MONDAY, DECEMBER 23, 2013
BUSINESS
Lean years leave banks short of dealmakers Volatile markets deter firms from raising funds LONDON: Years of quiet deal markets in Europe have left a generation of junior investment bankers with little opportunity to cut their teeth, and, with many senior staff let go, banks are finding themselves short on experience as business stirs again. With stock markets volatile during the financial crisis and European sovereign debt woes, many companies have held back from raising new funding, going public, or attempting big merger deals. While the European mergers and acquisitions market is still sluggish, with 2013 its slowest year in a decade, the volume of share sales has picked up, according to Thomson Reuters data, with companies raising more this year than any year since 2009. Bankers working in the sector say this has already exposed some of their junior counterparts as a little wet behind the ears. “For the next couple of years the people point will be key. There really is a lack of experienced talent almost everywhere. It will be a real issue. Only a few banks have kept senior teams,” said one senior London-based investment banker. Bankers say the size of many equity capital
MADRID: People walk past the Bankia headquarters tower in Madrid
Spain’s Bankia rides rollercoaster from ruin to riches MADRID: Bankia, after dragging the entire Spanish financial system to the brink of catastrophe, is about to make a remarkable comeback to the top ranks of the Madrid stock market. Today, Bankia will enter the IBEX-35 index of top listed companies, capping a rollercoaster ride for the bank, and the country. Born in 2010 from the merger of seven troubled savings banks, including Caja Madrid, Bankia listed in July 2011 with great ceremony, touting its “enormous potential” and its likely role in “dynamising” the Spanish economy. Less than a year later, in May 2012, Spain’s government had to nationalize Bankia and pump in 20 billion euros ($27 billion) to avert its collapse as the lender drowned in bad loans and revealed ever deeper financial losses. Soon after, Spain’s euro-zone partners agreed to offer the country a rescue loan of up to 100 billion euros to shore up Bankia and other shaky lenders threatening the whole economy. Spain ended up using 41 billion euros of the loan in a reform program, which expires January 23. “Bankia was part of the problem of the Spanish economy,” Economy Minister Luis de Guindos admitted recently in a news conference. “Today, it is part of the solution.” On January 2 of this year, as Bankia restructured, it was removed from the IBEX-35 index. Its return to the index on Monday comes exactly one month before Spain completes the banking reforms agreed with Europe. Now the fourth largest Spanish bank with a market value of 12 billion euros, “it was an obvious candidate to return to the IBEX-35,” said Javier Urones, analyst at the XTB brokerage. “It is a good sign because it gives the stock a lot of visibility, opening it up to the interest of many international investors,” Urones added. Jorge Soley, financial management lecturer at the IESE Business School, said the return to the IBEX-35 index was a reward for the bank’s clean-up under a new team. “It has done its homework,” he said. In shedding doubtful property-related assets and selling several investments, it
emerged from the red to post a net profit of 161 million euros in the third quarter. Now Bankia, which boasts seven million customers, is “a solvent and well-capitalized entity,” said its chief executive, Jose Ignacio Goirigolzarri. “We should make it profitable.” The turnaround has had a social cost: the group has cut its branches from 3,100 to fewer than 2,000. By 2015 it will have cut 6,000 jobs, 28 percent of the total. Shareholders, too, have had to swallow bitter medicine, watching the stock crash 90 percent since listing. When the Bankia chief gives speeches, he is regularly greeted by dozens of pensioners decrying the loss of their savings in preferential shares that the bank had persuaded them to buy. Image makeover “It is a bank with a very bad image in Spain,” said XTB’s Urones. “It still has a long way to go to be on a similar footing to other heavyweights of the Spanish financial sector.” Bankia’s greatest liability? “Its property investment portfolio,” Urones said. It