowdown in revenue because of unrest in the region, said Steve Bottomley, head of strategy and planning for the Middle East and North Africa. Political turmoil that toppled the rulers of Tunisia and Egypt and is continuing in Yemen, Syria and Libya increased the cost of borrowing for companies and governments in the region and disrupted stock markets. HSBC, which is ranked the second-biggest underwriter of bonds in the Gulf, arranged 50 percent less in sales this year, according to data compiled by Bloomberg. Europe’s largest bank by market value said last month it plans to cut less than three percent of its workforce in the Middle East and North Africa to improve efficiency. “It’s too early to determine the full impact of the regional crisis,” Bottomley said at a news conference in Dubai. “There will be some revenue slowdown in our business in the short term.” The London-based bank managed $862.8m in Gulf bond sales this year compared with $1.7bn in the same period last year. The Middle East unit almost doubled pretax profit in 2010 to $892m as provisions for bad loans declined amid a rebound in the region’s economy. Pretax profit fell 74 percent in 2009 to $455m as loan-loss charges jumped. “We’re not seeing anything significant at the moment, but we expect to see a slowdown in Egypt and Bahrain,” he said.
Source: Bloomberg

Doha Bank sees no layoffs in Islamic business

Doha Bank will not lay off any employees impacted by the Qatar central bank’s ban on conventional banks engaging in Islamic finance, its chief executive said on Monday. Raghavan Seetharaman said the bank will honor existing commitments from Islamic business undertaken before Qatar’s decision. “We have committed billions of riyals that we have to go ahead and finance. There is no stopping on that,” Seetharaman said on the sidelines of a conference in Abu Dhabi. Seetharaman said the bank will retain its Islamic branch employees to oversee the sharia-compliant business it currently has but is not writing new business. He added that excess staff has already been deployed to its conventional operations. In February, Qatar’s central bank asked conventional lenders to close down their Islamic operations amid worries of overlap between the two. The order gave lenders a grace period until Dec. 31 to shutter operations but did not provide clarity on whether banks can apply for separate Islamic banking licenses or be permitted to sell assets to Qatar’s wholly-Islamic banks. Islamic operations accounted for around 11 percent of Doha Bank’s total book value, Seetharaman said in February. Separately, Seetharaman said Doha Bank will be hiring additional staff as it sets up a new project and risk advisory division. “Project and risk advisory, that is the new division we are creating. It is at the first stage, and there has been a good response. We are going to work on it.”
Source: Reuters

Qatar investment forum set for November

QInvest, a leading bank in Qatar, has announced the third annual Qatar Global Investment Forum 2011 (QGIF 2011) will take place in November in Doha. Hosted by QInvest and organized by Institutional Investor, the event will be held on November 16 at the Four Seasons Hotel. High-profile investors, business leaders and commentators will share their expertise and insight on current and future challenges and opportunities in Qatar and the region, a statement said. The second annual Qatar Global Investment Forum welcomed over 350 international and regional investors with industry leaders, and high-profile government officials, from over 30 countries.
Source: TradeArabia News Service

Aman wins World Finance award

Dubai Islamic Insurance and Reinsurance Company (Aman) has been awarded the World Finance Award for the best Takaful provider in 2011. “We are very proud to receive this award, given our constant efforts to offer excellence in service delivery,” said Hussein Al Meeza, CEO and managing director of Aman. “We have a number of programs underway to ensure that we support the UAE’s national vision, and the ambitions of the global Islamic insurance industry. We pride ourselves on our high levels of client servicing, and our Emiratisation and training policies.” Aman’s recognition as leading Takaful Provider comes at a difficult time for the insurance industry globally, as well as for the more specialized Takaful sector, he added. “The adverse impact on reinsurers will translate to an increase in rates and very stringent terms for coverage like earthquakes or political troubles leading to loss or damage to properties. As a result, it is anticipated that it’s going to be a difficult year for the Takaful industry,” explained Al Meeza. The company has recently partnered with ICICI Lombard General Insurance of India, which is part of the Fairfax Group, to introduce two new Medical products in the market, and this is expected be followed by several new products in the near future. “Despite a difficult start of 2011, Takaful and Islamic banking are now buzzwords in today’s financial world and are globally recognized in the key financial centers of the world,” said Al Meeza. “Takaful products grew 27 per cent year on year between 2004 and 2007, prior to the economic slowdown. It is estimated that Islamic financial assets have exceeded the 1 trillion mark globally, with Insurance products playing a key role in this expansion.” “Aman remains cognizant of its leadership position, and is working to champion Islamic insurance or Takaful as a viable alternative to conventional products globally. We are constantly revaluating our portfolio and introducing innovative solutions in association with our valued business partners,” he concluded.
Source: TradeArabia News Service

