Global banks wary of Middle East operations
Fees have yet to return to the heights they reached in the boom years causing banks to question if the region is value for money.
In spite of growing economies in the region and shrinking revenues in the western world, global banks have been shedding staff and selling off subsidiaries in the Middle East.
"The industry has shrunk at a rapid pace and as European and US revenues dry up, there is no appetite in bigger centres to subsidise business here,” Simon Penney, Chief Executive for Royal Bank of Scotland's Middle East and Africa Unit, told Reuters. “In some respects, most of the banks were never really profitable in the region. Even in the boom period, the business was getting funded from outside to a large extent."
Middle Eastern investment banking fees totalled $402 million during the first nine months of 2012, according to Thomson Reuters’ data cited by Reuters. Although this represents a 23 per cent increase from 2011, it is still far below the levels seen in the boom years of 2005-07, when fees averaged above a billion dollars annually.
Last year's fee increase can largely be attributed to an increase in debt issuance and bond arrangement activity, as opposed to traditional investment banking business, such as mergers and acquisitions, which fell 14 per cent to $103 million.
Global banking giants such as Deutsche Bank , Credit Suisse and Citigroup have all cut jobs in the region, and banks such as PNP Paribas have sold off Middle East subsidiaries.
"The perennial question for global banks has been to find the optimum operating model here. I have seen teams quadruple in size and go back to square one during my five to six years here," Reuters quoted a Dubai-based banker as saying.
- Deflation shocks in emerging markets and the GCC currency peg
- Crashing oil: has the time come for GCC countries to tax their citizens?
- Moody indeed: how did Moody's rate the ME's banks for 2015?
- The Middle East's Switzerland? Lebanon's banking secrecy is here to stay
- Precious retirement: why UAE expats are moving their pensions out of the UK
- Another weak year for IPOs in the GCC as issuers and investors remain wary of volatility in the Capital Markets
- Doha Bank named ‘The Best Commercial Bank in the Middle East 2014’ at the Global Banking and Finance Awards 2014
- Emirates NBD becomes first bank in the Middle East to extend banking operations to China
- IFC invests in GAC Group to support oil operations in Kazakhstan, Africa, and the Middle East