US bank further expands footprint in the region to tap the ultra-rich market; bank's main focus on Saudi, Kuwait
JP Morgan Chase & Co
expects its private banking business in the Middle East to post
double-digit growth in 2011 as the US bank further expands its
footprint in the region to tap the ultra-rich market.
With double-digit revenue growth in the private bank unit
last year, the bank is targeting a class of investors from the
oil-rich region who have turned more cautious and risk averse
since the financial crisis.
"In the Middle East, you need patience and you need
perseverance. You need to stay the course," said Paolo
Moscovici, managing director of the bank's private banking
business in the Middle East.
"That's the tough challenge I have. I still need to produce
numbers every year. And the numbers have to make sense."
JP Morgan's private bank, which has around $700bn in
assets globally, caters to those among the wealthiest in
society. This means family businesses and individuals valuing
anywhere from $100m to several billions of dollars.
But the region saw heavy wealth erosion during the crisis as
oil prices fell sharply and some family-owned businesses were
hit due to exposure to toxic assets and heavy debt exposure.
Moscovici said that navigating through the storm meant
asking investors to diversify their portfolios and finding new
"Within the equities space, we went back into what we
thought would be growth positions that would pull the world out
of recession," he said.
"That was mainly emerging markets and that served us well."
But working with clients in the region is quite different
from serving the wealthy in New York or even Texas, Moscovici
said. While a typical U.S. individual's portfolio would have 1
percent to 2 percent invested into emerging markets, a Middle
East investor would have invested 15 to 20 percent.
"This part of the world has always been much more
comfortable in emerging markets," he said.
The private banking industry in the Middle East has a number
of players including pure-play banks such as Julius Baer
and Credit Suisse competing with
global banks including HSBC and UBS for a
share of the oil wealth.
Despite the double-digit growth, Moscovici said the region
would still lag growth rates seen in fast-growing markets such
as Asia where private bankers have been ramping up operations to
meet the rapid pace of emerging millionaires.
"I don't want to exaggerate, it's hard to grow 25 percent.
If I could stay in the 10-20 percent range, that's where it
makes sense,"he said.
Global private banks are increasingly turning their eyes to
Asia, where - with the exclusion of Japan - wealth is expected
to grow at nearly twice the global rate, according to the Boston
JP Morgan employs around 50 people in the Middle East and
Moscovici's plan is to hire "selectively", shifting people and
resources closer to the region and looking for talent locally.
"If you know HSBC, and UBS, the numbers are in the
hundreds," he said. "Actively, for JP Morgan, is always going to
While the current core businesses and main source of growth
is in Saudi Arabia and Kuwait, JP Morgan is looking to expand
its presence in places such as Abu Dhabi, Dubai and Bahrain.
The bank recently set up private banking operations in Doha,
Qatar, the tiny Gulf Arab state which recently won a bid to host
the 2022 football World Cup and whose economy has been growing
at a phenomenal rate.
The executive believes the bank's long-running presence in
the Middle East and its global reputation will help it in
winning clients and competing against other global names active
in the region.
"Our clients have an eye for brands. They like Gucci and
Prada and they prefer to deal with names like Goldman and JP
Morgan," Moscovici said.