December 29, 2011

Mideast Loans on Block as Euro Banks Seek Cash

France, Belgium lead way in selling loan books to Arab banks

European banks, in search of cash to meet new requirements, are looking to sell off their loans to Middle Eastern countries, and are looking for Arab banks as buyers in the process.

Bloomberg reported that the banks, led by France’s BNP Paribas SA and Societe Generale Belgium-based Dexia and KBC Groep, and Italy’s Intesa Sanpaolo and UniCredit, are among the firms looking for buyers willing to purchase project finance and corporate loans in the Persian Gulf region. Five bankers who had been approached about such deals spoke anonymously about them, and said the offers had all occurred within the last five months.

European banks are cutting back on some kinds of loans and also selling off businesses in the quest to raise capital to satisfy regulators as the eurozone debt crisis escalates. Across Europe, banks have promised to slash over 950 billion euros ($1.2 trillion) in assets over the next two years, the report said.

Ahmad Alanani, the Dubai-based director for the Middle East at investment bank Exotix, which trades debt, said in the report, “There have been some large transactions in recent months. Cash-rich banks from Qatar, Abu Dhabi and even some banks from Kuwait are natural buyers of these assets.”

He added, “A lot of these European banks are selling their premium assets to realize higher recoveries and generate some liquidity. We see a large offering of Middle East project finance portfolios as the cost of dollar funding has increased, making these long-term assets less attractive.”

Stef Leunens, spokesman for one of the banks reported to be thus engaged, Brussels-based KBC Groep, said in the report, “International project finance is one of the activities that are gradually being wound down at KBC. It’s logical that we get expressions of interest for some of the run-off parts of this portfolio from time to time.”

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