Banking on the old school

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FINANCIAL CAPITAl: Switzerland is home to some of the world’s oldest financial institutions.

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GATEWAY: European banks are using Dubai as a base for their Gulf operations.

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CONFIDENT: Pasha Bakhtiar, managing director, LODH.

Established Swiss financial institutions are increasingly turning their attention away from Europe, and towards the Gulf. Andrew White reports on why Swiss bankers can no longer afford to stay home in Geneva.

As the credit crunch threatens to draw the US and Europe into a suffocating recession, some of the world's most established financial institutions are increasingly turning to the Gulf to boost their balance sheets.

While affluent Gulf Arabs once had to travel to Geneva to do business with centuries-old Swiss banks, Europe's ‘old guard' is now making the trip East, in a bid to get closer to some of its most valuable and lucrative clients.

"Our focus over the next 10 to 20 years is definitely to grow our presence in areas where there is strong wealth creation, and that's obviously happening in areas such as the Middle East, as opposed to Europe today," explains Pasha Bakhtiar, managing director at Lombard Odier Darier Hentsch (LODH), the oldest firm of private bankers in Geneva and one of the largest in Switzerland and in Europe.

Founded in 1796, LODH has served the Middle East from Geneva for over half a century. Last year, however, the bank established a formal presence in Dubai to better offer its services to existing and new clients in the GCC.

While there is still a dedicated unit serving the region from Geneva, LODH now boasts a seven-strong team on the ground in Dubai - and that number is set to increase.

"Traditionally we always had teams based out of Geneva, Geneva being still the base for all of our private banking operations, but there is a lot of transit between [the Gulf] region and Switzerland in general," says Bakhtiar.

Some clients appreciate the fact that there is a presence in Geneva, so they can call up somebody in Switzerland if need be, while by being in Dubai we give them easier access if they want to see us at short notice. Combining the two has really been a successful model for us.

"We have seen a clear trend in private banking - it is becoming more and more international," agrees Hans Nützi, CEO at Clariden Leu, Switzerland's third-largest private bank.

"Five to 10 years ago people just brought their money into Switzerland and they money managed out of Switzerland. Today it is completely different - it's a worldwide market and we need to have locations all over the world."

Formed just a year ago through the merger of five independently private banks each owned by Credit Suisse, Clariden Leu has wasted no time in identifying the Middle East as a key market. It now has a 13-strong asset management team in Dubai, and will use the emirate as a base for its entire Middle East banking operations.

"We see an increasing demand for structured products [from Gulf clients], and that's why we believe that we have a growth opportunity here," continues Nützi.

We have 68,000 dollar millionaires [in the Gulf], and there are a lot of private banks around, but then this is a huge market with plenty of opportunities. We want to do it better than others."

The region currently accounts for a small slice of the firm's US$133bn assets under management globally, but the US subprime crisis represents a golden opportunity for canny Gulf investors - and the private banks they retain.

"There will be huge opportunities for big investors from the Middle East who believe that there are companies in the world whose stocks have been tumbling too much," explains Nutzi.

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