Published: March 01, 2009
Despite the global recession, the Middle East and North Africa (MENA) continues to be a region of attractive business opportunities. Deutsche Bank is one of the few international banks that is strengthening its commercial and transaction banking presence in the region. Isaac Thomas, Regional Head of Trade Finance and Cash Management Corporates, talks about 2008 and prospects for 2009.
There were several highlights, but the biggest one was Deutsche Bank’s decision to build up a specific corporate cash management and trade services team for the region.
My mandate has been to increase the profile of the corporate cash and trade business for Deutsche Bank in the region. We knew that to achieve this, we needed a combination of both internal preparation and market awareness. As a result of the work we have done, we now have a clearly defined Middle East and North Africa strategy for the future. Our senior management is convinced of the growth potential and very supportive of the sustainability of business in the future. As the business in MENA grows, we see it as one of the key pillars of our regional transaction banking business.
Corporate cash management and trade business, as I see it, has been the unsung hero in most of the commercial banking activities in the world today.
From a client interaction perspective, it was important that a regional sales contact be established for our existing small but demanding set of clients. This has helped our business development immensely in 2008 as evidenced by our extremely strong growth in the cash and trade corporate network business from our MENA clients.
Corporate cash management and trade business, as I see it, has been the unsung hero in most of the commercial banking activities in the world today. Given our existing client base, we are in a unique position to extend our cash and trade business to further broaden our base and deepen our proposition with clients globally across the network. I believe we were very successful with this in 2008 and we plan to further exploit these opportunities in 2009 and beyond.
I am also confident of the potential for the commercial banking business in the Middle East. We have the right set of products, service and implementation culture and the technology to compete actively when the market recovers from the current crisis now that we have local capabilities established.
There were - and still are - several important factors behind this. Firstly, many of our existing clients in Europe and Asia that conduct business in MENA have been requesting that we expand our presence here in order to partner their growth aspirations in the region.
The Middle East has been one of the fastest growing regions in the world in recent years, and although growth has slowed, it is a region that is relatively less exposed to the global crisis when compared to other economies. We continue to see multinational corporates setting up offices in this region, which need international banking partners. Countries like UAE and Saudi Arabia have benefitted from unprecedented foreign investment in the last 3-4 years. While some projects have been affected, this region continues to attract investors with large project and trade opportunities. Corporate trade continues to go from strength to strength given their focus on trading, re-exports between Asia and the rest of the world, and the oil related business. Banks that have a close partnership with these key clients will continue to see strong growth even in these tough times. We see this as an important business reason to be based locally and active in the markets.
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2009 will be a very tough year, but we remain optimistic particularly on the trade services and trade finance side. I see more stability, liquidity and continued growth in certain key Gulf markets such as Saudi Arabia and Qatar when compared to other regions in the next 1-3 years.
2009 will be predominantly a year for investment in the business. Our focus is to invest in people, our suite of products, and infrastructure across the region in order that we are in a position to provide the necessary solutions to corporate clients in these markets.
Given our existing relationships with some of the largest corporates in the region, there are significant opportunities for expanding the services we offer to these companies across cash and trade products globally in 2009.
Given our existing relationships with some of the largest corporates in the region, there are significant opportunities for cross-selling our cash and trade products in 2009.
We are looking to develop a greater number of relationships within the region with certain niche products such as cross currency international payments, electronic banking services and open account trade solutions. While trade finance and cash management requirements in MENA may not appear to be as sophisticated as those of corporates in, for example, Europe or the US, there is substantial volume, especially in the mid to large cap segment. In particular, we see very good opportunities in Saudi Arabia and Qatar.
On the trade side, we have seen a temporary pull back to documentary credit related trade during the crisis, especially in late 2008. In 2009, we have seen that clients are looking at achieving a lower cost of funding, and a strong interest in exploring different solutions with banks that would help them in their trade obligations and hedging strategies. So, we see a demand for a ‘back to basics’ approach, looking at the fundamentals of risk, liquidity and financing costs, but companies are willing to explore innovative solutions to address these issues.
As confidence in the market returns, clients which have sought documentary credit solutions in 2008 and 2009 will also be seeking open account solutions, which Deutsche Bank is also well-positioned to provide.
The Middle East and North Africa region is one of contrasting economies that can be grouped broadly into two categories: firstly, the one that relies on oil and secondly, the more traditional economy based on manufacturing, construction, re-export of goods and services etc.
The continuing world recession and credit crisis has also seen oil prices drop dramatically from their dizzy heights of the 2nd to 3rd quarter of 2008. As a result, the low price of oil remains a worry for many corporates with oil-based revenues in the region, although there are, of course, opportunities for those who need oil to fuel their business activities.
More importantly, we have increasingly seen how the liquidity crunch is affecting the corporate funding requirements. Liquidity will remain tight for most of the year, and corporate treasurers will place more value on the banks that support them during this time than at any time before.
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