Following The Money
Citi, Morgan Stanley among the bulge brackets that are relocating top talent to Dubai
May 26, 2008
As more revenue flows into the Middle East and North Africa (MENA) region, investment banks are moving greater numbers of professionals there to take advantage of the resulting opportunities.
Earlier this month, Citigroup announced plans to relocate its global co-head of investment banking, Alberto Verme, from London to Dubai.
Last week, Lehman Brothers named Philip Lynch, currently co-head of European and Middle Eastern equities, its chief executive for MENA, and appointed Jameel Akhrass, who has been Middle East CEO and head of Middle Eastern investment banking since April 2006, to be MENA vice chairman. Lynch will be based in Dubai.
A month ago, Lehman tapped its head of European and Middle Eastern media, consumer and retail banking, Makram Azar, to fill a newly created position, global head of sovereign wealth funds. Azar is relocating to Dubai from London.
Also in April, Barclays Capital established a new post, chairman of Middle Eastern investment banking and investment management, for Roger Jenkins, its CEO of private equity, principal investments and structured capital markets.
"As a firm, we like to mix product and geography where we can," says Jenkins. "In this case we're combining our business focus and dealmaking ability with an area that needs some guidance and help."
Jenkins maintains responsibilities for both businesses, so he will stay in London but plans to visit Barclays' MENA offices every few months. The firm has licenses to operate in the Dubai International Financial Center as well as the Qatar Financial Center in Doha, the Qatari capital.
Barclays began making plans for MENA expansion in the spring of 2004. "There's clearly a huge amount of wealth--hundreds of millions of dollars a day in revenue--transferred from the West to the Middle East, particularly in the Gulf as a result of increased oil and gas prices," says Jenkins. "A number of the recipients of this wealth have to work with professional firms and look at ways to protect the wealth for future generations."
Morgan Stanley, meanwhile, established a team of bankers in Dubai in April to cover MENA sovereign wealth funds and financial sponsors. Dennis Cornell, the group's leader, relocated from New York, where he was a senior coverage banker in the financial sponsors group. One of Cornell's subordinates, Hugo Parson, was transferred from London, where he was a member of the leveraged and acquisition finance division. Cornell and his team report to David Law, who himself was named chairman of MENA investment banking early this year and has moved to Dubai.
SWFs and more
Asset management, foreign exchange, Islamic finance and M&A advisory opportunities are some of the attractions for banks, and some of the wealthiest prospective clients in the region are sovereign wealth funds. "The attention these investment funds have attracted in the last 12 months has been unprecedented," says Law. "Two years ago, you could count the number of press mentions of sovereign wealth funds on one hand, but now it's a daily occurrence to hear them spoken about in the media."
Jenkins has worked with SWFs in his capacity as head of the firm's private equity business, though he declined to name them. Similarly, Law's experience with Morgan's non-US financial sponsors group, which he led from 2004 until his appointment in early 2008, was one reason he was selected for his new role. "Many of the sovereign wealth funds in the region deserve the kind of day-to-day coverage that private equity firms require--they are very sophisticated clients," says Law. "The approach we have at Morgan Stanley is that if you adopt the same intensity we apply to our financial sponsor clients to sovereign wealth funds, it will generate a lot of incremental business."
SWFs require intense coverage because of their differences. "Sovereign wealth funds are talked about in a very generic way, but the reality is that all these funds are different," says Law. "For example, you can't talk about the Kuwait Investment Authority in the same breath as Mubadala in Abu Dhabi." Mubadala operates like a private equity firm, says Law, while the Kuwait Investment Authority makes a lot of investments in fixed income and equities.
Though SWFs are a large part of Morgan's MENA business, the firm also services local clients in the financial services, energy, media and telecommunications sectors, says Law. Morgan opened its first MENA office in the Dubai International Finance Center in the first quarter of 2006, and advertises that it was the first firm to establish a full-fledged investment banking business in the region. Today, it has more than 70 investment bankers in MENA, about 40 of whom are based in Dubai. Law says the firm plans to continue incrementally raising its MENA banker headcount.
In addition to Dubai and Doha, where it set up shop in 2007, Morgan has an office in Cairo and three in Saudi Arabia-in Riyadh, Jeddah and Khobar. The firm was the first foreign player to receive an operating license from the Saudi Arabian Capital Market Authority, which was established in 2003. At the end of April, the Saudi state-owned Public Investment Fund confirmed it was establishing its first SWF with $5.3 billion, and Law says Morgan expects to work with the fund as a client.
Jenkins says Barclays does not have any specific benchmarks for MENA personnel increases, but it is still a priority. "Barclays' regional headcount is quite large in retail and commercial banking-in terms of investment banking and investment management, it's small but growing," he says. "We want to grow with our clients as they grow, and that will require increased headcount and activity."
The majority of Barclays' efforts in the Middle East will continue to involve the Gulf states, says Jenkins. In North Africa, he is bullish on Egypt, Libya and Algeria.
Morgan, Barclays and other firms have the highest concentration of MENA personnel in Dubai, but Jenkins expects that "over time you'll see a more balanced presence across other financial centers in the region." He adds, "Dubai started earlier than other regional centers, but there's a tremendous amount of investment going into Doha, for instance. In the scheme of things, it's quite a young region despite its tremendous history." Besides Abu Dhabi (which, like Dubai, is part of the United Arab Emirates), Jenkins predicts Cairo could become an influential regional hub for international financial institutions, along with Manama, the capital of Bahrain, and Riyadh and Jeddah.
Law credits Dubai's success as a financial center to the government's efforts. Although Dubai is not as rich in natural resources as its neighbors, the government managed to bring in outside investments by considerably easing financial-services regulation and building infrastructure to increase tourism and shipping. In previous decades, financial institutions found it difficult to obtain operating licenses in Dubai, says Law.
Local bank consolidation on the horizon?
One advantage in MENA is that homegrown financial institutions are themselves a potential source of revenue. "I wouldn't identify anyone as a key local competitor, but there are a number of local banks that we view as clients because we can significantly help their businesses," says Jenkins. "We have great relationships with a number of financial institutions in our markets, but we also work as partners whenever we can. It's often about alliances and joint ventures and working with financial institutions as a client base."
As MENA prosperity increases over the next five years, so too will consolidation among local banks, predicts Law. Banks will look to combine to achieve greater scale and provide additional services as the economies of their host countries grow, he says. Morgan provided a fairness opinion for National Bank of Dubai in connection with its merger with Emirates Bank International, a deal on which Lehman also advised.
Jenkins and Law expect more MENA buildups from their international competitors. "They recognize, in this challenging environment, that this is one of the bright spots in the world and they need to have some of their best talent here to capture the opportunities," says Law. "There is enough business for us all to do pretty well in the region."
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