30 Seconds On The Business Of…The GCC’s Private Banking Industry

Can you provide an overview of the region’s private banking industry?

With the emergence of regional financial centres in the GCC, private banking has significantly expanded in the past 10 years with 61 banks serving High Net Worth Individuals (HNWIs) in the region. In the next few years, emerging markets are expected to represent more than a third of the global millionaires’ wealth, and the GCC is expected to gain an increasing market share. Therefore, the GCC remains an attractive fast-growing market with continued inflows and rising profitability.

What are the main challenges that the industry faces?

With the introduction of Basel III standards, the banking industry is moving towards greater complexity with focus on liquidity and capital efficiency. Cross border transactions, tax transparency and sales practices need to stay on top of the agenda of private banks looking to keep pace with the scale and speed of these developing changes. Private banks also need to reinvent themselves and move away from simply selling products into providing bespoke services adapted to local clients.

The global financial crisis led the industry to shrink substantially. Has it recovered to pre-crisis levels in terms of manpower?

In terms of manpower, the regional private banking industry has not recovered to pre-crisis levels yet, as we have seen only a handful of private banks actively hiring after the crisis. However, we believe that with the growing number of HNWIs in the GCC, private banks will need to hire and expand in order to serve growing clients with bespoke localised services from their regional platforms.

Can you describe the current trends of regional clients?

Regional clients are very much yield oriented and risk-takers because more than 40 per cent of regional investors are entrepreneurs. The most popular asset classes are cash/fixed deposits (25 per cent), real estate (25 per cent) and the remaining 50 per cent is usually invested in liquid assets such as equity, fixed income and alternative investments like private equity. GCC’s HNWIs invest in core markets such as the UK, US and Europe, apart from emerging and frontier markets such as Asia and Africa.

Where do you see the industry headed in the near future?

Following years of industry consolidation, we can now see stronger partnership between private banks and their clients. This is resulting in healthier growth and sustainable environment for the industry’s future.