Citi considers Saudi expansion as banks aim to capitalize on reforms

Citi has already played an active role in Saudi Arabian finance and was one of the banks that helped to arrange the government’s $11 billion bond issue last month. (Reuters)
Updated 02 May 2018

Citi considers Saudi expansion as banks aim to capitalize on reforms

RIYADH: Citigroup is considering seeking a full banking license in Saudi Arabia as Western banks aim to capitalize on Saudi economic reforms, with rival HSBC announcing it has won mandates for several privatizations in the kingdom.
More than a dozen foreign banks have licenses to operate branches in Saudi Arabia, battling for business resulting from the kingdom’s efforts to itself off reliance on oil revenues.
US bank Citi ended a five-decade presence in Saudi Arabia in 2004 with the sale of its 20 percent stake in Samba Financial but in 2015 won permission to invest directly in the local stock market and in January this year gained approval to begin investment banking operations in the kingdom.
“We’re looking at whether or not we should expand our activities here into a full banking license,” James Forese, the president and chief executive of the bank’s institutional clients group, said at a business conference in Riyadh.
Other banks seeking a Saudi license include Credit Suisse, while Goldman Sachs plans to expand its services in the kingdom after being cleared to trade equities there.
The banks are vying for a role in Saudi Aramco’s planned initial public offering, which could float up to 5 percent of the state oil giant and make it the world’s biggest oil company by market capitalization.
Citi has already played an active role in Saudi Arabian finance and was one of the banks that helped to arrange the government’s $11 billion bond issue last month.
The kingdom is now working on a pipeline of privatizations aimed at generating up to 40 billion riyals ($10.7 billion) in non-oil revenues by 2020 and creating up to 12,000 jobs, according to an official document published last month.
HSBC has been mandated for several of the planned privatizations and will announce them very soon, Samir Assaf, HSBC’s chief executive of global banking and markets, said at Wednesday’s conference.
The bank is “very much contributing to the privatization program,” he said.
HSBC Saudi Arabia is already acting as an adviser on the sale process for the kingdom’s flour milling sector and the Saudi Stock Exchange’s planned flotation. It also has an advisory role on the proposed Aramco listing.


Startup sets the pace in Middle East’s virtual-currencies business

Updated 14 min 22 sec ago

Startup sets the pace in Middle East’s virtual-currencies business

  • Rain facilitates trade and exchange of digital currencies for conventional money
  • Over 2,000 virtual currencies exist outside the realm of traditional financial organizations

DUBAI: One of the hardest things after starting a company is to gain clients. But before Yehia Badawy and his three business partners could get down to it, they had a bigger hurdle to clear: Convincing financial regulators to endorse a new type of business in a non-existent industry.
Their idea was Rain, the first licensed cryptocurrency exchange in the Middle East. Launched in 2017, the venture fills a gap in the region’s digital assets market by facilitating the trade and exchange of digital currencies for conventional money.
Cryptocurrencies are a late-stage digital tender. Neither backed by physical assets nor guaranteed by central banks, they are nearly impossible to counterfeit.
More than 2,000 decentralized virtual currencies exist today, largely outside the sphere of influence of traditional financial organizations.
“Many people believe the internet should have its own currency,” said Badawy, 33, an Egyptian national. “Why should the euro or the US dollar or any other fiat currency be the default way to buy and sell goods and services online? That said, these transactions need to be safe, secure and properly regulated.”

The most famous cryptocurrency is bitcoin. Created in 2008, it caught the public’s attention in late 2017 when investors drove the value of one unit to nearly $20,000, before sending it back down to around $3,000. Subsequently, bitcoin stabilized at around $10,000.
Other cryptocurrencies have gone along similar trajectories. The fluctuations raised awareness of this fledgling business sector, while underscoring the importance of taking adequate safeguards.
“The industry has (now) reached the next level of maturity,” said Badawy. “There’s definitely a change in tone following a better understanding of cryptocurrency trading and how it works.”
This was not the case when he founded Rain with 29-year-old Abdullah Almoaiqel of Saudi Arabia and US nationals Joseph Dallago, 28, and A. J. Nelson, 27.

Rain, the first licensed cryptocurrency exchange in the Middle East, and launched in 2017.

With a shared enthusiasm for digital currencies, the four met online via social networks Twitter and Meetup.
At the time, the Middle East was the only region without a licensed cryptocurrency exchange, and local interest in this domain was scant.
“Despite our concerted efforts, regulators either didn’t understand cryptocurrencies or weren’t willing to engage with us,” Badawy said.

FASTFACT

Bitcoin

Investors drove the value of one unit of bitcoin to nearly $20,000 in 2017, before sending it back down to around $3,000

Regulatory approval was important to widen the buyer base for cryptocurrencies in what was then an untapped market.
“We could’ve started in an offshore jurisdiction with a white-label solution,” said Badawy. “But we knew that for crypto to really become a key piece of daily life, it needed to be
governed in a way that satisfies innovation but also existing regulation. That was the main driver.”

When the Central Bank of Bahrain agreed to a cryptocurrency trial in 2017, Rain joined its sandbox program for new financial technology solutions.
Two years later, the venture became the Middle East’s first company to be licensed by an onshore regulator, joining an exclusive international group.
Last July, Rain closed a $2.5 million round of seed funding. Thousands of customers from over 50 countries now use its platform to buy, sell or store crypto assets and fiat currencies in an ecosystem with bank-grade security.
Badawy drew parallels between Rain and early internet service providers (ISPs) such as America Online.
“We look at ourselves as the ISPs of the crypto industry. This is where we are providing the initial liquidity to the region, as the ISPs did for the internet,” he said.

“In the future, there will be other companies — and we hope this happens — that come and build on top of this foundation layer.”
Entrepreneurs hoping to establish such new-wave financial institutions need more than deep pockets, according to Badawy.
While these are essential, all startups also require discipline, perseverance and hard work. As Rain has shown, a good idea and persistence can help a new industry take root.
“Anyone starting a business today should come to terms with the fact that unless they take steps that are beyond the average, they shouldn’t expect above-average results,” said Badawy.
“That said, the startup ecosystem in the region has matured so much over the last few
years that anyone with a good idea and the ambition to go after it won’t be struggling.”

  • This report is being published by Arab News as a partner of the Middle East Exchange, which was launched by the Mohammed bin Rashid Al Maktoum Global Initiatives to reflect the vision of the UAE prime minister and ruler of Dubai to explore the possibility of changing the status of the Arab region.