Too many bankers seem to forget that the wealth they have been blithely destroying in recent months is actually somebody else's money, not theirs. In these times of wealth destruction around the globe, Bank Sarasin-Alpen and Alpen Capital firmly believe that private banking is about wealth preservation, and not wealth creation. Robin Amlot talks safety and security to the bank's Executive Vice Chairman and Chief Executive Officer Rohit Walia
Bank Sarasin-Alpen (ME) Ltd is a subsidiary of Bank Sarasin & Co. Ltd, a Swiss private bank based in Basel. The AAA-rated Rabobank is the majority shareholder of the Sarasin group. Bank Sarasin-Alpen provides private banking solutions including strategic investment planning and financial concept development based on client needs and preferences.
Alpen Capital, its associate firm provides advisory solutions in the areas of debt & equity capital markets, syndications, M&A advisory, corporate restructuring and private equity to Institutional and Corporate clients in the Gulf Cooperation Council and South Asia.
Rohit Walia is the Executive Vice Chairman and Chief Executive Officer of both entities. He has more than 25 years of international banking experience with financial institutions based in the Middle East and South Asia. He worked for American Express Bank and Bank of America in India on the corporate banking and financial institutions side. He then moved to the Middle East in 1993 and was part of the management team at Mashreq, Dubai, until he left in 2004 to establish Bank Sarasin-Alpen and Alpen Capital.
Two years ago Banker Middle East featured an in-depth interview with Rohit. It would be understating the case to say much has changed in the financial markets over that period. However, the bank has not been idle.
In both 2007 and 2008 Bank Sarasin-Alpen was voted 'Best Private Bank in the Middle East' by its peers in the Banker Middle East industry awards.
We recently caught up with Rohit to review the bank's progress over the past two years and his plans for the future.
How has the business evolved over the last two years?
The business has been great over the last two years. I think our unique model of leveraging our investment banking advisory capabilities to complement our private banking offering has worked very well. If I look back two years ago we were just in Dubai with two banking licences: Bank Sarasin-Alpen and Alpen Capital. Since then we've got an operation in Qatar with both investment banking and private banking licences from the Qatar Financial Centre Regulatory Authority (QFCRA) [March 2008] and we've gone live in Oman with both advisory licences from the Capital Market Authority (CMA) [July 2008].
We've also set up two asset management companies. The first one, Sarasin-Alpen & Partners Ltd, a joint venture between Sarasin & Partners, LLP UK and Bank Sarasin-Alpen (ME) Ltd. Got a license in November 2008 (see Banker Middle East, December 2008 p54). It is a fairly serious operation for us and we have seconded the Deputy Chief Investment Officer from our London office to head the operation here. Sarasin-Alpen & Partners Ltd is committed to launching conventional and Shari'ah-compliant funds and services for the bank's client base in the region.
The second company, Alpen Partners Ltd., is a private equity operation out of London which was recently licensed by the FSA in Jersey. Alpen Partners has already launched two successful funds. The first fund the UK Land Fund targets specific parcels of land in the UK which have the specific attributes to benefit from reclassification. The second fund - the India Real Estate Fund offers investors an opportunity to invest alongside one of the leading developers in a portfolio of developments.
You mentioned the licences in Oman and Qatar. What's the business doing in these countries?
We see both Qatar and Oman as having great potential and our expansion in to these two markets significantly supports our growth initiatives in the GCC. In both these locations, we follow a business model that is identical to how we operate in the United Arab Emirates. I'm a complete believer in "if it's not broken let's not try and fix it". Whatever we do here, we do there: two licences, two separate management teams, using the investment banking platform to bring in the private banking business.
Both Qatar and Oman operations have been very successful largely due to the fact that we have been able to build great teams in both locations.
Has the expansion you have experienced changed the nature of the business?
I don't think there has been any dramatic shift in the nature of the business. Of course the numbers have become larger as we are doing larger transactions today as compared to what we were doing two years ago. A key measure of success for us is whether we get repeat business from our clients and we are doing very well in this respect. We work with some of the largest customers and family businesses in the region, and we are getting more of their business.
Ours is a relationship business as clients needs evolve, so does our offering to them. In the investment banking side, we have expanded our reach beyond the conventional debt products and anticipate a further diversification of these products in meeting the finance needs of the corporates given the current market conditions of tight liquidity. We are also seeing a gradual shift in investment interest from western markets to South Asia, especially India. Considering our wide experience in these markets, we are creating investment opportunities for Middle Eastern groups in India.
You have the two sets of licences, investment banking and private banking. Is there a clear demarcation between the two or are you seeing more of a crossover?
There is a crystal clear demarcation between the two and both are run independently as two discrete businesses. The two have synergies and there is a clear understanding of the referral process between the businesses.
When a private banker comes across a customer who is running a business and needs to raise money or sell or acquire a company, it is clearly a need we can meet through our investment banking platform. Such customer needs are brought to my table and we bring the investment banking team in to provide the necessary expertise and take over the transaction. Similarly, on the investment banking side, if we work with a corporate on a transaction, we bring in the private banking team to capture the private banking opportunity with the customer. In both these scenarios, the two businesses remain separate in the entire process.
How would you compare the regimes you operate under, for example the DIFC and QFC?
I don't see much difference actually as both are very progressive and approachable in their functioning. Regulatory compliance is critical for us, we are very particular with all our regulators and as a result we have got perfect audits from them in all the areas we work in.
Even in Oman, where we're licensed from the Capital Market Authority, we have got great regulatory respect.
You have launched new funds. You believe the time is right; how do you persuade potential investors?
