Bloomberg News

Standard Chartered Sees 15% Loan Decline in Middle East, Africa

February 03, 2014

Standard Chartered Plc (STAN) expects lending for projects in the Middle East and Africa to decline 15 percent this year after a Saudi Arabian petrochemicals plant boosted loans to a record $87.6 billion in 2013.

“Some of the monster deals that were done in 2013 are not anticipated this year,” Ravi Suri, the bank’s head of project and export finance for Europe, the Middle East, Africa and South Asia said Jan. 30 from Dubai. “We’ll see activity in power, fertilizers and renewables, although at reduced levels.”

Most new projects are planned in Saudi Arabia, Oman and Morocco, he said. Sadara Chemical Co., a venture of the Saudi Arabian Oil Co. and Dow Chemical Co. (DOW:US), raised $10.5 billion last year from bank loans in the region’s biggest petrochemicals financing deal. The money will help fund its $19.3 billion chemicals project in Saudi’s Eastern Province.

Governments in the oil-rich six-nation Gulf Cooperation Council are investing in more than $1 trillion of projects, including schools and roads in Saudi Arabia, and stadiums to host the 2022 soccer World Cup in Qatar. Oman Oil Refineries Petroleum Industries Co. is seeking $3 billion to help upgrade an oil refinery.

Regional and foreign banks in the Middle East and North Africa are flush with cash and funding isn’t a problem for good projects, Suri said. The reliance on project bonds for funding will grow in the future as the implementation of Basel III rules makes loans more expensive and local regulators impose large exposure limits, he said. At least two project bonds from the Gulf are likely this year, he said.

Standard Chartered was the second-biggest arranger of syndicated loans in MENA last year, behind HSBC Holdings Plc (HSBA), according to data compiled by Bloomberg. Syndicated loans in MENA jumped 19.5 percent last year to $50.1 billion helped by interest rates near record lows, according to the data.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net; Samuel Potter at spotter33@bloomberg.net


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