The major players

The National Bank of Kuwait, has the highest financial strength rating among emerging market banks according to all four global rating agencies: Moody's, S&P, FitchRatings and Capital Intelligence. In June 2002, the NBK was awarded 'A+' status by FitchRatings. The secrets behind its success are diversified income streams, prudent risk culture and "global reaches" with offices in New York, London, Paris, Geneva and Singapore.

Ibrahim Dabdoub, CEO, said: "Globally and domestically, the banking industry continues to suffer from a low interest rate environment, economic slowdown and heightened instability in financial markets. Yet our solid financial position, excellent asset quality and earning power remain unaffected." During the first half of 2003, NBK's returns on equity and assets were 26.7% and 2.2%, respectively, high by industry standards. The emirate flagship was founded in 1952 as the first indigenous bank and today is referred as "The Bank You Know and Trust," boosting expertise in corporate/project finance and IT. The NBK stands out in the region for innovations - the first Arab bank to provide online brokerage service and 24-hour Internet banking (Watani Online). It has expanded its activities to include underwriting, initial public offerings, advisory and structured financing for capital projects. The NBK's portfolio services through Swiss subsidiary, NBK (Suisse) and NBK Investment Management Ltd (a London-based joint venture with Morgan Stanley) caters for private and institutional clients, offering them wealth of mutual funds. So far, its assets under management exceed $4.5bn. The bank is establishing a regional network, with offices in Saudi Arabia, Bahrain and Lebanon.

The Saudi British Bank, managed by the HSBC Group, has growing/diverse franchises, ranging from personal, corporate to investment-brokerage businesses. It remains a major broker on the Saudi Stock Exchange, with excellent inhouse research service.

The bank has won mandates for several highprofile projects over the years. In early 2003, SABB worked as co-bookrunner with the Gulf International Bank on the $4bn Saudi Telecom initial public offerings (IPOs), the region's largest-ever privatisation deal. Also, it has acted as joint-arranger and underwriter for large syndicated loans to private and government-owned enterprises.

The bank is extremely profitable thanks to low-cost funding, good asset quality (bad debts represented a paltry 3% of total loans last year) and healthy volume growth in consumer/corporate loans.

The National Bank of Dubai, the most heavily capitalised of Arab banks, remains a market leader in technology and internal control mechanism and its credit processes are among the best in the UAE. The NBD continues to invest in product innovations and staff development, thereby offering top-class services to high-end retail and corporate customers. Moreover, it boasts successful treasury operations to complement its experience in personal and business banking. The bank's financial strength and sustained growth in deposit base reflect the support of the ruling Al Maktoum family, which effectively owns the bank. NBD is the main banker to the Government of Dubai.

The Qatar National Bank occupies a unique position because of its sheer size and close ties to the government, the principal shareholder. In 2002, the QNB-with a distribution network of 33 branches and 63 ATMs held about 50% of aggregate banking assets and customer deposits. Its BIS capital/assets ratio (34%) tops the world's league. In contrast to monolith, (inefficient) commercial banks elsewhere, QNB ranks strong on technical efficiency, marketing/product-lines, pricing and earnings. FitchRatings and Capital Intelligence have assigned 'A-' rating to the QNB, pinned by heavy capitalisation, sound asset quality and sustained profits. The bank is pioneering home (Internet/phone banking) for higher income groups. In 2001, in alliance with MasterCard International and Ritz-Carlton Doha, the QNB became the first Qatari bank to issue a "co-branded" credit card. The QNB plays a leading role as co-financier/underwriter for big-ticket projects and loan syndication's like the $300m facility for the Qatar Fuel Additives Company in August 2002.

Arab Bank (Joradan) is the only non-GCC bank that is truly a global player, with over 400 branches and offices spread across five continents. It remains active in project and trade financing and facilitating investment flows between the Middle East and other regions. The bank's excellent credentials stand out, reflecting experienced management, sound credit quality and advanced IT infrastructure. Despite regional problems, Arab Bank has built vibrant businesses over the past three decades. It has recently undergone restructuring - credit management functions were merged to improve risk control and provide enhanced branch synergy, whilst, a separate private banking division will help to expand treasury management services. New innovation includes front-end dealing system, which offers real-time exposure and earnings reporting. Abdul Hameed Shoman, a Palestinian emigre, founded Arab Bank in Jerusalem in 1930.

Bank Muscat, the Sultanate flagship, is the best connected and largest (by assets) of Omani institutions, with expanding domestic franchises in both retail/commercial banking and solid equity base. Sultan Qaboos is the major shareholder. The bank boasts expertise in stock brokering, forex markets and advisory/project financing services. It now functions as a "clearing bank" for the Muscat securities market. Recent forex derivative products include more exotic options. Capital Intelligence noted: "BankMuscat has been a pioneer, being the first to start certificate of deposit issues and bonds. They see themselves as trend setters." The bank is also advising on the privatisation of the Oman Cement Company and Build-Operate-Transfer (BOT) $500m power/water project. BankMuscat, having purchased ABN Amro's Bahrain branch, has ambitions for regional expansion.

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Iraq reconstruction

Arab construction and services-oriented companies hope to participate in Iraq's reconstruction work - return of peace and security permitting.

Non-US companies may win subcontracts from the US Agency for International Development, currently awarding lucrative contracts covering almost every sector of the economy. The Global Investment House (Kuwait) estimates post-conflict reconstruction costs at between $50bn to $100bn.

Referring to regional developments, Ibrahim Dabdoub, CEO of NBK said: "With the new situation we cannot but be optimistic that Kuwait and its banks will flourish. More important than the opportunities the reconstruction of Iraq will present to the Kuwaiti business sector is the enhanced confidence of local and foreign investors alike." Saleh Al Kowary, CEO of HSBC Bank Middle East, remarked: "A lot of things need to settle. We have plans [for Iraq] but we will not rush in. Iraq is a very big country and the opportunities there will always be available." Glyn Davies of BNP Paribas, observed: "With the Iraq war now over, we're looking for a pick-up of business in the region."

Recently, a consortium of 13 foreign banks, led by JP Morgan, was chosen to run the Trade Bank of Iraq, created to conduct overseas business. Peter McPherson, the US-appointed economic adviser to Iraq, announced in London: "The banks would help to rebuild Iraq and enjoy the fruits of its economic potential, including some of the largest untapped oil reserves in the world." Among big names are Standard Chartered (UK), Australia and New Zealand Banking Group and surprisingly Credit Lyonnais (France). Obviously, Iraq presents a "bonanza" for the global investment community, if and when the dire situation stabilises.