Barclays Plc is willing to extend financing to the debt-laden Dubai government if required and expects the emirate to support state entities in meeting their debt obligations this year, the British lender’s regional head John Vitalo said.
His comments come at an important time for Dubai, which has restructured some $41 billion debt in the last two years but which still faces refinancing risks related to three of its state-linked entities in 2012 amid a tightening global bank lending environment.
“We have a level of balance sheet to support Dubai Inc among other clients. We’re committed to Dubai and the UAE but every credit decision has to stand up to its merits,” Vitalo, Barclays’ chief executive officer for the Middle East North Africa (MENA) region, said in an interview.
Government-related entities in Dubai have bonds worth $3.8 billion maturing in 2012, according to a Moody’s report last month. Moody’s reckons the total debt of the government and related entities stands at $102 billion ̶ amounting to around 125 percent of the emirate’s gross domestic product (GDP).
A chunk of $3.8 billion in bonds is due this year from a trio of state-linked firms seen as having the highest refinancing risk.
“We do expect some Dubai sovereign support for this debt,” Vitalo said.
Barclays, in which Qatar’s sovereign fund and the Abu Dhabi royal family own stakes, expects higher revenue from the Middle East and North Africa this year, driven by the lender’s solid capital position and supported by the expanding coffers of oil exporting countries, the executive said.
The British lender will focus on investment banking, wealth management and trade finance in countries such as the United Arab Emirates, Saudi Arabia, Kuwait, Qatar and Egypt.
“It’s a pretty fair spread of revenues from all those businesses,” Vitalo said. “The MENA region is critical to Barclays. We expect to increase revenues from the region this year ... There are very few places in the world today that I can ... (readily) write a big check and this is one of them.”
Vitalo did not rule out looking into other countries such as Iraq and Libya but said the bank did not have any concrete plans to enter those markets.
Vitalo’s comments come as several European banks have unveiled plans to offload assets in the Gulf Arab region as they look to raise capital and exit non-core businesses.
Royal Bank of Scotland said earlier this week it is in talks to sell its mergers and acquisitions business in the Middle East, while Lloyds Banking Group is in talks to dispose its operations in the United Arab Emirates, sources told Reuters last week.
“With the forced deleveraging of the some banks there, you have unnecessary withdrawal of cross-border lending,” Vitalo said. “But Barclays is in a different boat than those banks and ... many of the European banks. The bank does not have any UK government ownership. It is rock solid on capital and liquidity.”