‘New US, European prime brokerages eye GCC markets’


08/02/2014 09:23 AST

An overall “positive” macroeconomics in the Gulf Co-operation Council (GCC) region is encouraging many new US and European prime brokerage entities looking to tap into these new-found opportunities, according to Booz & Company, a leading global management consulting firm.

“In the GCC, for example, the overall macroeconomics outlook remains positive, having maintained solid growth over the years”, Daniel Diemers, principal with Booz & Company, said in a report ‘Global Wealth Management Outlook 2014–15: New Strategies for a Changing Industry’.

The UAE in particular has benefited considerably from new cash flows as a result of the Arab Spring, he said in the report.

In 2012, the Middle East was once again the standout region for wealth creation, posting its third consecutive year of impressive gains — 19% in 2012 after growth of 15% in both 2010 and 2011, the report said.

The large Middle East wealth management centres (such as Dubai) experienced particularly robust AuM growth, fuelled by inflows from Syria and politically unstable countries in North Africa, as well as the increasing number of HNWI households in more stable countries in the Middle East and North Africa (Mena) region.

“As a result, local GCC players are progressively entering the competitive prime brokerage market,” it said.

Finding that to some degree, Middle East wealth managers are “victims of their own success”, the report said the robustness of their AuM has attracted new players, especially local banks, and intensified price competition.

Many mid-sized offshore private banks are losing traction, forcing some of them to reduce their footprint in the GCC or even close shop, the report said.

“At the same time new US and European players are looking to tap into these new-found opportunities — especially in cities such as Dubai”, Diemers said.

These entrants, coupled with increasing regulatory costs, caused cost/income ratios to rise from around 49% in 2007 to 56% in 2012.

“These ratios are still significantly lower than those in other regions, however, thanks to higher lending rates and relatively simple banking products with higher margins,” it said.

Finding that at the structural level, there are significant changes currently occurring in the GCC, it said local regulators are continuing to issue a series of new banking rules and regulations.

Naturally, the Foreign Account Tax Compliance Act, Automated Exchange of Information and other regulatory bodies are also urging local private banks to improve their reporting capabilities and management transparency, according to the report.

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