Deutsche Bank Targets Commodity Finance for Mideast Growth

(Bloomberg) — Deutsche Bank AG plans to boost lending to commodity traders in the Middle East, even as other banks back away after a spate of defaults in the industry, to help double the size of its regional business.

The German lender, which on Monday appointed Loic Voide and Kees Hoving as co-chief executive officers for the Middle East and Africa, is also targeting bond markets for growth in the region.

“In the next five to six years, we would like to double the size of the revenues from what we have today,” Voide said in an interview. “The old Deutsche Bank wanted to be everything to everybody, and we realized in the past few years that’s not sustainable.”

Voide, formerly the head of wealth management for the Middle East and Africa, will now also oversee Deutsche’s private bank for the region. Hoving, who previously ran the Netherlands business, will also head corporate banking for the Middle East and Africa. The two replace Jamal Al Kishi, who left Deutsche earlier this year to become deputy group CEO at Bahrain-based Gulf International Bank.

Lenders including ABN Amro Bank NV, BNP Paribas SA and Societe Generale SA, have curbed their exposure to commodity traders after a string of collapses and scandals globally. GP Global Group, a United Arab Emirates-based commodities firm, is trying to sell off assets to repay creditors, while several banks have frozen credit lines to Dubai-based oil trader MENA Energy DMCC, according to people familiar with the matter. Despite those troubles, Deutsche spies an opportunity to expand.

“As we see other banks exiting certain business, for example commodity finance, then we will be looking to on-board new clients,” Hoving said in the same interview. “We have appetite for commodity finance but always in a very well-managed way.”

The bank picks clients that it knows well, and it takes stringent steps to minimize risks in lending to them, he said.

Boosting Bonds

The German bank also plans to ramp up its business arranging bond sales, Hoving and Voide said. It already participated in some of this year’s largest deals in the region, including Qatar’s $10 billion issuance in April and Abu Dhabi’s $5 billion sale in August. Deutsche has also worked on debt sales for Qatar National Bank and Emirates NBD PJSC and is the seventh-biggest regional bond arranger so far this year.

That’s a far cry, however, from its ranking in 2011 to 2014 when it jostled with HSBC Holdings Plc and Standard Chartered Plc to be the Middle East’s top bond underwriter, according to data compiled by Bloomberg.

“Now we’re not coming into the office to be number one on any league tables, but we’ll move up as a consequence of doing the job and serving the clients,” Voide said.

The current slump in oil prices combined with the economic impact of the coronavirus pandemic has caused governments in the region to issue a flood of new debt. Bond and sukuk sales from the Middle East and North Africa have risen to more than $94 billion so far in 2020 compared with $111 billion for all of last year.

Although this borrowing binge is likely to continue, Deutsche must focus on rebuilding relationships with clients in the region after a period of cost-cutting and internal restructuring that aimed at restoring the bank to profitability, Hoving said.

“We need to have relationships with the sovereigns, banks and the corporates, and while we do have those relationships, some of them can be strengthened,” he said. “There are clients that we have not given enough attention to over the past few years.”

(Adds bond sales details in eighth paragraph.)

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