JPMorgan Leaps to Second Spot on Gulf Sukuk Deals in 2014

By Samuel Potter

JPMorgan Chase & Co. didn’t do enough deals the past two years to rank among the top Islamic-bond underwriters in the Gulf. This year, they’ve leapt to second place, behind only HSBC Holdings Plc.
The biggest U.S. bank underwrote $1.3 billion of sukuk sales in the six-nation Gulf Cooperation Council in 2014, its best annual performance on record, according to data compiled by Bloomberg. JPMorgan advised on four deals, including for Saudi Electricity Co., while HSBC underwrote $2.49 billion in 10 issues.
JPMorgan’s rise comes less than two years after hiring Hussein Hassan from UBS Group AG, where roles included global head of Islamic structuring, according to a press release from the New York-based lender. The bank is chasing a slice of a market whose financial assets were worth $1.66 trillion in 2013, according to the Dubai government. It also reflects strength in Saudi Arabia, with all four bonds sold by companies from the kingdom.
“JPMorgan’s position on the league table is
a reflection of its recent hires in the Islamic finance space,” Rizwan Kanji, a Dubai-based partner at law firm King & Spalding LLP, said by telephone from Istanbul yesterday. “The upturn in sukuk sales in Saudi Arabia, where we have historically seen JPMorgan as a very active player, added to this climb.”

Global Sales

Regional debt markets have witnessed favorable conditions in the past two years and JPMorgan expects “resilience” in 2015, Hani Deaibes, head of Middle East and North Africa debt capital markets at the bank, said in an e-mailed response to questions yesterday.
“We will continue to build on our client base, heritage in the region and platform” including in the Shariah-compliant space, he said.
HSBC’s Paul Harris, a Dubai-based spokesman for the bank, declined to comment when contacted by telephone yesterday. National Bank of Abu Dhabi PJSC is ranked fourth, and is the only local bank to make the top five.
Global sales of bonds that adhere to Islam’s ban on interest have risen 14 percent to $44.7 billion this year through yesterday, approaching the $46.8 billion record set in 2012.
While sales worldwide have increased from 2013, issuance in the GCC has dropped 28 percent to $14.8 billion through yesterday from the same period last year. Sales slowed as Brent crude, the benchmark grade for more than half the world’s oil, sank about 40 percent this year. It was at $65.68 a barrel at 11:41 a.m. in London. The GCC is home to about a third of the world’s proven oil reserves.

GDP Growth

JPMorgan said at the time of his appointment that Hassan was focusing on clients in countries including Saudi Arabia and Malaysia. Malaysia is the world’s biggest market for sukuk, while Saudi Arabia boasts the largest share of Shariah-compliant assets.
JPMorgan also helped arrange sales for National Commercial Bank (NCB), Saudi Arabia’s largest bank by assets, and Saudi Telecom Co. Its current position in the kingdom is a “logical extension” of the fact it has been an active adviser, banker and market participant in Saudi Arabia since the 1930s, Hassan, JPMorgan’s head of Islamic finance, said by e-mail yesterday.
“The Islamic finance universe is still in full evolution and top league table positions remain up for grabs,” Christian Mouchbahani, managing partner of M Capital Group, a merchant banking group with offices in Dubai, London and New York and business in Saudi Arabia, said by e-mail yesterday. “Saudi Arabia will continue to gain in importance for issuers and capital in the global capital markets arena.”