The Royal Bank of Scotland Group (RBS) plans to target increased returns from derivatives sales in the Middle East as earnings from arranging debt sales and lending fall.
According to RBS, Gulf companies are interested in derivative products to manage risk after the financial crisis.
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Jacco Keijzer, RBS’s head of debt capital markets in the Middle East, said the lender is "investing quite heavily" in its derivatives platform as it will be challenging to make budget just by "running after bonds".
Local lenders from Qatar, Abu Dhabi and Dubai have increased competition and are challenging foreign institutions for bond and loan businesses, which in turn is driving down fees to win mandates.
Keijzer added: "Earnings for each bank from a transaction is ‘in single digits by now,’ so that each bank is paid less than 10 basis points or 0.1% point of the money raised in a sale."
Bond sales received from the Middle East and North Africa, which includes Saudi Arabia, the UAE and Qatar, surged 54% in 2012 to a record US$49 billion as issuers took advantage of falling yields, as per data compiled by Bloomberg.
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By GlobalData