is almost entirely based in Spain, which is groaning with unsold homes. “It still has a lot to do,” warned Lloyds Bank analyst Alberto Roldan. “It has to finish restructuring, sell branches, reorganize the size of the group, optimize its client portfolio and, don’t forget, the last stage: returning the (public) money that was injected.” At the same time, Bankia’s legal problems remain. Some 30 former Bankia executives are being pursued in the courts for fraud, embezzlement and falsifying accounts. What does the future hold for Bankia? Being sold. The European Union has given the Spanish government, which owns 70 percent of the capital, until 2017 to privatise the bank. The government says it has already seen signs of interest, though some analysts say there is no hurry with much of the bank’s restructuring still to be completed in 2014. “It has until 2017 to try to clean up its image, push up its share price and regain investor trust,” said XTB’s Urones. —AFP
markets (ECM) teams, who run deals ranging from new stock market flotations to sales of secondary shares by already listed companies, has shrunk by around 30 percent during the years of lean deal flow, and the pick-up in volumes has not yet spurred new hiring. “It takes a long time to build a team that works,” said the banker. The 2014 outlook for investment banking services survey published by Thomson Reuters and Freeman Consulting this month found corporate decision makers ranked detailed industry knowledge as by far the most important factor when selecting a bank. Of those surveyed, 80 percent in the Europe, Middle East and Africa region ranked this as a critical factor, versus just 15 percent citing a competitive fee structure as key. Bankers say fewer advisors are now being invited to pitch to work on upcoming deals, with the higher ranked advisory banks widening the gap within the European top 10 league table. The ECM rankings for 2013 showed an almost $7 billion gap between the financing raised for clients by sixth-placed UBS and seventh-placed Citi. At the same point in 2012, the
top 10 banks were more closely matched, with gaps of only $2-3 billion. No risk appetite “The bulge bracket is getting smaller, not bigger,” said one senior ECM banker, adding that a willingness to commit capital to deals was also contributing to the widening of this gulf. “If you do not want to play the risk deals it has an impact on the ranking.” In M&A, some are adapting to the lack of activity by moving down the size scale. “We have a strategy of doing smaller deals,” said a banker. “It’s important to be in the flow and follow clients even on smaller deals ... and the deal flow is also important for our junior bankers to get experience.” But fewer banks are now offering all investment banking products across all regions and are instead narrowing their focus, a decision some bankers say is not sustainable as clients will choose those able to offer them the full range. “If you are not a top-tier advisor it is going to be increasingly difficult to make a go of it in Europe,” said one senior banker. “You will continue to see large banks pulling out of things, restructuring their business model.” — Reuters
Gold facing first annual Burgan Bank price drop since 2000 sponsors Kuwait LONDON: Barring a late price surge, point is very important-the concept of gold’s value will suffer its first annual QE leading to inflation has not really Yacht Show 2014 drop since the start of the millennium, happened.” Gold is seen also as a hedge while the precious metal risks further losses in 2014. Gold stood at $1,205 an ounce Friday on the London Bullion Market, down almost 27 percent in 2013 on weaker demand and easing inflation-snapping twelve years of uninterrupted annual price growth. That leaves gold, whose twin drivers are jewellery demand and investment buying, set for its the first annual price loss since 2000 when its value had fallen by 5.6 percent. “There are two distinct factors behind the gold price decline this year,” Macquarie banking group analyst Matthew Turner told AFP. “ The first one is obviously the investor sell-off,” he said, citing a sharp slump in demand from so - called exchange -traded funds (E TFs) that allow investment without trading on the futures market. According to Turner, ETFs are on course to have sold 840 tons of gold this year