International banks struggling to compete with local institutions on lending
Rising liquidity at local banks is making them increasingly competitive against their international counterparts in the regional loan markets, according to a senior banker at the UK’s Royal Bank of Scotland (RBS).
“Local banks are attracting enormous amounts of deposits, [which is] making them increasingly competitive against international lenders,” says Jacco Keijzer, head of debt capital market for the Middle East and Africa at RBS.
Several recent deals in the region have featured only limited involvement from international banks. The Dubai Duty Free $1.5bn loan is expected to have only three international banks involved as lenders.
As a result, some international banks based in the Middle East, and without local deposit-taking abilities, will struggle to compete against local competition, adds Keijzer. Deals are also expected to increasingly feature a mixture of currencies, as well as a loan and bond element.
He adds that, “banks are [now] less willing to lend beyond five years”, because of new banking regulations that will put pressure on the way developers in the region fund projects. “Anything more than five years in tenor will have to also look for alternative sources of funding besides the bank market.”
This is expected to primarily be the bond market, and RBS is already working on several potential project bonds, Keijzer says.
The comments echo views of bankers across the region expressed at the Bonds and Loans Conference in Dubai on 29-30 May.