Chief executive highlights UAE and Saudi Arabia as bright spots
Exclusive: Swiss private bank Julius Baer bullish about Middle East growth
Julius Baer, the third-largest private Swiss bank with more than 388 billion francs ($410bn) of assets under management, said the Middle East outperformed for the wealth manager last year and is likely to continue to show promising growth this year as oil prices rebound from a three-year slump.
"The United Arab Emirates and Saudi Arabia hold the most promise in the region this year as the two states boost efforts to diversify their economies," Bernhard Hodler, the bank’s chief executive, told The National in an interview.
“In the past two years things have gotten better and it has a little to do with higher oil prices and I think the economy here in the UAE has become a bit more stable,” Mr Hodler said.
Assets under management in the region exceeded the target growth rate of between 4 per cent to 6 per cent in new money that the bank seeks to attract annually, he said. Globally Julius Baer was able to increase new money by 6.5 per cent last year, and expects to attract as much as 6 per cent more in 2018. The Middle East region is forecast to grow in line with that this year, he said.
The Middle East is one of the highest concentrations of wealth per capita in the world. Wealth in the region grew at an average of 17.5 per cent a year from 2010 to 2014, doubling to $2.2 trillion from $1.1tn, according to the consultants Strategy&. Almost half of the GCC’s wealth resides in Saudi Arabia. Together with the UAE the two countries controlled 74 per cent of the region’s wealth in 2013, compared with 71 per cent in 2009.
Though Mr Hodler is encouraged by the economic reforms in Saudi Arabia, he does not have plans to open an office there for the time being. The bank has been beefing up its presence in the region servicing its clients out its Dubai office and other regional outlets. In Dubai alone, the bank has 120 employees, the large part of which are private bankers, he said.
Other private banks, including Credit Suisse, UBS and Indosuez Wealth Management, are also setting up or boosting their presence in the region. Recent fines for a number of banks in Switzerland have increased costs they may incur to ensure their compliance with rules and regulations. That has made many of them keen to tap growth in high-yielding emerging markets.
Despite the uptick in wealth, private banks have stiff competition. The number of banks chasing affluent clients is rising. There are more than 60 private banks operating in the Gulf, the majority of which are based in Dubai.
Outside of the Middle East in other emerging markets, Mr Hodler sees most promise in the fast growing economies of Asia and Latin America. Asia already accounts for about a quarter of the bank’s assets under management, or about 100 billion Swiss francs.
“In Asia, we call it our second home market, not just China but Asia as a whole as a market,” he said. “We have about a quarter of our business in Asia in terms of assets under management. It an important market for us, we started at zero in 2006 and over the next 12 years we grew substantially.”
Where the business itself is concerned, Mr Hodler has made it his priority to boost the percentage of assets that he manages that have advisory mandates to eke out more fees from value added services rather than rely too much on revenues from custodial and transactional one.
Currently 50 per cent of the bank’s assets under management are under an advisory mandate.