Deutsche Bank AG (DBK)?and?Credit Agricole SA (ACA)?are among international banks withdrawing employees from Dubai as deals dry up, revenue falls and lenders curb costs.
Deutsche Bank,?Germany?s largest bank, will relocate Christopher Laing, head of?equity capital markets?for the Middle East and?Africa, back to London after three years in Dubai.?Credit Agricole?s corporate and investment banking unit said last month it would shut its mergers advisory team in Dubai.?Citigroup has already transferred its regional head of equities, Adam Key, back to the UK few months ago.
?Dubai never quite fulfilled its promise as a regional banking hub,? said?Raj Madha, a banking analyst at Rasmala Investment Bank Ltd., a Dubai-based asset manager. ?With limited capital market activity, and little sign of a serious improvement in the near future, it?s not surprising that investment banking costs are being transferred elsewhere,? he added.
Banks are pulling staff from the Gulf Cooperation Council region as a drought of mergers and share sales is compounded by pressure to make savings at home. According to New York-based research firm?Freeman & company,?fees earned by banks in the?Middle East?fell 42 percent to $320 million in the first nine months of the year from $551.1 million during the same period in 2010. Total fees in 2011 are 71 percent lower than in the first nine months of 2008, when it peaked at $1.1 billion.
DIFFERENT ME COUNTRIES
?We are now more focused on cross-border operations and on deals initiated from different Middle East countries, including?Egypt,? Bertrand Hugonet, a spokesman for Paris-based Credit Agricole said in an e-mail. The firm will service merger clients from Paris though ?remains, of course, present in Dubai and more globally in Middle East region.?
A spokesman for New York-based Citigroup, the third-biggest US bank in terms of assets, declined to comment, while a Deutsche Bank spokesman confirmed Laing?s relocation.
?Deutsche Bank?s commitment to the Middle East and North Africa region remains unchanged, as well as Christopher Laing?s function,? said Michael Lermer, a Frankfurt-based spokesman. The firm ?will continue to maintain a strong presence on the ground.? Both Laing and Key will continue to cover the Middle East region from?London.
The sovereign debt crisis in Europe is limiting revenue from trading and curbing mergers and stock offerings in the euro zone, prompting firms to cut jobs and reduce costs. In all, banks have eliminated 137,000 jobs in the past 12 months, according to data compiled by Bloomberg Industries. The Arab Spring has also slowed mergers in the region, and reduced the volume of stocks traded on local exchanges.
BANKS ALWAYS OVERSHOOT
International banks may be cutting too many people too soon, recruiters suggested. Increased public spending and oil output will help economies in the Middle East and North Africa expand faster than initially forecast, the?World Bank?said on Sept. 21 as it raised its 2011 growth estimate for the region to 4.1 percent from 3.6 percent.
?Investment banks always overshoot,? said Florence Eid, founder and chief executive officer of Arabia Monitor, a London-based research and advisory firm. ?There were too many bankers here at the height of the boom and the current retraction is also too aggressive. This region is not going to fall off the edge of a cliff and still needs bankers.?
Dubai?s credit risk has dropped over the past two years as debt restructuring deals, bond repayments and profitability at companies boost confidence in the emirate?s economic rebound. The second-biggest of seven sheikhdoms that make up the UAE, Dubai is also benefiting from a stable government despite political upheaval sweeping other parts of the Middle East.
Credit Agricole will relocate its regional headquarters out of Bahrain following the unrest in the kingdom earlier this year, two bankers familiar with the matter said. The French bank will move most of the 75 to 100 Bahrain-based employees to Dubai early next year, one of the bankers said, declining to be identified.
Dubai government set up the Dubai International Financial Centre, a tax-free business park for financial-services companies, in 2004 to attract global banks, asset managers and insurers to help diversify its economy. Firms such as?Goldman Sachs Group, Citigroup and?HSBC boosted their presence in the region as rising oil wealth increased demand for financial advice. By July, the DIFC had 11,331 full-time employees and 813 registered companies, according to the business park authorities.
HSBC, Europe?s biggest bank, said this week it will stop offering brokerage services to retail investors in the?United Arab Emirates?and focus on institutional clients after local trading volumes and stocks plummeted. The bank will also close its consumer operations in?Kuwait as part of a strategic review.
Matthew Gribble, Dubai-based managing director of?Michael Page International (MPI), a recruiter that operates in 32 countries, says international banks are retaining a presence in the Gulf region, though still “scaling down?.
ASKED TO MOVE
?We?ve been getting calls from bankers who have been working out here and have been asked to move, but would love to stay for the lifestyle and the benefits they get,? he said.
Bankers working in Dubai enjoy tax-free salaries and higher bonuses than their counterparts in Europe?and the US, Gribble said. In 2008, many were commanding ?seven-figure basic salaries with 100 percent bonuses,? the banker added. In today?s market, bankers coming to the region can expect ?more reasonable? packages, Gribble added.
Deutsche Bank?s Laing came to Dubai from London in July 2008, to help build the bank?s regional operation. Under his guidance, the bank last November arranged a share sale for Axiom Ltd., a mobile-phone retailer based in Dubai, in what would have been the United Arab Emirates? first initial public offering in two years. The company abandoned the project in December, citing market volatility.
Dubai’s financial regulation came in for plenty of flak during the crisis, and the Dubai Financial Services Authority (DFSA), which regulates the DIFC, and the central bank, have their work cut out.
This year the DFSA has censured the local unit of Danish lender Saxo Bank for its failure to comply with rules, and fined E*Trade Financial Corp for breaching anti-money laundering controls.
“We now spend more time on firms that are systemically relevant and with a higher risk profile – so we don’t try to cover all like we did in the beginning,” Paul Koster, the Dutch chief executive of the DFSA, told Reuters.
Dubai’s political bosses continue to make positive noises.
“It is growing as a financial hub,” Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai’s Supreme Fiscal Committee, told Reuters. “I’m very positive about all the core businesses of Dubai.”
But in the final analysis, how seriously Dubai is taken as a financial centre could depend on reforms in Saudi Arabia and further afield, progress in India.
Sources: Bloomberg, Fox Business