Dubai in recent years has looked to the likes of Singapore and Hong Kong as inspiration for its own financial hub, the Dubai International Financial Centre (DIFC).
Today, the tables have been turned, with news of one of Asia’s largest private banks, Bank of Singapore, setting up shop in the DIFC last month.
The private banking arm of Singapore’s second-biggest lender OCBC opened its outpost in the DIFC scarcely four months after receiving a licence to operate in the emirate last autumn.
During an interview with Arabian Business, the affable global CEO Bahren Shaari proudly shows off the new base, explaining that the décor is intended to reflect the convergence of East and West, with minimalist, European-style furniture and a carpet resembling the swirling patterns of sand dunes.
Bank of Singapore has had a representative office in Dubai since 1996 – before the DIFC was set up in 2004 – enabling it to service Asian customers doing business overseas. But this is the first time it has launched full-scale offshore operations – including private investment, credit and wealth planning advisory services – for regional clients.
Shaari, who was appointed CEO in 2015 and previously served as the bank’s head of the Southeast Asia region and as managing director at UBS AG Wealth Management, explains that the new hub is intended to help the bank capitalise on rapid growth rates in private wealth across the Middle East and Africa.
Bank of Singapore's opening in Dubai International Financial Centre signifies the increasing economic ties between the two cities.
According to a report published by Boston Consulting Group last June, private financial wealth in the Middle East and Africa is set to rise by 8.2 percent to reach $11.8 trillion by 2020, against a global growth rate of 5.9 percent. Dubai, says Shaari, is the perfect place from which to service this growth.
“Dubai is positioning itself as a bridge between East and West and between South Asia and Africa. It’s a safe haven with excellent connectivity to all parts of the world, a place where talent congregates and converges, and an open and diverse cultural hub that welcomes people from all over the world,” he says.
“That is a unique offer, and that is why we want to start offering our full range of services from here. Previously, Singapore did that because Dubai was only a representative office. Today, with the DIFC office, we intend to grow Dubai as our regional hub.”
The DIFC office opened with about 75 staff including investment advisors, relationship managers, product specialists and a compliance and research team, headed up by Kirit Chauhan, market head for the Middle East, Sub-continent and Africa. Chauhan in turn reports to Derrick Tan, Bank of Singapore’s global market head for Malaysia, Brunei, Japan, Sub-Continent and Middle East, based in Singapore.
The bank has registered significant growth in the Middle East region – doubling its assets under management and growing its net new money by almost five times in the past three years, Shaari tells Arabian Business.
Its total global assets under management stood at $79bn at the end of December 2016 – a significant jump following the transfer of $13bn of assets from the acquisition of Barclays Wealth and Investment Management in November.
More millionaires in Asia has encouraged banks to expand their wealth businesses.
Shaari says the firm has also expanded the number of bankers it has in Dubai, in particular over the past two years, from 25 to 36. He says the bank will continue to look for new talent as it builds the regional hub.
The bank aims to target ultra-high net worth clients (UHNWIs)– those with liquid assets of $30m and above. While many of its clients in the region are wealthy Middle Eastern families, it also seeks to grow its client base in Africa through the DIFC base. “We cover clients from key African cities in Kenya, Tanzania, Nigeria and Uganda, particularly non-resident Indians with access to the Middle East, and this is a key part of our anticipated growth in trading coverage in the years ahead,” Shaari says.
Assets managed out of the Dubai office are expected to grow by more than 20 percent over the next three to five years, and net profit by a similar rate, the CEO adds. This is actually more conservative than the previous three years, in which the bank registered close to 30 percent growth annually. Shaari laughs and says: “[Twenty percent] is actually the minimum we want to see! But we started with a very small base so the pace of growth may not be the same as previously.
“We have only just moved to the DIFC and have to concentrate on getting to know the regulations, what requirements are expected of us from the regulator, the risk management and other processes we need to put in place to stabilise.”
But he adds: “There’s definitely growth to be had – the market is there, the opportunities are there.”
There are three key trends he is seeing among high net worth individuals (HNWIs) that he hopes to exploit in Dubai. The first is in terms of investment opportunities.
Bank of Singapore's launch at DIFC helps the financial free zone reach its goal to triple in size by 2024.
“Middle Eastern clients have the experience and the desire to invest properly, both in developed markets and emerging ones. Some of our family clients in particular have been investing for the last 15-20 years so they are very experienced.
“Whether it’s fixed income, equities, hedge funds or private equities, there is a growing appetite to look at diverse and steady income streams.”
Second, wealth planning is becoming an increasingly important area, particularly as global common reporting standards are implemented across the world, he says.
“Clients want and need to know how best to organise their affairs, and we as a bank can connect them with lawyers and other correct advisors and share [permissible] information on how others have organised their structures to meet compliance expectations,” he says.
“Third, as part of OCBC group – one of the biggest banking institutions in the world – we provide a platform for Middle Eastern and African businesses and individuals that wish to expand to Asia or further West to the UK, where we have many clients investing in real estate portfolios, for example.”
