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A good deal

April 2007
Gulf International Bank is often associated with high profile project finance deals, but the bank is capable of much more than that, as chief executive officer, Dr. Khaled Al-Fayez told Paul McNamara
Over the last 25 years, Gulf International Bank (GIB) has become one of the most respected banks in the Arab world, with total assets of $24.8 billion and shareholders' equity of $1.86 billion at the end of December 2006. The bank also manages $20 billion of clients' assets.

Established in the Kingdom of Bahrain in 1975, the six GCC governments own 72.5 per cent of the bank, while the Saudi Arabian Monetary Agency owns 27.5 per cent.

Dr. Khaled Al-Fayez took time out of his schedule to tell Banker Middle East a little more about the future strategy for the bank.

Could you brief us about GIB's direction and strategy?
In 2002, GIB implemented a GCC-focused merchant banking strategy, which has resulted in a significant improvement in the diversification and quality of revenues, and a substantial increase in net income and shareholder's return. Net profits more than doubled from $100.5 million in 2001 to $255 million in 2006, reflecting increases in interest and non-interest earnings, the containment of expenses, and lower provisions. The business strategy focuses on relationship-based merchant banking activities within the GCC. This involves identifying customer needs and providing customers with the products and services they require. At the same time, the bank has curtailed its non-relationship international lending activities, which generated inadequate risk-adjusted returns. The bank has also reduced costs through the consolidation of back office functions and the implementation of new information technology systems.

Our strategy emphasises higher skilled activities, including project and structured finance, corporate advisory and asset management. The bank's activities are supported by a risk-adjusted performance measurement system for the evaluation of business and individual performance. GIB, in fact, is one of few banks within the GCC to measure performance on a risk-adjusted basis.

Which areas would you like to develop in the future?
The bank's current strategy focuses on developing our merchant banking franchise in the GCC. We are already market leaders in project and structured finance and in the regional syndications market. In the coming years there will be additional emphasis on the investment banking and asset management business.

We would like to strengthen GIB's status further as a leading provider of corporate advisory services in the GCC by offering innovative solutions in the fields of financial restructuring, private placements, private sale, IPOs, underwriting equity as well as mergers and acquisitions.

In relation to asset management, GIB currently manages more than $21 billion of client assets, which makes the bank one of the largest Arab-owned commercial fund managers in the GCC region. GIB has a proven reputation, earned over the past 20 years, for innovative solutions, strong performance and quality of service.

In short, our objective in the coming years is to continue to build the flow of non-interest income through a further increase in funds under management and important investment banking and capital markets mandates.

What about your asset management strategy?
GIB's strategy for the asset management business continues to be focused on growth and diversity. The investment management process is generally conservative, preferring to focus on delivering consistent returns rather than volatile short term returns.

We have recently launched our latest asset-backed securities (ABS) collateralised debt obligation (CDO). Our continued leadership in this field has also been recognised by Fitch Ratings who have, for the third year running, rated GIBUK as a 'CAM 2' for its ABS CDO activities, the highest rating awarded to a CDO manager in Europe.

We have also been growing our client base both in the Gulf market as well as in Europe. Gulf-based institutional investors are largely served through our tailor-made discretionary portfolios, designed to meet their specific needs.

What are the major deals in which GIB participated during the year?
GIB continued to grow its investment banking business in 2006, retaining its regional role as a pre-eminent adviser and arranger for private placements and IPOs. The bank acted as exclusive financial adviser for the AlBaraka Banking Group's $582 million IPO and concurrent listing on the Bahrain Stock Exchange and the DIFX. GIB also acted as the exclusive financial adviser for a number of IPOs on the Saudi Stock Exchange, including the $177 million IPO of Advanced Polypropylene Company , and the $119 million IPO of Saudi Paper Manufacturing Company. In addition, GIB advised Dubai Investments in acquiring a 100 per cent stake in Saudi American Glass Company.

In the oil, gas and petrochemicals sector, GIB acted as a mandated lead arranger for a $1.75 billion conventional term loan facility and a $600 million Islamic lease facility to finance an integrated refinery and petrochemical complex at Rabigh, Saudi Arabia. This is the largest petrochemical project financing deal completed to date in the GCC. In the UAE, GIB was MLA for a $500 million Ijara financing facility to finance the upgrading of an oil refinery at Jebel Ali for ENOC, while in Oman, the bank was the sole original MLA for a $234.5 million refinancing facility for Oman Gas.

In the transportation sector, GIB was MLA for a $326 million syndicated loan facility for the Arab Maritime and Transportation Company, Kuwait; a $500 million term and revolving facility for Qatar Gas Transport Company (Nakilat); and a $145 million LNG ship financing facility for a subsidiary of Oman Shipping Co .

In addition, GIB acted as MLA for a $1.9 billion facility package comprising senior debt, mezzanine debt and equity bridge facilities for the financing of an independent water and power project for Shuqaiq Water & Electricity Company of Saudi Arabia. This deal was closed in February 2007. The bank was also mandated, with a number of banks, to arrange a $2 billion, three year loan for Qatar Telecom.

How do you evaluate your Islamic banking business?
On the wholesale debt side of Islamic banking, GIB has become a major player. The bank has, over the years, increased its range of Shari'ah compliant services. These now include project financing, structured finance, syndicated lending and corporate finance, which are provided to a wide client base. GIB has also enhanced its Shari'ah compliant capital market capabilities by acting as a joint lead manager in some of the high profile Islamic Sukuk transactions launched during 2006. For example, the bank was mandated lead arranger in the $1.2 billion syndicated Murabaha facility for MTC and the $850 million syndicated Murabaha facility for Kuwait Finance House.

In addition, GIB has firmly established itself as an Islamic facility agent of choice. Our Islamic banking complements the diversified portfolio of financial services we offer to clients in the region.

© Banker Middle East 2007