Dubai close to finalising $800m Salik deal

Dubai is close to completing an $800m loan deal secured by receipts from the Salik road toll system operating by the Roads & Transport Authority (RTA). The loan is being raised by the Dubai Department of Finance through a special purpose vehicle called Salik 1. The debt will have a tenor of six years and will pay a margin of 350 basis points above the London interbank offered rate (Libor). The deal is expected to close by the end of the month and so far commitments from banks add up to around $1.2bn, according to sources close to the deal. It is still unclear if the deal will be increased in size. After launching the deal in early April, banks were given until early May to respond with loan commitments. However, several banks asked for an extension until mid-May to finalize their commitment levels. The US’ Citigroup is arranging the deal along with local banks Emirates NBD, Commercial Bank of Dubai and Dubai Islamic Bank. Proceeds from the deal will be used to fund other infrastructure projects in the Emirate. Securitization involves using steady income streams as security on loans to help lower the cost of borrowing. Dubai Electricity & Water Authority has previously completed two securitizations based on the income it receives from utility bills. Dubai is expected to use the securitization of its revenues from well-performing state-owned assets as a means of raising cash will it tries to overcome its debt burden, estimated at more than $100bn, well above the emirate’s annual GDP of about $80bn.
Source: MEED

Egypt probes illegal transactions

UAE companies that have invested in Egypt may stand to lose millions of dollars as the state runs an investigation into alleged corruption by former government officials who sold land and assets to investors below market prices, lawyers say. If investors acquired land through bribery, profiteering, cronyism, from public servants who abused their position or through other illegal means, then under current Egyptian law they will be required to return the land, face a jail term, and pay a fine equal to the benefit they received, Mohamad Al Damaty, Undersecretary of the Egyptian Bar Association, told Gulf News by phone. “If the investor got land without using illegal means, then the law has nothing on him. But these are a minority. No one gets a measure of land for 50 Egyptian pounds unless they paid under the table,” he said. If the Egyptian government finds the original contract invalid, improper or if there’s corruption involved, then it can take steps to recover the land or assets, provided there is proof, said Paul Turner, Regional Head of Arbitration with Al Tamimi & Company Legal Advocates law firm, adding that investors can lose their assets if there is a breach of fair play. However, some UAE and other investors could also gain from compensation. The Al-Futtaim Group is preparing international litigation against Egypt for $3.5 billion (Dh12.8 billion) in compensation for land it owned in New Cairo, after the government demanded an additional 900 million Egyptian pounds from the Emirati company, according to the Egyptian newspaper Al Masry Al Youm. When asked for a confirmation on the report, Al-Futtaim said it cannot provide additional information as “this matter is still ongoing.” “We are confident that despite short-term uncertainties, Egypt and Egyptians will weather this storm and convert the uncertainties into long-term opportunities that will help Egypt capitalize on this unique opportunity. We look forward to remaining in the Egyptian market and possibly even growing our business further in the future,” it said in an emailed statement. Al-Futtaim said it invested more than 2.7 billion Egyptian pounds in its Cairo Festival City project in New Cairo and another 5.7 billion pounds in construction. The political risk associated with the ongoing investigations and expectations of populist economic policies could shake up investor confidence and harm foreign investment in Egypt. “The demonstrable strategy of the new regime to distance itself from the old one in terms of the investigation of personal and corporate transactions with the former government and the important changes with previous foreign policy both create risks for capital inflow (regardless of the moral or realpolitik basis for these investigations and changes),” stated a recent report by Citibank. The Egyptian authorities and the future government would not want to have a track record of nationalizing investors’ assets because it would discourage new investments. They should consider its actions with existing investors carefully, said Turner. “The new government should be extremely careful before making allegations that harm the economy unless they have proof,” he said. “If things are done by the book, UAE companies have nothing to worry about.” UAE investors facing charges can make a claim against Egypt with the International Court for Settlement of Investment Disputes (ICSID) under a bilateral investment treaty between Egypt and the UAE, which protects investments by Emiratis in Egypt. “[It] is designed to enable an investor from one country to invest in another country with a certain degree of comfort and security knowing full well that if his investment is interfered with by the government, then claims under the treaty can be made against the government,” said Turner. The outcome of a claim put forward to the ICSID is enforceable, he added. “Normally a country cannot be sued because it is immune from attack in foreign courts ... By signing up to a bilateral-investment treaty (BIT), countries lose that immunity because they agree to allow claims against them to be referred to arbitration before ICSID.” However, if a claimant goes through the process and obtains arbitration against the state, he still has to enforce it. That usually means going to the country in question and asking for payment. At that stage, the country could claim that its assets are immune from enforcement. However in some BIT’s the state agrees to waive its rights to claim its assets are immune from enforcement, so in each case one has to look carefully at what the BIT says, Turner added.

Egypt is considering a draft law to reconcile with businessmen and foreign investors over property acquired through illegal means under the former regime. “This is a stab in the heart of the Egyptian revolution. We are against this law. It sets free corrupt individuals,” Mohammad El Damaty, Undersecretary of the Egyptian Bar Association, told Gulf News. The “Freedoms Committee” of the Bar Association is meeting to voice its protest against the proposed law. The draft law would allow defendants to return the land they acquired below market price by direct allocation rather than public auction and in return the state drops charges against the investor, he explained. It is intended as a bid to reconciliate with businessmen and encourage foreign investments to return to Egypt, experts say. However, El Dematy criticized the law as intended to release former ministers and ruling family from jail on charges of selling vast quantities of land for cheap prices, he added. The current law suits brought by the state against some investors will create an honest and fair environment for future investors, free from corruption and obstacles, he added.
Source: Gulf News