Mitsubishi UFJ optimistic on Saudi project finance, Aramco IPO role

DUBAI (Reuters) - Mitsubishi UFJ Financial Group 8306.T (MUFG) expects double-digit growth in its project finance business in the Middle East in 2017, driven partly by Saudi Arabia's efforts to reduce its dependence on oil, the bank's co-head in the region Elyas Algaseer said.

People are reflected in the logo of Mitsubishi UFJ Financial Group's bank of Tokyo-Mitsubishi UFJ (MUFG) in Tokyo, Japan, May 16, 2016. REUTERS/Thomas Peter

Saudi Arabia’s push to diversify its economy under its National Transformation Plan provides a big opportunity for international banks, as well as the privatization of state-controlled enterprises such as Saudi Aramco’s [IPO-ARMO.SE]planned initial public offering.

MUFG, which is ranked as one of the leading project finance lenders globally and in the region, is working with clients in the Middle East including Saudi Aramco, Acwa Power IPO-ACWA.SE and Mubadala Development [MUDEV.UL], Algaseer said.

MUFG was expecting around $350 billion in project finance opportunities in Saudi Arabia by 2022 and more across the region in areas such as power, alternative energy, health and education, Algaseer said.

“In this part of the world, they do have good liquidity reserves and good underground energy reserves and a good need to shift from relying on oil, so if these come through we should be on a lot of these deals because of our credentials and because of our know how,” he said in an interview.

Algaseer said there were also a lot more openings from privatizations in the country, estimating that there would be $300 billion in such opportunities by 2022.

Saudi Arabia already has plans to list up to 5 percent of oil company Saudi Aramco that could raise as much as $100 billion via a listing in Riyadh and one or more international markets.

Japan’s Prime Minister Shinzo Abe this month asked Saudi Arabia’s King Salman to support a listing of Aramco’s shares in Tokyo. Other markets, including New York, London, Hong Kong, Singapore and Toronto, are also vying for a role.

“I won’t say it’s [a Tokyo listing] a high possibility but it’s not impossible,” Algaseer said. He also said that the large size of the sale meant it would be hard for only two centers to manage it.

"If they do go to Japan they will definitely consider to have MUFG to launch it and if they go somewhere else there's a good possibility to let MUFG and its partner Morgan Stanley MS.N to launch it."

Morgan Stanley and MUFG have several partnerships, stemming from a $9 billion investment MUFG provided the Wall Street bank at the height of the financial crisis. MUFG now owns 23.2 percent of Morgan Stanley, making it the bank’s largest shareholder, according to Thomson Reuters data.

MUFG’s banking subsidiary, The Bank of Tokyo-Mitsubishi UFJ, expects to open its first branch in Saudi Arabia in 2018 after becoming the first Japanese bank to receive a license in the kingdom late last year, he said.

Editing by Jane Merriman