with the metal’s haven status dented by signs of economic recovery despite ongoing strains across the euro-zone. Gold’s value took a knock during 2013, also from growing speculation that the US Federal Reserve would start to scale back its quantitative easing (QE) stimulus program that propped up the world’s biggest economy by billions of dollars. Gold in June hit a three-year low at $1,180.50 an ounce on Fed speculation, before bouncing back. It came close to matching this level at the end of last week as the US central bank ended months of speculation by finally announcing it would start to scale back its stimulus next month. Turner said gold demand had fallen for a variety of reasons, including “a growing anticipation of the Fed ending QE... a reduced sense of crisis around the world and the fact that inflation has fallen in most countries this year, especially in the US”. He added: “This last
against rising prices. Fed tapering of its $85-billion-a-month QE policy is meanwhile set to boost the greenback, making dollar-priced gold more expensive for countries using other currencies, further weighing on demand. Demand crunch Gold has been pushed lower also by rising supply, Turner said, noting that global gold mine output was increasing amid falling purchases by central banks. In a further blow, the government of top consumer India has hiked gold customs duty three times this year to curb imports and rein in its current account deficit. “In the very near term, Fed monetary policy stimulus will continue to be the big driver of gold prices, with improving economic data in the US increasing bets of (further) stimulus withdrawal,” said National Australian Bank (NAB) economist James Glenn. The US central bank last Wednesday announced that it would cut QE by $10 billion (7.3 billion euros) a month to $75 billion from the start of 2014. Analysts are forecasting further $10-billion cuts throughout the course of next year. While NAB predicts that the price of gold will drop to $1,050 an ounce by late 2014/early 2015, Commerzbank is forecasting the metal to reach $1,400 by the end of next year as global monetary policy stokes inflation. “Gold is... likely to gain greater acceptance again from Western investors as a means of hedging against a loss of purchasing power due to inflation and currency devaluation,” they said in a research note. Gold has fallen back sharply from a record high of $1,921.15 an ounce recorded in September 2011, when investors rushed to snap up the precious metal on fears of a fresh global recession amid the euro-zone debt crisis. —AFP
KUWAIT: Burgan Bank recently announced its platinum sponsorship of the second edition of the much anticipated luxurious Kuwait Yacht show, attrac ting visitors and luxur y marine enthusiasts from all over the world. The high-end yacht exhibition and show, which is scheduled to take place from Februar y 2 - 5, 2014 at the Marina, will contain some of the most exclusive super yachts in the world, and is geared to be three times bigger with an increased number of prestigious international dealers. The exhibition and show are expected to be one of the most popular events held in Kuwait this year, giving visitors the chance to explore the latest and most modern maritime craft, check on new developments in the industry, while also enjoying fine and exclusive services. Burgan Bank’s keen participation this year serves as a platform to offer its elite customers a distinct opportunity to view high-end yachts and brands showcased in one location. The Bank accordingly has setup a VIP Lounge to welcome and cater to its clients and visitors. Bashir Jaber, Assistant General Manager - Group Corporate Communications at Burgan Bank said: “Burgan Bank is proud to sponsor an exhibition that brings visitors from all over the world and puts Kuwait, its long love and history with the marine culture, on the international map as a hub and premier destination and integrates such diverse offerings on local grounds. Kuwait’s long history with the sea makes it the perfect location to continue hosting such luxurious functions on an international level.” Sponsoring such events falls in line with Burgan Bank’s overall approach of delivering exclusive award winning services that cater to the varied needs of its wide customer base. The Bank was recently recognized as the “Best Private Bank in Kuwait 2013” for the third consecutive year, from Capital Finance International, an added testimony to its strong private banking operations, exclusive and tailored customer services, and successful track record of international recognitions of excellence.
