The National Bank of Fujairah (NBF) is planning to open a representative office in Antwerp as it looks to capitalize on the decline in financing to the Belgian city’s diamond sector.
“I’ve been pushing for the move for a long time because there’s an opportunity to cherry-pick some clients,” Davy Blommaert, head of diamond lending at NBF, told Rapaport News on the sidelines of the Dubai Diamond Conference on Tuesday.
Blommaert participated in a fact-finding mission to Antwerp in June, along with NBF’s CEO and other executives, to explore the possibilities of servicing the Antwerp diamond industry.
He noted that a gap had opened as European banks cut their lending to the diamond sector, with Antwerp Diamond Bank (ADB) closing its doors and Standard Chartered Bank withdrawing from lending to the diamond trade.
The NBF delegation met with representatives from Belgium’s central bank, the Antwerp World Diamond Centre (AWDC) and prospective clients, and Blommaert expects the office to open in the first quarter of 2018. It will enable the bank to service Antwerp-based companies with dollar-based lending in Dubai.
NBF opened its diamond-focused branch in 2015 and Blommaert reported it had gained steady market share since, ranking behind ABN Amro as the second-largest lender to Dubai’s diamond trade. With the Dubai business now firmly established, Blommaert said its expansion into Antwerp was a test for possible penetration into other markets.
However, he cautioned that the global industry was still considered a high-risk sector and that further consolidation and bankruptcies should be expected. The recent high-profile default by Antwerp-based manufacturer Exelco, with debts of $50 million to $100 million, fueled caution toward the trade from the global banking sector, panelists at the Dubai Diamond Conference noted.
Many at the conference pointed to a lack of profitability in the manufacturing sector, due to a perceived divergence between rough and polished diamond prices. Still, rough sales have been steady this year, while polished demand has remained stagnant, resulting in a rise in polished inventory in the midstream, Blommaert noted.
“There are too many diamantaires vying for rough, and that has resulted in them paying premiums for goods that are not necessarily required by the market,” he said.
Erik Jens, head of ABN Amro’s diamond and jewelry unit, added that the trade was over-financed by banks enabling those rough purchases. While the diamond industry’s global bank debt is estimated at around $15 billion, Jens estimated that it really only needed about half that amount.
For similar reasons, the midstream manufacturers and dealers are left with high inventory exposure. “Ultimately, a clean-up must happen and I believe we will see more consolidation in the next few years,” Blommaert said. “At the same time, there are good companies that are struggling to get financing who we can help.”