x Abu Dhabi, UAEMonday 22 January 2018

The fastest moving banker in the Gulf

Meeting up with Hassan Heikal is like trying to hit a moving target.

The philosophy: paying employees predominantly in shares helps align the interests of executives and shareholders.
The philosophy: paying employees predominantly in shares helps align the interests of executives and shareholders.

Meeting up with Hassan Heikal is like trying to hit a moving target. I thought I had him nailed down in Cairo, but he managed to elude me. Then I had arranged to meet in Dubai, but on the morning he had to go elsewhere. Finally, when I collared him in his office in the Dubai International Financial Centre, he said hello and disappeared around a corner. I followed. By the time I found him, the wiry, animated man was waiting for me, perched behind a table in a small room.

"We can't go into my office, because Philip Southwell, who has just joined the firm from Deutsche Bank, has taken it," he explained with a smile. Mr Heikal is clearly proud to have made such a high-profile signing, even if it means his new office is half the size. He offered a drink, popped open a can of diet Pepsi, and proceeded to explain how EFG-Hermes became one of the region's leading investment banks.

He grew up in Cairo, the son of Mohamed Heikal, one of Egypt's most outspoken political commentators. Mr Heikal Sr was close to Egypt's second president, Gamal Abdel Nasser, but less keen on either Anwar Sadat and his successor, Hosni Mubarak. Now, aged 85, he still presents a weekly television show on Al-Jazeera. "Apparently it has a very strong viewership," his son says proudly. Mr Heikal decided against following his father into journalism, instead getting a degree in economics and politics at Cairo University after which he joined Commercial International Bank in Egypt. After three years he joined Goldman Sachs in London. After only 18 months he left to join EFG.

"My colleagues thought I was mad. Goldmans is a great training ground. Even the Financial Times wrote about my departure." It helped that he was joining his uncle, who had set up the Egpytian Financial Group in 1984, and his brother who was a partner there. When Mr Heikal joined in 1995, there were just 50 employees. Turnover at the brokerage was just US$300,000 (Dh1.1 million) a day; this compares with $450m today. The firm expanded rapidly and in 1996 merged with Hermes, which had been set up a few years earlier by Egyptian bankers who had worked in the Cairo offices of Kidder, Peabody and Co, a US investment bank.

Today, EFG-Hermes has 900 employees, zero debt, and more than $550m in cash. Its largest shareholder is the Dubai Group, which is owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. Another major shareholder is the Abu Dhabi Investment Authority. By just about every measure it is the top investment bank not just in the Gulf, but in the Middle East. How did that happen?

"Egypt was going through a transformation. It was a good time to see the birth of a new market," Mr Heikal says. "Even my boss at Goldman Sachs agreed. There were a lot of privatisations at the time. Initially, we had to do all the privatisations with a state-owned bank, Bank of Alexandria. But eventually we were able to do them on our own. Then we started growing the corporate finance business and the brokerage arm. Everything was fine until Egypt went into recession in 2000."

For Mr Heikal, this experience was the making of both him and the bank. "It was tough," he recalls. "We had gone public in 1998, which was very successful. Citigroup bought 20 per cent of us. But when the recession hit, everything stopped. We did a rights issue of 200 million Egyptian pounds (Dh130.5m). It was small, our market capitalisation was just $30m. But it allowed us to survive and to expand in the Gulf."

Last year, it was the second-largest mergers and acquisitions player in the Middle East, behind only HSBC, which did a number of large deals in Saudi Arabia. "Saudi is probably the only place where we are not as strong as we would like," says Mr Heikal. "But we have just hired Hossan Radwan from Goldman Sachs and we are going to push our Saudi presence." He insists that despite the firm's success, the events of 2000 have "scarred" the management team.

"Already in 2005 and 2006, while markets were rallying, we took the opportunity to increase our capital. We are not leveraged. We have an investment in Bank Audi because we wanted to have a stake in a big local bank to have a universal banking model, while maintaining our liquidity." So does he think the worst of the financial crisis is over, or are there more shocks to come? "There will be volatility but the region will fare better than others," he says. "With the exception of Dubai, governments, consumers and corporates in the region are under-leveraged. There are sufficient reserves to withstand the shock.

"If you look, most governments have set budgets at $40 to $50 a barrel, this at a time when the oil price was about $35, which shows that they were willing to run deficits. With the oil price recovering, this may not be necessary." Mr Heikal says, ultimately, demand will go up for oil. "There are only so many reserves, and demand will increase from China, Egypt, India and other places." Not that EFG-Hermes has been unaffected by the downturn. Its first-quarter profits compared with the same period last year fell by 45 per cent.

The company cut 7 per cent of its workforce and the 200 best-paid were asked to take voluntary salary cuts ranging from 20 per cent to 55 per cent, with the senior staff taking the highest percentage. "It is important to show everybody that we are all in the same boat." He points out, though, that since March, the firm has been hiring again is making senior appointments. Despite criticisms of executive pay, the firm will continue with its bonus structure. "We are paid predominantly in shares. I think this achieves an alignment of interests with executives and shareholders."

Unusually for a banker, Mr Heikal does not consider himself a capitalist. His father is left wing and this influence has rubbed off on his son. He sees no dichotomy between making a profit and using those profits to achieve socialist goals. "I think governments should intervene to distribute wealth in a just way." But he does think that bankers earn their money, at least in most cases. "What catches up with people in this industry are the brutal mood swings," he says. "You have a couple of weeks on top of the world, then the market turns. It's very stressful."

Mr Heikal has many fans in the banking community, who admire both what he has achieved and what his bank has become. "EFG is uniquely positioned to benefit from this crisis," says a leading international banker based in Dubai. "It is almost in an opposite position compared with its competitors, with zero debt, and hardly leveraged. It has a strong brokerage arm, a firm foothold in Egypt, which has been probably less affected than just about anywhere by the economic crisis, and people find the quality of their research to be among the highest in the region. As for Hassan, he's a bright, creative, energetic and motivated guy."

So does Mr Heikal think he will still be in banking in 10 years' time? "No longer banking," he laughs. "I'd like to be in Gouna, where we have a house." Gouna is a resort on the Red Sea less than an hour from Cairo. His uncle has already retired, while his brother now runs his own private equity fund. Mr Heikal is married with two children aged four and six. "There I can get away from the stress of the city. We waterski, play tennis, do some fishing. Perhaps I shall sit on the boards of some companies."

Politics? "No interest, zilch, zip, nada." Mr Heikal has just bought a blue- grey Porsche 911 in Dubai, which his friends claim is a sign of a midlife crisis. At just 42, he has achieved more than most bankers do in their whole careers. He isn't ready to retire yet, but just talking about the Nile lights up his eyes. "I have been down the Nile from Luxor to the Aswan Dam seven times," he says. "Each time it's as good as the last. It's like returning to a lover."

With that, there's a knocking on the door and it's time for him to leave. After quick goodbyes he is on his way to the airport. There is still work to be done and he's a man in a hurry. * with additional reporting by Sara Hamdan rwright@thenational.ae shamdan@thenational.ae