Deutsche and Calyon target Saudi Arabia

Deutsche Bank has become the first bulge-bracket bank to launch a brokerage business in Saudi Arabia, as French bank Calyon also revealed plans to start a joint investment banking unit with a local Saudi bank in the kingdom.

Deutsche Bank and Calyon, the investment banking arm of Crédit Agricole, are the latest banks to target the Middle East region, where burgeoning profits from high oil prices have increased demand for financial services.

In a statement, Deutsche Bank said it was the first broker from outside the region to execute a trade on the Tadawul, Saudi Arabia's stock exchange.

Ricardo Honegger, head of global markets for the Middle East and North Africa, said: "Recent regulatory reform, the privatisation of the Tadawul, and the creation of the King Abdullah Financial District are signs of the dynamism of the Saudi financial system and we are committed to the region.

"We see great opportunities for Deutsche Bank to contribute to the development of the Saudi market by launching equity finance, mutual fund, corporate advisory, and money market businesses."

Deutsche recently issued a $1bn (€777m) "murabaha" - a contract of sale in which a bank buys goods from a third party at the request of a client and resells the goods to the client on deferred payment terms, which must include a declaration of its mark-up - for Saudi Basic Industries Corporation, or SABIC, a Saudi Arabian conglomerate.

Last week, Deutsche Bank partnered with Abraaj Capital, an emerging markets private equity group, and Bahrain-based Ithmaar Bank to raise $2bn for an alternative assets private equity fund.

Deutsche Bank said that the fund will be compliant with Shari'a law and is due to have a particular focus on infrastructure. It will invest in companies from the Middle East, North Africa and South Asia.

Separately, Calyon has unveiled plans for a joint venture in Saudi Arabia with Banque Saudi Fransi, a Saudi retail bank in which Calyon holds a 31.1% stake. The combined group would provide execution and advisory services for initial share sales and corporate and project financing.

In an interview with Bloomberg, Albert Momdjian, head of Middle East and Africa investment banking at Calyon, said: "We hope to get a full licence from the Capital Markets Authority by year-end."

Citigroup applied for a licence to operate in Qatar last week, while Deutsche Bank opened its first office in Saudi Arabia on April 30.