Citi considers Saudi expansion as banks aim to capitalize on reforms

Citi has already played an active role in Saudi Arabian finance and was one of the banks that helped to arrange the government’s $11 billion bond issue last month. (Reuters)
Updated 02 May 2018
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Citi considers Saudi expansion as banks aim to capitalize on reforms

RIYADH: Citigroup is considering seeking a full banking license in Saudi Arabia as Western banks aim to capitalize on Saudi economic reforms, with rival HSBC announcing it has won mandates for several privatizations in the kingdom.
More than a dozen foreign banks have licenses to operate branches in Saudi Arabia, battling for business resulting from the kingdom’s efforts to itself off reliance on oil revenues.
US bank Citi ended a five-decade presence in Saudi Arabia in 2004 with the sale of its 20 percent stake in Samba Financial but in 2015 won permission to invest directly in the local stock market and in January this year gained approval to begin investment banking operations in the kingdom.
“We’re looking at whether or not we should expand our activities here into a full banking license,” James Forese, the president and chief executive of the bank’s institutional clients group, said at a business conference in Riyadh.
Other banks seeking a Saudi license include Credit Suisse, while Goldman Sachs plans to expand its services in the kingdom after being cleared to trade equities there.
The banks are vying for a role in Saudi Aramco’s planned initial public offering, which could float up to 5 percent of the state oil giant and make it the world’s biggest oil company by market capitalization.
Citi has already played an active role in Saudi Arabian finance and was one of the banks that helped to arrange the government’s $11 billion bond issue last month.
The kingdom is now working on a pipeline of privatizations aimed at generating up to 40 billion riyals ($10.7 billion) in non-oil revenues by 2020 and creating up to 12,000 jobs, according to an official document published last month.
HSBC has been mandated for several of the planned privatizations and will announce them very soon, Samir Assaf, HSBC’s chief executive of global banking and markets, said at Wednesday’s conference.
The bank is “very much contributing to the privatization program,” he said.
HSBC Saudi Arabia is already acting as an adviser on the sale process for the kingdom’s flour milling sector and the Saudi Stock Exchange’s planned flotation. It also has an advisory role on the proposed Aramco listing.


Oil edges up on looming Iran sanctions, but US-China trade war caps gains

Updated 10 min ago
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Oil edges up on looming Iran sanctions, but US-China trade war caps gains

  • The US sanctions on the oil sector in Iran are set to start on November 4
  • other producers may struggle to fully make up for the expected Iran disruption, and that oil prices could rise further
SINGAPORE: Brent crude oil prices rose back above $80 a barrel on Monday as markets were expected to tighten once US sanctions against Iran’s crude exports are implemented next month.
Benchmark Brent crude oil futures were at $80.26 a barrel at 0646 GMT, up 48 cents, or 0.6 percent, above their last close.
US West Texas Intermediate (WTI) crude futures were at $69.60 a barrel, up 48 cents, or 0.7 percent.
The US sanctions on the oil sector in Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), are set to start on November 4. The United States under President Donald Trump is trying to reduce Iranian oil exports to zero to force the country to renegotiate an agreement on its nuclear program.
US Treasury Secretary Steven Mnuchin told Reuters on Sunday that it would be harder for countries to get sanction waivers than it was during the previous Obama administration, when several countries, especially in Asia, received them.
OPEC agreed in June to boost supply to make up for the expected disruption to Iranian exports.
However, an internal document reviewed by Reuters suggested OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere.
Fatih Birol, executive director of the International Energy Agency (IEA), said on Monday that other producers may struggle to fully make up for the expected Iran disruption, and that oil prices could rise further.
Some relief may come from North America, where US drillers added four oil rigs in the week to Oct. 19, bringing the total count to 873, Baker Hughes energy services firm said on Friday, raising the rig count to the highest level since March 2015.
The US rig count is an early indicator of future output. With activity increasing after months of stagnation, US crude production is also expected to continue to rise.
Reflecting rising US crude exports, the Intercontinental Exchange said its new Permian West Texas Intermediate crude futures contract deliverable in Houston, Texas, will begin trading on Monday.
In addition to the potential for rising oil supply, the ongoing Sino-American trade dispute is expected to start dragging on demand.
“The full impact of the US-China trade war will hit markets in 2019 and could act as a considerable drag on oil demand next year, raising the possibility of the market returning to surplus,” said Emirates NBD bank in a note.
Shipping brokerage Eastport said “Chinese manufacturing is beginning to slow” and that “Trump’s proposal of slapping ... tariffs on additional ... Chinese goods from 1 January would be a further drag on trade.”
K.Y. Lin, spokesman for Taiwan’s Formosa Petrochemical Corp, a major fuel refiner, said “weaker demand in Europe and the US” was already affecting gasoline profit margins as excess fuel is being sent to Asia.