20 October 2011
The global financial industry is in a downward spiral. More than 100,000 jobs have been lost in the banking sector across the developed world and more are no doubt on the way as the financial sector contemplates the horror of the EU debt crisis and the great deleveraging that continues to show no sign of abating.
Major international banks from the United States and the European Union are selling off units, restructuring, recapitalising, and shrinking their operations as they comply with stricter regulatory regimes and face poor economic growth in their main markets.
New trading rules has also reduced the prowess of commercial and investment banks in proprietary trading, commodity trading and more complex areas such as dark pools and high frequency trading, vastly reducing their money-making skills.
Virtually all the major banks are distracted as they fight for survival and focus on their home territory.
In this context, the Gulf, which at one point was an exotic new outpost brimming with petrodollars, no longer seem like an irresistible proposition.
From wealth management to retail banking, all areas of banking have taken a hit in the region. A number of investment and retail banks cut down their staff or shut down their regional operations in the immediate aftermath of the global financial crisis of 2008 - most famously Goldman Sachs which left as quickly as it came to the region.
Now more cuts seem to be on the way - and for good reason
This year, the Middle East saw 11 IPOs raise a paltry $678.6 million till October 20, according to Zawya IPO Monitor. That's a third of the capital raised during the same period last year by 20 companies seeking a public sale.
No wonder Zawya's IPO league table does not feature a single international bank either among the top ten lead managers or the top ten financial advisors - investment fees has dried up, leaving many of the high profile bankers to move to greener pastures.
HSBC, which has shut down its UAE brokerage unit, is in talks with Oman International Bank to merge its operation. The international bank has also merged its Saudi operations with SABB Securities.
Abu Dhabi newspaper The National reported recently that Zurich-based EFG International has shut its Dubai and Abu Dhabi offices. Other banks reportedly cutting staff or shutting down include Nomura Bank, Credit Suisse and Credit Agricole, among others.
Meanwhile, there is consolidation among the home-grown banks as they look to strengthen their position and prepare for what will be a spirited rounded of financing activity over the coming years in the Gulf.
Emirates NBD's recent takeover of Dubai Bank is a welcome move that will reduce at least one player in the UAE's crowded sector.
That's just the tip of the iceberg.
Zawya's M&A monitor reveals how the regional financial services industry is a hive of mergers and acquisitions' activity: Shuaa Capital is eyeing Egypt's HC Securities and Investment, Qatar's Barwa Bank took over Al Yusr Islamic Banking Service and Bahrain's Al Salam Bank is merging with Bahrain Islamic Bank, to name but a few.
End of the golden age of international bankers
The golden age of the international bankers with plush offices in multiple Middle East destinations seem to have been short-lived. In place is the stark reality of global financial austerity, shrinking bonuses and very narrow focus areas of expertise.
That's a pity given that the international banks' strong, aggressive presence raised the bar in the region and forced local banks to put their game faces on to compete with the global powerhouses.
International banks were at the forefront of advances made - ironically - in Islamic finance and deal structuring in the region and brought great depth of knowledge and personnel in the regional industry.
They also expanded the investment pool and introduced new clients and prospects into the region from their other global outposts - a fine skill that their sovereign wealth fund clients no doubt appreciated.
While none of this will go away, it will certainly be reduced as international banks batten down the hatches and defend their home turf before they return to hoist their flags in frontier markets in a major way.
That leaves much of the terrain to the regional banks, who have a great chance of consolidating their position, and deploying much of the $1 trillion funds that are set to be unleashed by regional governments and institutions, according to Morgan Stanley estimates.
That $1 trillion carrot dangling in front of them will ensure the international players don't all rush to head for the exit doors, and keep one foot firmly in the region.
The global financial industry is in a downward spiral. More than 100,000 jobs have been lost in the banking sector across the developed world and more are no doubt on the way as the financial sector contemplates the horror of the EU debt crisis and the great deleveraging that continues to show no sign of abating.
Major international banks from the United States and the European Union are selling off units, restructuring, recapitalising, and shrinking their operations as they comply with stricter regulatory regimes and face poor economic growth in their main markets.
New trading rules has also reduced the prowess of commercial and investment banks in proprietary trading, commodity trading and more complex areas such as dark pools and high frequency trading, vastly reducing their money-making skills.
Virtually all the major banks are distracted as they fight for survival and focus on their home territory.
In this context, the Gulf, which at one point was an exotic new outpost brimming with petrodollars, no longer seem like an irresistible proposition.
From wealth management to retail banking, all areas of banking have taken a hit in the region. A number of investment and retail banks cut down their staff or shut down their regional operations in the immediate aftermath of the global financial crisis of 2008 - most famously Goldman Sachs which left as quickly as it came to the region.
Now more cuts seem to be on the way - and for good reason
This year, the Middle East saw 11 IPOs raise a paltry $678.6 million till October 20, according to Zawya IPO Monitor. That's a third of the capital raised during the same period last year by 20 companies seeking a public sale.
No wonder Zawya's IPO league table does not feature a single international bank either among the top ten lead managers or the top ten financial advisors - investment fees has dried up, leaving many of the high profile bankers to move to greener pastures.
HSBC, which has shut down its UAE brokerage unit, is in talks with Oman International Bank to merge its operation. The international bank has also merged its Saudi operations with SABB Securities.
Abu Dhabi newspaper The National reported recently that Zurich-based EFG International has shut its Dubai and Abu Dhabi offices. Other banks reportedly cutting staff or shutting down include Nomura Bank, Credit Suisse and Credit Agricole, among others.
Meanwhile, there is consolidation among the home-grown banks as they look to strengthen their position and prepare for what will be a spirited rounded of financing activity over the coming years in the Gulf.
Emirates NBD's recent takeover of Dubai Bank is a welcome move that will reduce at least one player in the UAE's crowded sector.
That's just the tip of the iceberg.
Zawya's M&A monitor reveals how the regional financial services industry is a hive of mergers and acquisitions' activity: Shuaa Capital is eyeing Egypt's HC Securities and Investment, Qatar's Barwa Bank took over Al Yusr Islamic Banking Service and Bahrain's Al Salam Bank is merging with Bahrain Islamic Bank, to name but a few.
End of the golden age of international bankers
The golden age of the international bankers with plush offices in multiple Middle East destinations seem to have been short-lived. In place is the stark reality of global financial austerity, shrinking bonuses and very narrow focus areas of expertise.
That's a pity given that the international banks' strong, aggressive presence raised the bar in the region and forced local banks to put their game faces on to compete with the global powerhouses.
International banks were at the forefront of advances made - ironically - in Islamic finance and deal structuring in the region and brought great depth of knowledge and personnel in the regional industry.
They also expanded the investment pool and introduced new clients and prospects into the region from their other global outposts - a fine skill that their sovereign wealth fund clients no doubt appreciated.
While none of this will go away, it will certainly be reduced as international banks batten down the hatches and defend their home turf before they return to hoist their flags in frontier markets in a major way.
That leaves much of the terrain to the regional banks, who have a great chance of consolidating their position, and deploying much of the $1 trillion funds that are set to be unleashed by regional governments and institutions, according to Morgan Stanley estimates.
That $1 trillion carrot dangling in front of them will ensure the international players don't all rush to head for the exit doors, and keep one foot firmly in the region.
© alifarabia.com 2011
