Business | Banking

HSBC to focus on region’s infrastructure finance and Islamic debt capital

As sector evolves, tenor of funding required also develops and that lends increasingly to capital markets, mainly bond issues

  • By Gaurav Ghose; Financial Features Editor
  • Published: 18:57 April 21, 2013
  • Gulf News

Dubai: While continuing to focus on Egypt, Saudi Arabia, UAE and Qatar, as markets for growth and more recently, Oman as one which offers big opportunities, the key focus for HSBC’s regional strategy going forward would be in the areas of infrastructure finance and Islamic debt capital market, according to Simon Cooper, chief executive officer of HSBC Middle East.

“The continued growth in infrastructure investment is going to be the key theme in the region and that theme is going to be developed further as well into being an enabler… of capital markets,” said Cooper during the annual company presentation yesterday.

As the infrastructure market of the region evolves, the tenor of funding required also develops and that lends increasingly to capital markets, mainly bond issues. Within that, Copper said, there is going to be a continuous development of the Islamic debt capital or sukuk market in the Mena region and “that’s the market HSBC expects to continue to play a significant role.”

The British bank said it had the largest project finance team with 17 dedicated professionals in the region. It had $17 billion (Dh62.4 billion) worth of project finance business on its books. And, when it comes to the sukuk market in the Mena region, HSBC has about a quarter of the market share.

Last year, the bank registered $1.4 billion profit before tax, which was broadly flat year-on-year.

Cooper was optimistic about UAE’s growth, which he said was demonstrated not only by global capital market’s faith in Dubai government’s recent bond issuance, but also because of growth being witnessed in economic activity and recovery in the real estate market.

Sukuk

The local market has continued to see growth in sukuk and debt markets. In January this year, Dubai raised $1.25 billion in 10-year sukuk and 30-year conventional bond, taking advantage of the falling borrowing costs.

With the growing role of the yuan as a trade financing currency, and given HSBC’s footprint in Middle East and Asia, the bank sees itself playing an increasing role in this area of trade finance. During 2012, 12 per cent of China’s trade with the UAE was settled in the yuan, which was a jump from three per cent in 2010. By 2015, Cooper said, the number is likely to reach 30 per cent, equivalent of $2 trillion.

HSBC sees also an increasing business with Turkey as it becomes one of the major economic actors in the Mena region. With 18 per cent and 25 per cent of Turkey’s foreign direct investment and exports coming into this region respectively and with large Turkish companies coming in to assist with the infrastructure spend, HSBC believes it could be of help in these specific areas, said Tim Reid, HSBC’s regional head of commercial banking.

When it comes to other opportunities, countrywise, UAE presents “fantastic” wealth management opportunities borne out the international characteristics of the customer base, said Francesca McDonagh, regional head of personal finance and wealth management of Mena.

While Egypt is “experiencing bumps in the road” and will face a “tough” 2013, Cooper added “it’s an economy we continue to believe in.”

Egypt, being a far more local market, McDonagh said, the retail banking strategy is geared towards growing the profitability of the business and also, reinvesting in infrastructure of Egyptian network in terms of the branches with a focus on lending and cards segment. In fact the bank opened a few branches in the first quarter of this year.

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