Standard Chartered's move to develop a project finance team at a time when everyone else is downsizing or getting out of the market, might seem like strange timing. But the bank thinks the moves makes perfect sense.

Project finance teams have not escaped the round of cuts that have hit most investment banks over the past two years as the continued global economic downturn, exacerbated by uncertainties over war in Iraq, forced banking committees to scale back. For some this has meant pulling out of markets and returning to core investment banking capabilities and for others downsizing departments and amalgamating project finance departments into export finance and corporate finance divisions.

At the beginning of September, HSBC, for example, said that 40 investment banking jobs would go from its corporate advisory and project finance team. Just under 10 of those are likely to go from project finance. Surprisingly the bank said that some of the senior positions would be refilled, by new hires.

Meanwhile Abbey National recently said it would be pulling out of all its wholesale banking activities, including project finance, to concentrate on its retail business. The news followed the departure of Ian Harley, chief executive, in June amid sizeable losses on high-yield and equity portfolios.

But elsewhere changes in the market are all too obvious in the types of banks involved in deals.

In Hong Kong, for example, some of the major British and American banks have scaled down their activities while banks such as Fortis have stepped up a gear. Says one: "There are just fewer [project finance] deals around at the moment. So some banks have pulled back. But in their place we have seen local banks becoming bigger players. Banks that were not historically involved in project finance are now doing a lot more."

Set against this background, Standard Chartered earlier this year announced that William Rathvon would be spearheading an expanding team focusing on project finance.

As global head of project and export finance at the bank, Rathvon will be integrating a strong existing export finance team with good local network with a new project finance unit. However, his appointment and his new team's capabilities, gives a strong hint of the direction the new project finance team intends to take.

Before joining Standard Chartered, Rathvon was at Bank of America where during the 1990s he focused on non-recourse finance, eventually heading up the bank's Asian project finance team from 1994-1998. However, following the bank's merger with NationsBank, the mergers and acquisitions and project finance teams moved closer together. During that time, Rathvon gained more straight investment banking experience. Moving on from there, most recently he has been coordinating Bank of Americas Securities' hydrocarbon team, taking more of an M&A/investment banking perspective on the oil, gas and petrochemicals sector.

Under his leadership the Standard Chartered project finance team aims to take advantage of opportunities in Asia and the Middle East with the main thrust being in oil and gas, LNG, refining, chemicals and related infrastructure and power - sectors that have provided a strong line of business for project financiers of late.

Rathvon, who joined Standard Chartered in March this year, said he spent a year discussing his move and fleshing out what form a new team would take. "What attracted me in particular was that it was new start-up and one that fits in with the bank's existing regional and local presence and client base, and within the corporate finance team." More specifically the new team builds on Standard Chartered's well-established export finance team, complementing its expertise in debt capital markets and corporate finance.

Reporting to V Shankar, the bank's group head of corporate advisory, Rathvon's newly integrated team falls under an umbrella that includes Corporate Finance Advisory (origination and execution), project and export finance, structured finance (tax based solutions), structured trade finance, and private equity.

Among the existing export finance team are those who came over from CIBC when the Canadian bank sold its export finance and structured trade finance business in March 2000. The acquisition encompassed the Canadian bank's capital equipment sales finance and structured trade credits, including aircraft finance, and also gave Standard Chartered access to profitable export credit agency support work.

Only a year before in 1999, Standard Chartered had acquired the global trade finance arm of UBS, though surprisingly not UBS's export finance portfolio. However, the deal brought in new business and new markets for the bank, which it has since built up.

Rathvon says one of the motivations for building up the bank's project finance capabilities was to give its existing clients a broader service. "We've got out strategy and it has been approved by senior management. So, having good quality people in place, we then had to look at where the business would go globally and where that would link up with our client and country expertise."

The team is setting up two centres - Dubai and Singapore.

To that end a number of key players have already been brought on board. Deepa Pasumarty, Conor McCoole and Chris Box were among the recent hires, brought in by Standard Chartered in June this year.

Pasumarty, who has over 14 years experience in the sector, joins from Credit Suisse First Boston where she was a director in the project finance team. She has experience in M&A and structured project finance in the power, natural resources and infrastructure sectors in Asia.

McCoole comes from UFJ Bank in Singapore, where he was a senior vice president in the project finance team. He previously worked at Barclays in the bank's corporate and project finance team. Box is one of Rathvon's former colleagues at BofA where he was an associate director with experience in the media, telecommunications, power, water and transportation sectors.

Meanwhile, Ravi Suri, formerly of ABN Amro, will be based in the Dubai office, heading up the Middle East project and export finance division for Standard Chartered.

From a project finance perspective the team is small but Rathvon says: "that is just the first phase of hires. We'll see how the business goes and after that."

Certainly the new team is keen to win higher-level roles in key transactions. Rathvon says that adding the project finance function should 'up-tier' the bank, giving it access to more lead arranging and advisory roles.

Rathvon has not given a timeframe for the expansion of the team but the initial indications are that existing clients like the newly merged team and the extra capabilities the bank has to offer.