Yet in Dubai, Bank of Singapore is expanding in a competitive market where the private banking units of local banks are jostling for position with global players such as Citigroup and HSBC. Meanwhile, shifting client needs – particularly in a low oil price environment and challenging economic conditions that squeeze revenue and profits – is forcing wealth managers to re-evaluate their strategies.
Courteous and discreet, Shaari says rising competition only brings greater opportunities to the table. “The market is getting bigger in the Middle East. There is already consolidation and a few other things happening; it’s an active space.
Bank of Singapore was formed by combining ING Asia Private Bank and OCBC Private Banking.
“At the moment, the trend in Singapore and many other parts of the world is that global banks are retreating to make sure they focus on core markets where they have a competitive advantage. So some of them are moving back to focus on the US and Europe.”
He points to several examples of global banks’ Asian operations being snapped up by other players as part of this trend. Bank of Singapore’s acquisition of Barclays Wealth was one – “They pulled back to focus on the UK,” Shaari says. But there have also been Union Bancaire Privée (UBP)’s acquisition of Coutts’ private banking activities in Singapore and Hong Kong, and the acquisition of Société Générale’s Asian private banking business to DBS, southeast Asia’s biggest bank by assets, to name a few.
“The banks’ strategies were to focus on core markets. For us, the core markets and where we have a competitive advantage is Asia, and there some banks cannot decide how they want to cover the Middle East.
“They are wondering, is it part of London and Zurich, or is it part of Asia? Well, it’s in between. It’s easy for us because we are starting from scratch and have decided to open a hub to bridge East and West rather than acquire. Yes, Singapore will remain the head office but Dubai will be key, and getting the right bankers in will be key.”
Would the bank then look to make acquisitions in the Middle East as part of its growth strategy? Shaari says the right opportunities have yet to come up. “If there are offers that fit in with our core strategy, then yes, we may do. But we always look at organic growth first, because this is what we can control.
“The first rule of business is to think inside first. What is it that we can strengthen? What can make us better, make us more competitive? The key is to ensure that all the bankers we’ve hired perform and achieve their targets, then we may be able to achieve what we want without new acquisitions.”
Bank of Singapore’s partnerships with global asset managers is crucial, too, he adds. “If we do not have the skills in-house to develop the products to take us into, say, hedge funds, then we will find a suitable partner who does.”
Singapore is the world's third-largest financial centre, behind London and New York.
With increased competition in private banking in the Gulf, Bank of Singapore could also – or instead – have chosen to open an office in Abu Dhabi Global Market (ADGM), the UAE capital’s brand new financial free zone that formally opened for business last year. Shaari indicates this is something the firm may do once the DIFC office is established. “Maybe in another year or so – we had to do one at a time and first stabilise the DIFC base,” he says.
Dubai’s financial free zone, he adds, is a “strong set-up, with a solid regulatory framework, established judicial system and good infrastructure. We have the full flexibility here in terms of providing advisory services to our clients.”
He does not envisage emerging rivalry between the UAE’s two free zones. “I think ADGM is a different segment in the business – it is offering a different geographical base and I think there is room for both.”
And, despite the bank’s increasing focus on Africa, he does not envisage opening a standalone office on the continent in the foreseeable future, preferring to take advantage of offshore financial centres.
“Singapore is our main offshore hub, covering South Asia; our Hong Kong office covers the China region; Dubai is to service this region here. So the key is to develop capabilities within these hubs.”
But can Dubai – a relatively new financial centre when compared to the booming banking powerhouses that are Singapore, London, Shanghai and Hong Kong – every truly compete? Of this, there is no doubt, Shaari states. “I think there is no longer a single banking hub. It’s not possible; private banking has to be positioned in terms of regional businesses.
“In order for us to understand a particular region we have to be based there, to develop a good knowledge of client diversity and the regulatory environment in which we are operating. To think we can cover the Middle East out of Singapore is not practical.”
OCBC Bank is the second largest financial services group in Southeast Asia by assets.
However, it helps that recognition of ‘Brand Singapore’ is strong among Middle East-based clients. “I’m born and bred in Singapore so I always think there are things it could do better. But when you start travelling around the world, you realise what a strong brand Singapore is in terms of credibility, governance, transparency and rule of law – all of which are hugely important elements for private banking clients when they’re thinking about where to put their money. Singapore is a choice destination for clients.”
Thus, ensuring the bank’s high standards of transparency are maintained in the Dubai office is important for Shaari given the emirate’s geographic proximity to opaque and unstable political regimes. He says this is of greater concern to him than cyclical market and other economic challenges.
“I’ve been in the business now for 30 years, I’ve seen all the cycles and we are geared up for volatility and ready to face all the big challenges.
“But, as we grow bigger, there are a few things I want to ensure: one, that we don’t create a bureaucracy that makes it difficult for us to conduct our business; two, that people don’t lose accountability and simply pass a problem around the business; and three, that we comply with global regulations on anti-money laundering and client suitability … and make sure we continue to be lauded for our discipline and integrity.
“Look, if [a client] does not have high integrity himself and does not comply with the right values, I am prepared to lose the gentleman and his business. That is something we will not tolerate.”
Bank of Singapore looks ripe to set high standards for itself, and its clients.