When the Kenyan government issued a debut $2 billion Eurobond last month, most of the lead arrangers were top Western and African banks. But there was a standout: Qatar's QNB Capital.

After decades during which banks from the wealthy Gulf countries rarely ventured outside their region, they are starting to play major roles in arranging bond deals overseas, competing with long-established international banks.

This is partly because the Gulf banks have grown, allowing them to build up their technical expertise in bonds and making them keen to expand beyond their crowded home markets.

But it is also because the global financial crisis has made the cash-rich Gulf more attractive to overseas bond issuers as a source of investment funds. Gulf banks are seen as the best channels for issuers to attract this money.

QNB Capital, a unit of Qatar National Bank, the country's biggest lender, is now believed to be a strong contender to arrange Kenya's first Islamic bond issue, which is in the planning stage, bankers said.

QNB "is a big bank in the Middle East and it has been involved in arranging other issues in Africa, especially in North Africa," said Geoffrey Mwau, economic secretary at the Ministry of Finance in Kenya.

"It helps to spread out the investor base by bringing in some from the Middle East, and there are many. They are up and coming."

The trend is still in its infancy. In lists of the top 25 arrangers of bond issues globally by monetary value, no Gulf bank appears, according to Thomson Reuters data.

Even in their home markets, the Gulf banks are still not dominant. Among the 25 most active arrangers of international bonds from Gulf issuers last year, the highest-ranked Gulf institution was National Bank of Abu Dhabi (NBAD) in sixth place, according to Thomson Reuters data. Dubai's Emirates NBD came in seventh.

Only 10 of the 25 banks were from the Gulf; the list featured a wide range of banks from Europe and the US and Asia, and was headed by HSBC.

The last several years have seen a big change, however. As recently as 2011, the top 25 arrangers did not include any Gulf banks at all. Now, even relatively small Gulf institutions such as Dubai Islamic Bank and Saudi Arabia's Riyad Bank have entered the league tables.

There is evidence that the entry of Gulf banks into the bond arranging business within their region has increased competition and squeezed fees - making it more attractive for the Gulf institutions to seek arranging activity outside their region.

According to estimates by Thomson Reuters and Freeman Consulting, fees for international dollar bonds arranged in the Gulf this year have totalled about 0.22 per cent of the size of the deals, down from roughly 0.58 per cent in 2010.

Rapid, oil-fuelled growth in the Gulf's banking industry over the last few years has helped local banks bulk up to challenge foreign competitors; banking assets in the GCC ballooned to $1.47 trillion in 2012 from $1.09 trillion in 2008, according to a study by QNB.

This has helped Gulf banks to hire some high-profile talent from international institutions over the past year.

Qatar's QInvest hired Michael Katounas from Credit Suisse to lead its investment banking operation; Simon Penney moved from Royal Bank of Scotland to Abu Dhabi's First Gulf Bank as head of wholesale and international banking, with responsibilities including the debt markets.

The global financial crisis supported the trend, by forcing many Western banks to downsize their Gulf operations as they focused on repairing balance sheets back home.

Similarly, the introduction of tighter global capital rules in Basel III banking standards over the next few years may help Gulf banks; they are flush with capital, while many Western banks may face higher costs.

Meanwhile, the last three years of high oil prices have seen a surge in the amount of money which Gulf states have available to invest abroad. One indicator of this, the Saudi Arabian central bank's net foreign reserves, has jumped 52 per cent since May 2011 to $732 billion.

At a time of economic instability, this makes Gulf investors highly sought after by many bond issuers around the world. The fact that many Gulf funds are Islamic partly explains the increasing interest around the world in issuing sukuk (Islamic bonds); Senegal is in the process of selling its first sovereign sukuk.

Gulf banks, many of them with close links to their governments, are often the best way of reaching top investors in the region such as sovereign wealth funds.

When Britain raised 200 million pounds ($345 million) through five-year sukuk last month, two of the five banks mandated to arrange the issue were from the Gulf: NBAD and Qatar's Barwa Bank. They worked alongside HSBC, Standard Chartered and Malaysia's CIMB.

In fact, sukuk are emerging as a key area in which Gulf banks can expand internationally. Although several foreign banks such as HSBC have major expertise in sukuk, the Gulf banks are based in countries where Islamic banking is mainstream, and some are dedicated Islamic banks themselves; this may give them an advantage in developing their sukuk arranging operations.

Three of Turkey's four Islamic banks are affiliates of Gulf banks, which has helped steer Turkish sukuk issues to Gulf arrangers. Sukuk from Albaraka Turk and Kuveyt Turk this year were arranged by Gulf banks.

Banks from the Gulf are also looking at Malaysia, which accounts for over two-thirds of global sukuk volumes, and Thailand and Indonesia to expand their arranging business.

"We certainly have been Europe- and Mena-focused, and continue to be so, in our activity for capital financing be it sukuk, syndication, project finance or structured finance," said Khalid Al-Subeai, acting group chief executive at Barwa Bank.

"We do think Asia is interesting and we know there is unique value that Barwa Bank can bring, specifically to sukuk issuers," he remarked.

Dubai's Mashreq Bank, which began arranging syndicated loans for state-run entities and financial institutions in Sri Lanka in 2011, leveraged this into a role as an arranger for a $175 million, five-year bond issue by Sri Lankan Airlines last month.

Standard Chartered was lead arranger; QNB Capital was also an arranger.

"The Gulf fixed income business is increasingly crowded and the fee income is shrinking. That aside, there are opportunities elsewhere where we can leverage our existing relationships and make inroads in markets outside the GCC," said Rahul Goyal, the associate director for debt capital markets at Mashreq.

"We are actively pitching for bond and sukuk mandates in Asia and Africa, along with growing our DCM franchise in the region as well," he added.-Reuters