EXCHANGE RATES Al-Muzaini Exchange Co. ASIAN COUNTRIES 2.722 4.569 2.667 2.164 2.859 225.600 36.541 3.639 6.372 87.030 0.271 0.273 GCC COUNTRIES Saudi Riyal 75.590 Qatari Riyal 77.886 Omani Riyal 736.360 Bahraini Dinar 752.890 UAE Dirham 77.197 ARAB COUNTRIES Egyptian Pound - Cash 40.000 Egyptian Pound - Transfer 40.570 Yemen Riyal/for 1000 1.322 Tunisian Dinar 172.410 Jordanian Dinar 400.300 Lebanese Lira/for 1000 1.902 Syrian Lira 2.020 Morocco Dirham 34.981 EUROPEAN & AMERICAN COUNTRIES US Dollar Transfer 283.350 Euro 390.460 Sterling Pound 465.830 Canadian dollar 268.960 Turkish lira 135.700 Swiss Franc 319.810 Australian Dollar 255.580 US Dollar Buying 282.150 GOLD 20 Gram 231.000 10 Gram 117.000 5 Gram 61.000 Japanese Yen Indian Rupees Pakistani Rupees Srilankan Rupees Nepali Rupees Singapore Dollar Hongkong Dollar Bangladesh Taka Philippine Peso Thai Baht Irani Riyal transfer Irani Riyal cash
UAE Exchange Centre WLL COUNTRY Australian Dollar Canadian Dollar Swiss Franc Euro US Dollar Sterling Pound Japanese Yen Bangladesh Taka Indian Rupee Sri Lankan Rupee Nepali Rupee Pakistani Rupee UAE Dirhams Bahraini Dinar Egyptian Pound Jordanian Dinar Omani Riyal Qatari Riyal Saudi Riyal
SELL DRAFT 262.45 270.72 323.46 392.54 282.25 468.20 2.81 3.631 4.610 2.161 2.885 2.640 76.91 751.23 40.97 401.71 734.03 77.94 75.40
SELL CASH 262.000 271.000 323.000 395.000 285.000 471.000 2.800 3.800 4.850 2.600 3.400 2.760 77.200 752.100 41.100 406.800 740.100 78.300 75.600
Dollarco Exchange Co. Ltd Rate for Transfer US Dollar Canadian Dollar Sterling Pound Euro Swiss Frank Bahrain Dinar UAE Dirhams Qatari Riyals Saudi Riyals Jordanian Dinar Egyptian Pound Sri Lankan Rupees Indian Rupees Pakistani Rupees Bangladesh Taka Philippines Pesso Cyprus pound Japanese Yen Thai Bhat
Selling Rate 282.700 269.510 461.550 390.375 319.945 746.465 76.945 78.500 76.255 398.510 40.993 2.160 4.567 2.652 3.632 6.379 694.370 3.745 09.800
Syrian Pound Nepalese Rupees Malaysian Ringgit Chinese Yuan Renminbi
3.010 3.855 88.370 46.975
Singapore Dollar South African Rand Sri Lankan Rupee Taiwan Thai Baht
0.222116 0.021594 0.001872 0.009439 0.008519 Arab
Bahrain Exchange Company CURRENCY
BUY
SELL
Europe 0.007354 0.008354 0.454152 0.463152 0.006128 0.018128 0.048075 0.053075 0.383235 0.390735 0.041694 0.046894 0.081644 0.81644 0.008104 0.018104 0.039000 0.044000 0.311563 0.321763 0.139334 0.146334 Australasia Australian Dollar 0.244783 0.256283 New Zealand Dollar 0.227901 0.237401 America Canadian Dollar 0.261903 0.270403 US Dollars 0.278850 0.283200 US Dollars Mint 0.279350 0.283200 Asia Bangladesh Taka 0.003522 0.004122 Chinese Yuan 0.045114 0.048614 Hong Kong Dollar 0.034408 0.037158 Indian Rupee 0.004414 0.004815 Indonesian Rupiah 0.000020 0.000026 Japanese Yen 0.002670 0.002850 Kenyan Shilling 0.003349 0.003349 Korean Won 0.000259 0.000274 Malaysian Ringgit 0.084066 0.090066 Nepalese Rupee 0.002974 0.003144 Pakistan Rupee 0.002444 0.002724 Philippine Peso 0.006405 0.006685 Sierra Leone 0.000069 0.000075 Belgian Franc British Pound Czech Korune Danish Krone Euro Norwegian Krone Romanian Leu Slovakia Swedish Krona Swiss Franc Turkish Lira
0.228116 0.030094 0.002452 0.009619 0.009069
Bahraini Dinar 0.744074 Egyptian Pound 0.037518 Iranian Riyal 0.000078 Iraqi Dinar 0.000187 Jordanian Dinar 0.394864 Kuwaiti Dinar 1.0000000 Lebanese Pound 0.000138 Moroccan Dirhams 0.022632 Nigerian Naira 0.001197 Omani Riyal 0.728903 Qatar Riyal 0.077009 Saudi Riyal 0.074817 Syrian Pound 0.002168 Tunisian Dinar 0.166061 Turkish Lira 0.139334 UAE Dirhams 0.076055 Yemeni Riyal 0.001285
0.752074 0.040618 0.000080 0.000247 0.402364 1.0000000 0.000238 0.046632 0.001832 0.734583 0.078222 0.075517 0.002388 0.174061 0.146334 0.077204 0.001365
Al Mulla Exchange Currency US Dollar Euro Pound Sterling Canadian Dollar Indian Rupee Egyptian Pound Sri Lankan Rupee Bangladesh Taka Philippines Peso Pakistan Rupee Bahraini Dinar UAE Dirham Saudi Riyal *Rates are subject to change
Transfer Rate (Per 1000) 282.800 388.750 463.500 267.550 4.555 40.915 2.161 3.638 6.356 2.668 753.000 77.050 75.500
