Time for private banks to tap Gulf wealth?

There are more than half a million wealthy individuals in the Gulf Cooperation Council region with too few private bankers to serve them. It could be time for wealth managers to step up.
Time for private banks to tap Gulf wealth?

Private banks need to establish a greater presence in Gulf Cooperation Council (GCC) countries and place more staff there if they are to benefit from the region’s wealth, writes Scorpio Partnership.

A study by the GCC published towards the end of last year, plus publicity surrounding the upcoming World Expo 2020 to be held in Dubai, has concentrated attention on the region, specifically the provision of financial services to the wealthy.

There are about half a million high-net-worth individuals (HNWIs) with investible assets of $1 million or more in the Middle East, comprising 4.2% of the global total. Together they have assets of some $1.8 trillion, according to Capgemini’s World Wealth Report 2013.

Within the GCC, HNWIs are serviced by 61 private banks all located in Dubai, 31 of them international. There are an estimated 700 private bankers in the region.

Given clients’ preference for a personal, face-to-face service, there appears a need for private banks to establish a greater presence in the GCC and place more staff in the region if they are to seek to tap this wealth.

The private banking landscape of the GCC has been changing in recent years, with a number of firms entering the region – LGT, Nedbank Private Wealth, Arbuthnot Latham – as well as exiting – Lloyds TSB, Merrill Lynch and Morgan Stanley.

The Middle East did not escape the global debt crisis of 2008, but has since returned to firmer ground and has followed the trend of emerging market growth outperforming advanced economies.

While the lure of an onshore presence remains, the Capgemini report shows that Middle Eastern HNWIs keep a higher proportion of their wealth offshore than international counterparts: 34.8% compared with 19.7% for peers in North America and 25.8% in Europe.

In total, the cumulative offshore assets of Middle Eastern and African HNWIs totaled a little more than $1 trillion in 2012, of which about $630 billion can be attributed to the Middle East.

With a growth rate of the HNWI population of 8.1% for 2011-2012, beating Europe (7.5%) and Latin America (4.4%) in spite of the Middle East’s ongoing political uncertainties, the region is a promising market for private banking services, while events such as the 2020 Dubai Expo will underline the attractiveness of the GCC.

However, any hopes of taking advantage of the growing wealth of the region must be predicated on institutions establishing a strong, local presence.

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