So far Standard Chartered has won its first power advisory role for RPCL, the Rural Power Company, in Bangladesh, beating competition from HSBC. "We won that mandate because we were able to convince the client that we had the right skill sets," says Rathvon. The project, a simple power plant, has the potential to be developed into a combined-cycle plant.

The bank has also won a lead arranging role with 10 other international and local banks on the $450 million Qatar Vinyl Company deal in Qatar. And before Rathvon's appointment, the bank was brought in as co-lead with HSBC on the Tabreed district cooling project in the United Arab Emirates.

"We are looking at about five other projects in the Middle East at the moment for good lead-arranger and lead advisory roles," says Rathvon.

But with the Middle East the focus of high proportion of business over the past few years, Rathvon is extremely bullish on the region and believes that the bank will still be able to mop up a fair amount of work, even given that regional banks have played increasingly senior roles in deals over the past few years. "The Middle East has many projects," says Rathvon, "and in my mind still needs additional liquidity. We want to augment the arranging business and we certainly don't see an oversupply at this stage."

Following the summer break, banks say the market in the Middle East is definitely warming up with a series of roadshows and presentations due over the coming few months. Independent water and power, aluminium smelter, petrochemical plant and pipeline projects in countries such as Oman, UAE and Saudi Arabia are all in the offing.

However deal structure and participants have changed. Appetite from international regional banks has declined following the significant number of mergers in European and Japan over the past few years. But also with those banks that remain, the arranging groups over the past year have become larger as banks' credit committees have moved to spread their risk.

Meanwhile, recent deals have also seen a heavier local bank component, with banks such as Qatar National Bank and the National Bank of Abu Dhabi taking up much of the slack. Nevertheless even with this rise in liquidity, the strong pipeline of deals in the region looks set to continue well into next year and beyond with some predicting that next year could be a record year for project finance transactions in the region. Though whether there will continue to be enough supply for those looking for longer-term tenor deals is less certain.

Yet while Rathvon is in tune with the huge potential for business in the Middle East, he says the new team will remain cautious.

He contrasts the Middle East with China, where many banks have built up sizeable teams in the hope of winning new business in the country. "We won't staff up that high there [China] yet. We'll just see how that progresses."

However other parts of Asia, although deal project flow is slower that in its mid to late 90s high, are also viewed as attractive prospects for the bank. Essentially this appears to be about building on existing links to the region derived from contacts on the export finance side.

"In Asia we are waiting for a couple of announcements to be lead. We know that in Asia we have local currency and fixed income capabilities and that gives the SCB team a strategic advantage," says Rathvon.

Among the areas his team expects to be in, are Malaysia, Thailand, Vietnam and possibly the Philippines. However, the Americas and western Europe are not on the bank's target range for now.

But sector-wise, while Standard Chartered will continue to chase deals primarily in the oil, liquefied natural gas, petrochemicals and power, it says it may from time-to-time look at other opportunities in ports or infrastructure.

"India is definitely a key area for us," says Rathvon. "We have huge market share in the country. And there are a number of things coming up that we will be looking at in LNG, power, and possibly infrastructure-related deals."

However, a key part of the integration of a new project finance focused team with the existing export finance group, is to pick up deals that span to the two disciplines.

Says one Hong Kong-based banker: "There may be fewer project finance deals around in Asia but import and export finance deals are still very important. There is still a need for companies to import machinery and equipment." And in some cases those types of export finance deals pave the way for future project finance deals.

One London-based project financier says: "It's not really a surprise that Standard Chartered are pursuing project finance deals. I'm not sure of their strategy but if it is export finance-led, then it clearly makes sense. However, we don't get the impression that they are going to be getting involved in the longer tenor deals. But certainly in oil and gas, the bank will be able to use its export credit skills more in conjunction with commercial loans. And, perhaps, with that blend of risk it could do very well for them."

Rathvon agrees. He says that for the bank the decision to move into project finance now has much to do with the demands of the clients."Many of them had been asking for help outside of traditional corporate finance banking."

And as with other banks such as HSBC and Citi, the aim is for both sides of the team to pick up business for the other. "In almost all project finance transactions there are other things that the clients wants - be it a good interest rate swap or cash management function. But the same may work in reverse for deals that we are not involved in but that we can come in to provide some project finance expertise."

As for bucking the trend of hiring rather than firing, perhaps Standard Chartered's moves are as much evolutionary as its peers. Many of the big players built up their project finance teams in the 90s responding to a boom in work globally. By the late 90s, when things were faltering, many kept up their staffing levels with the hopes of recovery. Since then banks have been faced with solvency issues, whereby they had too much debt and hence the move to shore up their balance sheets.

The result is that some of the bigger banks have switched back to demanding quick turnaround on deals, and in some cases shunning the longer turnaround times typical of project finance transactions.

Rathvon's team, meanwhile, is simply building its capabilities to take advantage of very real business opportunities in oil and gas in places such as the Middle East. Perhaps the real question then is not why now? But why did it take them so long?