I believe there is an opportunity in every situation if you look for one. The markets are at such a low that now is the right time to launch a fund as compared to when the markets were at a peak and were about to start their downward slide. As to your point regarding how to convince investors, well investors still invest! If you have got some money, you have got to put it somewhere and there is an opportunity out there to buy some very reasonably priced and in many cases heavily undervalued assets. We therefore hope to see a lot of inflow of money.
Our track record, our pedigree and the fact that 'AAA' rated Rabobank is the majority shareholder of the Sarasin group, convinces people that we are a safe strong bank and a good place to put money.
We have always followed this mantra that we are here to keep your money safe not make you rich: wealth preservation, not wealth creation. I think wealth creation is the customer's job. They are in business to create wealth. As a banker, I am here to keep it safe for them. The moment those concepts get mixed up then you get into trouble.
Do you believe private banking at large has suffered from such confusion?
The banking industry has indeed suffered from this confusion. When bankers try to compete with the returns that a customer's business can offer him, they have to go for very aggressive and risky products. Many times customers themselves push for products with higher returns because in a boom market everywhere around them they see unbelievable returns and want their bank to provide the same. It's ultimately a position one has to take.
I think we've been very particular about what we have sold even to the point that if the customer wants something that we don't think he should be buying then we won't sell it to him.
What's the outlook for private banking in the region?
In the last few years we have seen that anybody could come, set up a shop and make some money. Now the customer wants to understand very clearly why he should trust you with his money. In many ways it is back to basics for the private banking industry - safety and security are of prime importance. That is why banks came up in the first place and there is again a growing recognition of these basics and trust is once again the key word. Customers and potential customers will increasingly want to understand your story and your credibility before they will trust your advice and trust you with their money.
One of the things that will definitely happen is consolidation. People who had multiple accounts will definitely consolidate, especially if they have got less wealth. So I think those who will prosper are the private banks who have got the right positioning, the right pedigree, the right products and the track record.
Looking at the question from the other side, this is the first real downturn that investors in this region have experienced.
We have had some minor corrections in the past. I have been here for a long time and we have seen some ups and downs but not such a steep downturn as we are seeing today.
In the last few years, most investors in the region have only seen markets go up and started believing that this is the way the markets will always behave. It has been a learning process for everyone. The more I interact with people, the more I feel they are beginning to understand some of the things they shouldn't have done like overleveraging. It will hurt, that's for sure and it is with this hurt that the maturity will come in.
Into 2009, what are the key trends in wealth management or, as you put it, wealth preservation?
Safety! Security! Safety AND Security! People just want to be sure that when they give you their money they are going to get it back whenever they want it back. The current financial crisis has strengthened the belief amongst investors that they need to bank with an institution of repute and make informed decisions.
The Sarasin Group has the backing of 'AAA' rated Rabobank which is considered one of the safest banks in the world. With the increased focus on wealth preservation, we have seen some substantial new business and a renewed interest in the products of Rabobank. The kinds of products we have been selling are mostly capital guaranteed structures around agribusiness from Rabobank and other asset classes that are considered less risky.
I think people will return to the stock markets too. Stock markets are here to stay. The world has seen markets go up and down before, maybe a little bit more gradually than we see now.
Banking is a confidence business how do you go about retaining your clients' confidence?
It is about giving sensible advice, sometimes despite what the customer wants!
You also need to be careful about what you want to sell, making the extra one per cent and leaving the customer in trouble six months down the road is not good. I think it is also about managing customer expectations. That's the other problem, especially in the last year when you're offering products that return seven or eight per cent a year when customers have been making that in a day in the real estate and stock markets around the world.
How are you coping with the changes in investment banking?
Our investment banking operation is not a typical investment bank; it is more advisory in nature. We don't run a balance sheet on the investment bank. In this kind of model we don't expect to see much change. We'll carry on with the M&A activity, the debt syndications, the bilaterals, the IPO advisory, the risk rating advisory kind of business. So this model is not subject to the kind of change happening elsewhere and it looks good today. When I started this operation over four years ago I too wanted a balance sheet like everybody else. It was debated and then not allowed, which is looking good today (laughs) but the way investment banking is run by bigger players is going to change dramatically.
How are your plans for Shari'ah products?
On the investment banking side we have done some very interesting Shari'ah-compliant transactions. We advised on a Sukuk for Berber Cement in Khartoum. In fact we've done quite a few transactions with Islamic structures.
In private banking we have not been as active in this area as we would have liked to be. Having said that we have just hired a whole team in from a 'friendly neighbourhood' bank, three of whom are based in Zurich and one will be based in Dubai. The game-plan is to have an Islamic structure for each of our private banking products. By the end of Q1 2009 we should have our first Shari'ah-compliant private banking product.
On a lighter note, what's the significance of the Global Fusion concerts?
Global Fusion was conceptualised to commemorate the launch of the bank's operations in Dubai way back in 2005. We just held a concert in November in Qatar and will be holding our fifth concert in Dubai in February followed by another in Oman in March. We're good at doing this, we've had fantastic concerts but we have no plans to move out of banking into music promotion although it's a good alternative to keep in place if banking goes out of fashion (laughs)!
The event offers an unforgettable musical experience and serves as an ideal platform for client interaction. Over the years the Global Fusion concert has become our flagship event and our clients eagerly await it every year. Every concert features a fusion of different kinds of music ranging from European to Asian and Arabic.
Finally, tell us about the Ferraris...
My colleagues talk of an offer that if they make a specific target in one year they will get a Ferrari from me on top of their salary and bonus. Nobody's there yet but one guy has got to two wheels already!
Wealth preservation, not wealth creation. I think wealth creation is the customer's job. They are in business to create wealth. I am supposed to keep it safe for them.
© Banker Middle East 2009
