The executive search team asked open-ended questions in an attempt to pre-qualify the various candidates for senior level positions at brand name international banks in the region.
I patiently answered their questions for two and a half hours before it dawned on me that these guys are totally unaware of the reality on the ground.
Then I started to correct them by highlighting the different aspects of the economy along with the strengths and weaknesses of the various international banks in the region.
Let’s start with the reality of the situation in Saudi Arabia, which is that it is literally going through its industrial age.
That means the government is stimulating the local economy by building infrastructure projects like transportation, water, utilities and the like.
These investments can be compared to the stimulus plans in the US, Japan or China.
The fact of the matter is that the liquidity drain of the international banks, individual states in America and countries in Europe are caused by claims of a perpetual imminent default as they beg for an unlimited amount of revolving credit.
On the other hand, the GCC and Asia are focused on asset-backed loans, Islamic financing and government spending.
The situation is that the West is at a liberal extreme banking standard while the East is at a conservative extreme banking standard.
Now that we have defined the trends in the global markets, let’s revisit the position of the international banks in the GCC region.
The dynamics of pricing corporate clients at local banks involves evaluating the overall revenue that the bank generates from the clients.
That means each bank adds up revenue from loans, checking accounts, fees from letters of credit, fees from letters of guarantee, brokerage and investment banking businesses also.
Now as a new asset manager in the Kingdom, you have to stop and consider that while you may have access to portfolio managers, initial public offerings, Swiss secrecy, and all the other allures.
Any market share that you might win from the local commercial banks and their affiliates will end up costing your client higher fees.
The competition will raise prices if they notice that their asset management or brokerage business is migrating away from them.
As a result, the new foreign banks and brokerage firms need to offer all the products and services that the commercial banks offer. That way they can break the oligopoly by supporting the other business needs of the client.
The wild fluctuations in the value of the monthly account statements have brought Saudi investors to the point of asking detailed questions about their international investment portfolios.
Their discomfort has spurred the growth for the demand of educational curriculum that involves knowing and understanding the risks of the growing Islamic banking products and conventional financial products.
In our humble opinion, we need to go back to the basics of banking and brokerage by building the educational platforms within the investment community.
We need to properly fund the research and sales departments, so that they might raise the suitability levels of the investors with educational programs.
In our interpretation of the “Know your customer law,” only accredited investors should have access to the financial markets.
At this point, we would like to applaud the efforts of NCB Capital and Jawdat Al Halabi for their efforts to build an educational platform with Injaz called ‘NCBC Financial Literacy Program’.
This is the kind of leadership that the local market needs in order to build the foundation of an investment community that shares the responsibility of their own investments.
At this point, we are pleased to see the recent hiring spree at Deutsche Bank.
It is surprising to me and my readers that in the midst of an ambiance of billion dollar contracts being doled out by various ministries, that somehow the rest of the various brand name international investment bankers are not ready to underwrite the various opportunities.
They seem to be understaffed at the moment; however, we believe that they will follow the initiatives of both NCB Capital and Deutsche Bank as they endeavor to develop the educational platforms, the research reports, and the products and services to the highest possible standards of excellence.
HSBC is yet another bank that has been an active participant in the underwriting of both conventional and Islamic debts on the London Stock Exchange.
From an economic standpoint, the cash flow that HSBC brings into the economy is rewarded with more asset management business from its respective client bases.
We at The KIN Consortium believe that as they continue to uncover the needs of the local market, they will continue to design products and services, which will in turn vitalize the local economy.
That means we are going to see capital inflows to under writings here in the GCC region, as all the international competitors attempt to win a market share.— Khalid I. Natto, [email protected], is chairman & CEO of The KIN Consortium.