JP Morgan seeks growth in KSA market

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Ghassan Abdul Karim, Chief Executive of MENA at JP Morgan.

JP Morgan last week celebrated the official opening of its office in Riyadh. In June 2004, it was one of three institutions to receive the first-ever banking licences issued to global banks in the kingdom. Since then it has formed a local subsidiary and secured a licence from the Capital Market Authority to conduct securities business in the kingdom.

Why are you opening a new office in Riyadh?

We're here because we continue to see Saudi Arabia and the region as a growth region and we continue to invest in it.

We have had really close relationships with the government and various entities, like Aramco, the Saudi Arabian Monetary Agency (SAMA) and SABIC, dating back to more than three quarters of a century ago.

We've had people on the ground for almost 18 months now, but this was the official opening of the office. We had obtained all of our licences in March this year but then the Bear Sterns situation came up so our chairman, Jamie Dimon, couldn't travel, so we had to postpone it.

Will you be expanding your team in Saudi Arabia?

Yes we will, but at this stage we prefer not to give any figures. We will have the right people that we need to have across all relevant product and industry areas.

What parts of your Saudi business do you see growth coming from?

We are definitely focusing on the investment banking business, the advisory business is obviously important, and also the capital markets business. We also have the branch, under SAMA, where some of the treasury services business is conducted.

Several other international investment banks are taking an interest in the Saudi market. Will there really be enough business for all of you?

First of all I think it depends on the strength of the relationships these banks have, how well they know the market and how well they know how to operate within the market. If they do, clearly there are opportunities.

At the same time, I would say that banks need to have the right model to operate successfully. Some banks in the region have taken the approach that they will throw an enormous number of bodies on the ground.

If you're going to have investment banking operations with hundreds of people and have certain expectations, then clearly that's a different story.

Oil has been trading below $50 recently. What will it mean for your Saudi business if it stays at that level?

It doesn't mean anything. These levels are high by historic standards and we believe that they are levels under which Saudi Arabia and the region will do well.

Clearly, some people look at where it was a few months ago and say that it went down considerably, which is true. But these levels are very strong by historical standards and the Kingdom as well as the Gulf would continue to do well under a scenario of $50 per barrel oil.

Also, remember that over the past few years they have amassed a very big cushion that can take them through many years. Besides, our own forecast sees oil prices going up again.

When do you see the IPO markets picking up?

That's a tough one. Because of what is happening in the markets I think it's going to be difficult until things start to improve. Clearly they will pick up eventually. I think they will pick up in 2009, but when in 2009 it's hard to tell.

The markets in the Gulf and Saudi Arabia have been suffering from the panic that has hit the other, international markets. I would say that as soon as you see some clarity and optimism in the global capital markets this will spill into regional markets.

In the Kingdom, I think the key sectors will be financial institutions and what I would call ‘diversified industries', which includes energy and derivatives of energy.

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