Barclays is exploring a return to Saudi Arabia in a bid to capture a slice of the country's burgeoning capital markets, two people close to the matter told Reuters.

The British bank is looking at securing a license in the kingdom to be able to manage deals including initial public offerings (IPOs), the people said, speaking on the condition of anonymity.

They added the deliberations were at an early stage and no final decision has been made. Barclays declined to comment while a representative for Saudi Arabia's Capital Markets Authority did not respond to a request for comment.

The bank gave up its Saudi licenses in 2014 amid a global retreat of its investment banking operations under then-chief executive Antony Jenkins. The bank is authorised to operate in the Dubai Financial Centre and Qatar, but in its latest annual strategic report it said it aimed to "selectively expand" its investment banking presence in the Middle East.

Barclays earned about 70% of 2021 pre-tax profit from corporate and investment banking activities, including trading, advisory and transaction banking. International banks have been courting Saudi Arabia ever since the kingdom outlined plans to float state oil giant Saudi Aramco, resulting in a landmark $29.4 billion share sale before the COVID-19 pandemic.

Barclays would enter an increasingly competitive market dominated by Western banks, such as Moelis & Co, Goldman Sachs , JPMorgan and HSBC, which are vying for IPOs and advisory work on the kingdom's multibillion projects despite traditionally low advisory fees compared to other markets.

The Middle East has been a bright spot of activity in an otherwise gloomy year for equity capital markets. Companies have raised some $21.9 billion through IPOs in the area in 2022, more than half the total for the wider EMEA region, which also includes Europe and Africa, according to Dealogic data.

In particular, Saudi Arabia has witnessed a string of IPOs amid a government-led privatisation programme that has also seen state entities shed some of their holdings in listed firms, encouraging local companies and family businesses to go public.

On Dec. 11, oil refiner Luberef priced its $1.3 billion share offer at the top of the initial price range on the back of strong investor demand. The following day, restaurant operator Americana began trading on the Riyadh and Abu Dhabi bourses after a successful $1.8 billion dual listing.

In 2021, Barclays ranked among the top 10 bookrunners of share sales worldwide, according to Dealogic data compiled by the Wall Street Journal. Its latest quarterly report showed a more than 80% drop in equity capital markets income in the first nine months of 2022 from the same period last year amid a global drop in IPO issuance.

(Reporting by Pablo Mayo Cerqueiro and Hadeel Al Sayegh Editing by Tomasz Janowski)