x Abu Dhabi, UAETuesday 23 January 2018

Foreign bankers swamp Gulf

Slim job markets elsewhere put increasing pressure on the region amid credit crunch.

The Dubai Government has said it would help unemployed Lehman Bothers' staff.
The Dubai Government has said it would help unemployed Lehman Bothers' staff.

Bankers have been flocking to the Gulf in the past six months in search of financial security and fat fees. But as the credit crunch continues to wipe out some of the biggest names on Wall Street and encourages mergers in the City of London, the realisation is growing that not even Dubai can absorb all the bankers looking for work.

Lehman Brothers's bankruptcy has laid off 25,000 staff worldwide - including about 40 in Dubai - while the staff at AIG must be worried about their own future, along with just about everybody else on Wall Street. In Britain, a proposed merger between Lloyds Bank and HBoS, the country's largest mortgage lender, will inevitably lead to job cuts. More consolidation in the banking industry worldwide is inevitable.

While it is easy to be blinded by the bright lights of potential in the Gulf, this market is not completely sheltered from a global recession. "I don't think the absorption will be possible for all talent available - it will be too much to add to the situation where the banks themselves are not necessarily hiring," said Walid Shihabi, the head of research at Shuaa Capital, an investment bank based in Dubai. "Banks will hire only in areas where they see the need in the immediate term, while managing their own expenses and their own funding."

You don't have to travel far in the Dubai International Financial Centre (DIFC) building to see first hand the consequences of a collapsing Wall Street. The lilies are wilting in the reception area of the Lehman Brothers offices and there are strict instructions not to admit any visitors. Not that anybody is waiting: the leather chairs and sofa are empty and there are no papers on the smoked-glass table. Despite having been in Dubai for only a few weeks, many of those who had worked at Lehman, which is now in bankruptcy protection, are having to decide whether to return home to an uncertain future or try to find new jobs in the Gulf.

"We are talking to many of the [Lehman] staff and have already hired one guy who is going to start on Monday," said Georges Makhoul, the managing director of Morgan Stanley in Dubai. "We have nothing but empathy for them. We understand their predicament." That view is echoed around the DIFC. The Dubai Government has even said it would help the firm's staff, paying their living costs or their children's school fees. "No one will be asked to leave or even face deportation," Omar bin Sulaiman, the governor of the DIFC, told Zawya Dow Jones.

The message is clear: in today's financial climate, no one is safe. One brokerage firm said it was willing to talk to Lehman staff, but would not be taking anybody on just for the sake of it. "Of course, this is a terrible thing to happen to anybody, especially at the start of the school year," he said. "However, there is no point hiring people if it risks jeopardising our own business." Financial firms in the US have cut about 65,400 jobs in the past year, according to the Department of Labor's employment figures for last month. Investment banks and brokerage houses on Wall Street cut 9,300 jobs, which is an estimated five per cent of their workforce, according to the New York State Department of Labor.

Some of these financial institutions have spent much of the summer posting staff to the Emirates. The Royal Bank of Scotland (RBS), for example, has decided to make its global headquarters for project finance in Dubai and has relocated some of its top executives to the region for that purpose. "We are going through a reorganisation of our global banking teams and are in discussion with the different product heads about what resources to relocate to the region, and that includes project finance," said Scott Barton, the head of global banking and markets in the Middle East.

RBS has rebranded the regional ABN Amro business it acquired in the GCC region, and Shihad Niazi, now heading the bank's wealth management platform, believes the timing could not be better. "RBS did a lot of homework to look at the potential of the market in the UAE and GCC before they could fully conclude that this is the region they mainly want to focus on," he said. In the past six months, Commerzbank/Dresdner Bank, ING Group, Credit Agricole and Standard and Poor's Rating Agency have been part of a flurry of international banks and agencies that have established hubs in the GCC or opted to transfer top executives to the region, rather than managing teams from London and New York.

The ING Group, a global financial services firm based in the Netherlands, entered the regional market earlier this year with plans to raise up to US$5 billion (Dh18.4bn) in the Middle East and North Africa (MENA) over the next three years through investment funds, with a specific aim to tap the Saudi market from its hub in the UAE. "Without a doubt, the Saudi market plays an important role in the decision making process of firms to come to the region," said Mr Abdulla al Awar, the managing director of the DIFC Authority. "Lots of investment opportunities lie in Saudi, so it contributes quite heavily to the increasing demand for this region in particular."

Mr Awar said more firms would be coming to the region in the coming months, reinforcing that global firms were beginning to understand that the region's potential covered 42 countries existing between established centres in the West, like London and Paris, and the East, including Hong Kong and Singapore. The GCC region has $60bn to $65bn of assets under management, with $52bn spread across 500 funds, according to research by Shuaa Capital. The UAE alone is estimated to have $6.5bn in assets under management, according to a report by Cerulli Associates. It is a decent figure, but will not be enough to keep all the world's investment bankers in business. shamdan@thenational.ae