According to the Financial Times, Abu Dhabi has introduced an informal boycott on Western banks with significant Qatari share ownership, including Barclays, Deutsche Bank and Credit Suisse.
There has been no official announcement of this policy from the Abu Dhabi government, however. So far, the only official statement made has been from the Central Bank of the UAE, instructing its local banks to perform due diligence on six Qatari banks to ensure there are no links between transactions and terrorist groups — standard procedure, one would hope.
If Abu Dhabi were to take this further step of cutting out these three banks, Saudi Arabia, Bahrain and Egypt could follow.
In terms of immediate funding needs, Abu Dhabi’s state-owned oil company Abu Dhabi National Oil Co (ADNOC) is looking to raise $5bn in the loan market this summer, one of the biggest transactions to come out of the region so far this year. The company is also considering an initial public offering of its services units and possibly a $3bn bond.
Turning the liquidity tap off from banks with Qatari shareholders, however, is unlikely to limit Abu Dhabi’s overall access to finances. Abu Dhabi, as a sovereign entity, has plenty of other banks to choose from after all.
On the other side of the coin, the boycotted banks would also get away fairly unscathed — the three were cutting back on the balance sheet they deployed to the region long before the current breakdown in relations.
Over the past 10 years, Deutsche Bank has done only one loan deal in Abu Dhabi — with Aabar Investments in August 2010 for $2.2bn, according to Dealogic. Credit Suisse was one of the mandated lead arrangers on the deal, but aside from that has been on no other deals. Barclays, on the other hand, has been on no deals in Abu Dhabi since 2007. There are also no deals with the sovereign for any of the banks during the time period.
In bonds markets, Dealogic data shows Credit Suisse has not worked on any debt capital markets deals in Abu Dhabi since it arranged a $50m private placement for National Bank of Abu Dhabi in 2015.
Deutsche Bank’s activity in the United Arab Emirates has been low. According to a Dealogic search, it last arranged a deal for a government-owned Abu Dhabi entity, Etisalat, in 2014. Deutsche’s activity in the UAE peaked in 2007 when it arranged deals worth $8.27bn. 2014 was another strong year, with the bank bringing in $6.4bn. But this year, it has arranged no deals.
Barclays remains the most active in the region of the three banks, raising $4.1bn via seven deals for UAE borrowers this year. It has also worked on several trades for Abu Dhabi-owned entities in the past six months, including Mubadala.
Only Deutsche Bank has worked on sovereign transactions for the Emirate of Abu Dhabi, but not since 2009.
One analyst argued that the banks do still engage in seeking advisory work in the region, which may be a sticking point.
“The bit where it is of consequence [is when] they are trying to win advisory mandates,” he said. “It’s a tiny number compared to the size of those banks globally but it’s big for their regional operations.”
Further down the line, international lenders may find themselves having to pick sides if the diplomatic tiff continues. Qatari banks are looking to raise wholesale funding, as foreign deposits have started to leave the country, thanks to the disagreement. Meanwhile, entities from the other Gulf Cooperation Council states are continuing to issue debt in the capital markets.
But worrying about how to pick and choose the mandates to compete for is no problem for international firms at the moment.
If there has been any Abu Dhabi boycott of banks with Qatari shareholders, then the country’s message has not just been mumbled, but muddled. It seems to be speaking softly while carrying no stick.