* GCC banks climbing regional league tables
* Double-digit growth in assets
* Smaller local banks also expanding business scope
* Basel III regulation one reason for contrast with foreign
* Flow of high-profile personnel shifts to local
By Stanley Carvalho and Dinesh Nair
ABU DHABI/DUBAI, June 19 When British banker
Michael Tomalin took the top job at National Bank of Abu Dhabi
in 1999, the lender had about $9 billion in assets - tiny by
global standards - and its operations were largely confined to
the oil-rich emirate of Abu Dhabi.
Today, NBAD has a presence in 14 countries and
assets of about $100 billion, and is heavily involved in
international businesses such as loan syndications, private
banking for wealthy clients, and advising on mergers.
Such change is being repeated across the wealthy oil
exporting countries of the Gulf as powerful economic trends
combine to strengthen the region's local banks while humbling
their foreign rivals.
It amounts to a shift in the banking industry's balance of
power, which looks set to continue in coming years; NBAD, for
example, has said it plans to have a presence in 41 countries
across the Middle East, Africa and Asia by 2021, and sees
international operations contributing 40 percent of its
operating earnings by that time.
"Perceptions have changed over the years. The market
recognises we are now a bank with the balance sheet muscle and
the intellectual capacity to compete with global banks on level
terms," Tomalin, who retires as chief executive this month, said
in an interview.
Operating income at the 32 largest banks in the six-nation
Gulf Cooperation Council jumped 74 percent between 2006 and
2012, according to a study by the Boston Consulting Group.
Meanwhile, income at their international peers fell 9 percent.
GCC banks such as NBAD are still much smaller than the
world's largest institutions, which each have over $2 trillion
of assets, but the gap is narrowing. Assets in the GCC banking
sector, two-thirds of them held by the 20 biggest local banks,
increased 11 percent in 2012 to $1.47 trillion, estimated QNB
Economics in Qatar.
One reason for the Gulf banks' success is the strength of
their home economies, which have ridden out the global financial
crisis of the past five years more smoothly than many economists
expected, thanks to heavy spending by governments.
High oil prices have given local banks access to huge pools
of funds which they can use to expand their balance sheets and
make foreign acquisitions.
The fact that most of the top Gulf banks, including NBAD,
are largely state-owned has probably helped them, by ensuring
financial security and in some cases, access to business.
Expansion of the banks fits in with the national policy of most
Gulf countries, which are marketing themselves as international
But other trends have also helped local banks. The global
financial crisis has in the last few years prompted some big
Western banks to pull in their horns, cutting their teams in the
Gulf as they focus on repairing their balance sheets back home.
This has left a gap for Gulf banks to fill.
At the same time, cash-rich Gulf banks are finding it less
difficult than Western banks to meet stricter capital and
liquidity requirements that are being imposed across the world
under the Basel III regulatory regime.
"The regional banks have sound capitalisation, sound funding
profiles and they have cleaned up their balance sheets
significantly," said Paul-Henri Pruvost, an associate director
at credit rating agency Standard & Poor's. "Unlike global banks,
Basel III is not necessarily a constraint for these banks."
The results are beginning to show in the league tables which
record individual banks' share of various sectors.
As late as 2010, Gulf banks were largely absent from
investment banking league tables. But Saudi Fransi Capital, the
investment banking arm of Banque Saudi Fransi, Qatar
National Bank and Samba Financial Group's investment
banking division held the top three spots for fees from
arranging equity offerings in the Middle East last year,
according to Thomson Reuters data.
They replaced Bank of America Merrill Lynch, Morgan
Stanley and Deutsche Bank, which held the top spots
Saudi Arabia's National Commercial Bank earned the most fees
from arranging syndicated loans in 2012, taking in $9.4 million
and replacing HSBC Holdings, which was the top arranger
in 2011, the data shows.
NBAD says it handled 20 debt issuance deals worth about
$16.3 billion in 2012, after arranging only four such issues in
Even smaller local lenders are stepping in, identifying
niche business areas where they believe they have competitive
National Bank of Fujairah, based in the small
emirate of Fujairah, part of the United Arab Emirates, is
setting up a financial advisory business in Dubai's tax-free
financial zone, it said this month.
"There's a growing demand for financial advisory services in
the mid-tier market currently not served by international
players," said the bank's chief executive, Vince Cook.
Another sign of the rising strength of local banks is a
shift of high-profile personnel to them. A decade ago, foreign
banks operating in the Gulf cherry-picked many of their
executives from local institutions; now, the flow is
increasingly in the other direction.
Tomalin will be replaced by Alex Thursby, who spearheaded
Australia and New Zealand Banking Group's international
expansion before joining the Abu Dhabi bank.
Abu Dhabi's First Gulf Bank hired Simon Penney,
previously Royal Bank of Scotland's chief executive for
the Middle East and Africa, to help expand its wholesale banking
business, the lender said in May.
QInvest, a Doha-based bank, has appointed Michael Katounas,
previously with Swiss lender Credit Suisse, to run its
investment banking division. Last year, the heads of the Qatar
operations of Goldman Sachs and Morgan Stanley joined local
banks in that Gulf state.
"If you believe in the prospects of the region, then working
for a local bank has increasingly become a better option now
than being employed by a large bulge-bracket firm," said a
Dubai-based banker who resigned from a global bank last year. He
declined to be named because of commercial sensitivities.
"These banks are here to stay and won't run away once a
crisis hits the region. They are embedded here and they are
(With additional reporting by David French; Editing by Andrew