Private Banks Thrive In Turmoil

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UBS AG andRoyal Bank of Scotland Group Plc (RBS)are among banks boosting their wealth management operations to attract Middle Eastern clients as the regions richest seek to protect their cash amid political turmoil.

Former Credit Agricole SA banker Albert Momdjian will join UBS in August to head and expand its wealth unit in emerging markets, while Coutts, the private banking unit of RBS, plans to more than double its team over four years, Middle East managing partner Chris Allen said in May. Julius Baer Group Ltd. last month hired Credit Suisse AGs Edmond Carton to head its Middle East business and five bankers began work atBarclays Plc (BARC)in Geneva this month to target Middle Eastclients.

In the countries that saw the most turmoil, some private savings have naturally been transferred abroad to international banks and international banking centers, said Florence Eid, founder and chief executive officer ofArabia Monitor, a London-based research and advisory firm. Arab private money has always sought safe havens in times of turmoil.

Regional unrest in the neighboring North African coutries of Egypt and Tunisia, and the slow spread to Middle Eastern countries of Syria and Saudi Arabia, has prompted the wealthy of these nations to turn to stable markets like the U.A.E.

Deposits held by U.A.E. banks increased 7 percent to 1,123.5 billion dirhams ($306 billion) during the first five months of the year, surpassing the increase for the whole of the previous year, according to data from the U.A.E.s central bank.

Many U.A.E. bankers report an increased level of business with clients from countries most directly affected by the political unrest such asEgypt, said Sven-Olaf Vathje, partner and managing director of TheBoston Consulting GroupMiddle East.

This is a clear vote of confidence on the stability of the U.A.E. as the regions leading banking hub.

The number of high-net-worth individuals in the Middle East rose 10.4 percent to 400,000 last year, while their combined wealth rose 12.5 percent to $1.7 trillion, according to the Capgemini and Merrill Lynch 2011 World Wealth Report. The rate of growth in the size and wealth of the regions high-net-worth individual population was higher than any other regions, according to the June 22 report.

In 2009, growth in the Middle Easts high-net-worth population lagged all other regions mainly due to the financial crisis in Dubai and a decline in real estate prices.

The increased focus on wealth management by banks in large part reflects a broader global trend towards businesses with lower capital intensity as a result of post-crisis regulatory changes, said Gabriel Aractingi, managing director of Morgan Stanley PrivateWealth Managementin Dubai.

U.A.E.-based banks faced a shortage of deposits from the onset of the global financial crisis in September 2008 as foreign investors speculating on a revaluation of the currency pulled out and credit markets froze. The loan-to-deposits ratio has declined to 93.4 percent in April this year, from 108 percent at the end of 2008. U.A.E.-based banks are also looking at wealth management to lift revenue as income frominvestment bankingdeclined.

Source: Bloomberg

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