Aramco listing tempts banks with prospects of lucrative deals

LONDON/DUBAI — Investment banks are jostling to take part in the listing of a chunk of Saudi Arabia's state-owned oil giant Aramco as a portal to the lucrative deals they expect to flow from the Kingdom's plan to revamp its economy. The prospect of new business will offer a respite for investment banks, struggling with dwindling revenue as the global economy slows and regulation eats away at their business. "For banks, being on this (Aramco) deal is a game-changer for the league tables," said one senior executive at a European bank, requesting anonymity. Saudi government on Monday released its National Transformation Plan, a 112-page list of policies and targets for 2016-20 that aims to wean the economy off its dependence on oil. It is part of a wider, long-term reform drive known as Vision 2030 and it includes the initial public offering of less than 5 percent of Saudi Aramco's value. "The Aramco IPO of itself is not that interesting to us in terms of business," said a senior source at a big investment bank, speaking on condition of anonymity. "The fees won't be great, but it's about what other business will result." Wall Street bank JPMorgan and independent boutique bank Michael Klein have already been picked to advise the country ahead of any listing. A beauty parade, where banks will pitch for a role, is expected to be held in the coming months to determine what could be a roster of dozens of banks, both international and local, coordinating the share sale. "We would be doing it for sure in part as it would lead to other things," a chief executive of a major bank said, speaking anonymously. "If we're not on it, then it's a problem." Aramco subsidiary companies will also be listed, as will stakes in other publicly held companies, such as the stock exchange. Details in Monday's plan showed the Energy Ministry aimed to transfer all its power generation to "strategic partners" by 2020 and Riyadh will also privatize its water desalination agency. Saudi Arabia also signaled it is adopting new strategies to invest is petrodollars, with the $3.5 billion purchase of a stake in US ride-hailing firm Uber, advised by JP Morgan. So far the market has been modest. Investment banking in Saudi Arabia has netted banks just $1.75 billion in fees in the last ten years, Thomson Reuters data shows.