There were some excited noises from the Middle East after Thomson Reuters reported a 72% jump in quarterly investment banking fees from the region. Some local press presented this as a renaissance in the Gulf, a sign that the good times are back after the financial crisis.
Euromoney commissioned some numbers from our own data partner, Dealogic, to check, and the picture they show is not quite so clear. Dealogic concurs that there was strong growth between the first quarter and the second in fee revenue – from $143 million to $249 million.
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But the truth is, investment banks have earned less in fees year to date than they did in the same period last year, and not much more than half the equivalent figure for 2007, in which the full-year total eventually hit $1.425 billion in fees (by comparison, banks had earned $404 million in fees by July 17 this year).
As our feature on the Middle East capital markets this year shows, the market is lumpy. A 72% quarter-on-quarter climb is not necessarily a good thing: it just proves how the numbers can be skewed by one or two big deals (in this case, a jumbo debt capital raising for Etisalat).
The performance of the markets, in terms of new issuance, was very welcome in the second quarter, and provided evidence of growing maturity in a number of different ways: not just volume but tenor, credit rating and diversity of issuer type. But it was also dominated by just two markets (the UAE and Saudi Arabia) and too few issuers, giving a clear sign of how much further work needs to be done.
That said, there’s no question that there is a feelgood factor back in the Gulf now, most clearly illustrated by the robust health of Dubai. The economy is humming, construction is back underway again, companies are raising capital and audacious shopping malls are being announced like the (bad old) good old days.
A truly sophisticated capital market would be of great benefit, not only to Dubai’s state-backed behemoths, but for the region as a whole – and for local and international investment banks too. But it’s not here yet.