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Thu 12 Jan 2017 12:45 PM

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Global volatility offers a silver lining for GCC's private banking industry

There is significant room for growth in the GCC, given the unprecedented economic diversification through privatisation plans and subsidy reform

Global volatility offers a silver lining for GCC's private banking industry
Wealth Daher is seeing a continuous increase in the region’s HNWIs.

Last year was clearly one of unexpected events. Britain’s vote for Brexit, the results of the US elections and the growth of populist movements across Europe all project the dissatisfaction with the status quo.

While these global events have had a direct impact in developed markets, it has so far only had a limited impact on the GCC region. However, the region has been grappling with issues of its own — mainly centred on the impact of low oil prices. Volatility and uncertainty are currently the main characteristics of the market.

On a more positive note, the GCC countries continue to exhibit a robust growth trajectory in the non-oil sector — especially with these countries pursuing strategies to rebalance growth towards more productive public spending and strengthening non-oil fiscal balances to preserve oil wealth for future generations.

It is also important to note that GCC’s global economic prominence has risen rapidly in the past decade with its share in world GDP doubling to 2.2 percent. We believe there is significant room for further growth in the GCC given the unprecedented steps taken towards economic diversification, namely through privatisation plans and subsidy reform. These steps mark a milestone in terms of the region’s economic development.

Despite falling oil prices and geopolitical instability, the Gulf region continues to be a highly attractive investment destination for high net worth individuals (HNWIs) worldwide. So, although we may see the investment activity drop slightly, we expect this to rebound.

The Middle East is a growth region with wealth increasing by 162 percent since 2000, well above the global average of 119 percent.

One other example that highlights the region’s potential is that the number of millionaires is projected to rise by another 52 percent to 500,000 adults by 2020, with Saudi Arabia and the UAE expected to lead this growth, increasing by 72 percent and 62 percent, respectively.

These figures clearly show that, despite the current turmoil, we have witnessed an impressive and rapid upward trend in the regional markets. This produces opportunities for the private banking sector. Ultra-high net worth clients from the Middle East, like other emerging markets, have an entrepreneurial spirit and risk appetite that matches the growth environment they live in. They focus on growing their wealth rather than concentrating on wealth preservation.

Regional and other emerging markets provide our clients tremendous opportunities to invest in businesses and capital markets of the region. We have provided such a platform to our clients, from capital raising, business acquisition, syndication of debt and equity financing.

In today’s dynamic world, clients of this segment have complex financial requirements beyond traditional private banking services. They require more support and advice on complex situations and are looking for wealth advisors that offer a value proposition that is unique when compared to local players.

For instance, a global bank that is able to offer the best of both worlds, (ie) global products as well as customised local solutions. They are also looking for a strong synergy that can leverage collaboration across the different divisions of the bank, and comprehensive use of both sides of the balance sheet through the ‘one bank’ model.

Clients in the region appreciate the willingness of a bank to commit to a balance sheet. And this, combined with the enhanced value proposition of the integrated banking solution and the capability of delivering local products, will increase competitiveness in capturing the share of wallet of clients’ local wealth.

Bruno Daher, CEO, Middle East and Indian Subcontinent at Credit Suisse

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