May 13, 2020 / 8:31 AM / 21 days ago

JPMorgan sees more Gulf companies linking up but no liquidity crunch

FILE PHOTO: A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez/File Photo

DUBAI (Reuters) - JPMorgan (JPM.N) expects more consolidation among Gulf companies this year in sectors such as banking, real estate and hospitality, but it sees no liquidity crunch in the region, despite the twin blow of the new coronavirus and low oil prices.

“We are going to continue to see consolidation themes building up on what we have witnessed in the previous years. I expect banking consolidation to continue its way through and to spill over in sectors such as real estate and hospitality,” said Karim Tannir, head of investment banking for the Middle East and North Africa and co-head of MENA at JPMorgan.

The economic downturn in the Middle East is expected to be worse than the 2008/09 financial crisis and the 2014/15 oil price crash, the International Monetary Fund has said.

But Tannir said the region had entered 2020 with strong finances and, after an initial phase of assessing liquidity needs, companies and governments are now looking more strategically at potential opportunities.

“Unlike the 2008-2009 global financial crisis, we have gone into the current crisis with the corporates, the financial institutions and the government having more liquidity and stronger balance sheets, in a very low interest rate environment that has been low for a while,” he said.

“Now that we have started moving out of assessing the operational impact, and the industrial impact of COVID 19, businesses are starting to have a clear view of their liquidity needs. The debate now will probably shift towards what strategic moves you can make and how to do that in the region.”

JPMorgan was one of the top advisors of Saudi oil giant Aramco 2222.SE for its record-breaking initial public offering last year. This year, it has worked with the governments of Saudi Arabia, Qatar, Abu Dhabi, and Bahrain on over $30 billion in international bond issues.

Governments and companies in the Gulf are expected to borrow heavily this year to offset the impact of low oil prices. Abu Dhabi’s state fund Mubadala raised $4 billion in bonds this week.

“I cannot say if this year will be record year in terms of debt issuance from the region, but it’s going to be intense,” Tannir said.

Reporting by Davide Barbuscia and Saeed Azhar; editing by Larry King

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