October 16, 2018 / 12:12 PM / a month ago

Breakingviews - Saudi fail is fresh win for U.S. banks over Europe

A BNP Paribas logo outside a bank office in Paris, France, August 6, 2018.

LONDON (Reuters Breakingviews) - It’s not often one imagines Jamie Dimon with a halo over his coiffured head. But that, in effect, is what European banks have given the JPMorgan boss by dithering over whether to attend the Future Investment Initiative in Saudi Arabia next week. The accusation that Riyadh had engaged in state-sponsored murder left all attendees facing the awkward choice of whether to bail and potentially miss out on fat fees, or go and risk pariah status.

Having decided to pass, following the disappearance of Saudi journalist Jamal Khashoggi, Dimon occupies what passes for the moral high ground. European bank bosses have been left with an even worse choice – pull out because everyone else has, or risk looking even more morally dubious. HSBC, CEO John Flint, Standard Chartered’s Bill Winters and Credit Suisse’s Tidjane Thiam have gone for the former: they said on Tuesday they would no longer attend.

The fact that French lenders Société Générale and BNP Paribas have remained conspicuously silent illustrates the moral and commercial quandary European lenders find themselves in. Having been bested in their own backyard by U.S. peers – bar Deutsche Bank, the top five biggest investment banks by revenue in Europe are all American, according to Coalition data – and shut out by U.S. sanctions of other markets like Iran, the conference organised by Crown Prince Mohammed bin Salman now offers a rare opportunity to steal a march on their transatlantic rivals.

HSBC, Standard Chartered, BNP Paribas, Credit Agricole and Société Générale are among the top 12 biggest investment banking earners in Saudi this year, according to Refinitiv data. True, the collective $79 million in year-to-date fees may be small beer compared to much bigger home markets. But the reform drive pledged by MbS, including the touted stock market listing of oil company Saudi Aramco, various privatisations and overseas acquisitions of the Saudi sovereign wealth fund, promised much fatter paydays for Europe’s assorted rainmakers.

Still, given JPMorgan has topped the Saudi investment banking fees table this year and last, Dimon has taken the principled response. Thiam, Blackstone chief Steve Schwarzman and others who remain on the FII advisory board occupy a middle ground. As for the French, they better make sure they get some lucre to offset the reputational hit.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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