Germany’s Deutsche Bank has undergone a dramatic restructuring of its Middle East project finance business, cutting most of its Dubai-based staff as it looks to concentrate on arranging deals.
The bank is understood to be trimming staff involved in project finance down from about 10 bankers to three.
Over the past few years, Deutsche Bank has been appointed as an adviser by several project sponsors, but the global financial crisis, followed by a subsequent drying up in activity in the project finance sector has hit appetite in the bank for making long tenor loans on projects.
Coupled with that, new banking regulations will make it even less attractive for banks to hold low-yielding assets, such as project finance for 15-20 years.
“It is a difficult time for the European banks anyway, and the project finance market in the Middle East has been depressed since 2008,” says one project finance banker at a rival bank. “They were really hoping that the project bond market would take off and it hasn’t.”
Another Dubai based banker says: “They are not totally getting out of project finance, but they are really reducing their capabilities.”
The bank is currently involved in the sukuk (Islamic bond) for the Jubail refinery in Saudi Arabia, and has also been advising the Abu Dhabi Department of Transport on its transport masterplan.
Under the restructuring, Dolan Hinch is expected to remain with the bank as head of the project finance team.
The number of banks actively involved in the Middle East project finance sector has dropped dramatically since the 2008 financial crisis. There are now only between 12-15 banks actively involved in the project finance sector, not including some of the local banks that typically only lend on projects in their own country, down from about 45 at the peak of the market in 2006.
“There has been a refocus away from labour intensive advisory work to arranging work,” a spokesperson for the bank said.