Investment banks are starting to talk about expansion in the Middle East again, but it’s not in the places you might expect. While the large international firms get by with a few senior deal originators, following big cuts to their teams in the last 18 months, regional firms and boutique players sense a chance to secure talent that wouldn’t otherwise be available.
Despite the lag in investment banking fees in the MENA region since the 2008 crash, last year was positive. Fees rose by 20% on 2012, to $722m according to Thomson Reuters, but this is still around half of the 2007 peak of $1.4bn. Much of this is down to a surge in debt capital market activity – lead by HSBC and Deutsche Bank who have maintained their teams in the region – while M&A is still muted.
However, there remains sense of optimism about investment banking in the region. A new report by consultants Frost & Sullivan suggests that while the industry globally will see slight growth of 2.3% in 2014, investment banks in the Middle East and Africa are “characterized by high capital ratios, low reliance on debt, high profitability margins and high return on equity in comparison to their global counterparts”.
Global investment banks are talking in terms of the worst being over for the sector in the Middle East, but regional firms are spotting an opportunity. They’re expected to see “high growth and increasing competition in 2014”, says the report, as firms start vying for business on their own turf.
“No international banks are talking about bulking up right now, but the regional institutions are only happy to fill that void and are looking to grow their teams,” says Barbara van Meir, managing director of Dubai-based headhunters Vogel & Noor. “There’s also a comparatively large amount of activity coming from the investment banking boutiques again.”
The likes of Arqaam Capital, EFG Hermes and, to a lesser extent, Shuaa Capital have been hiring again this year. Meanwhile, the gravitation of senior investment bankers across to regional players – Simon Penney from RBS to First Gulf Bank, Michael Katounas from Credit Suisse to QInvest, for example – is starting to create jobs further down the career ladder, suggest recruiters.
However, more senior bankers have also been setting up shop on their own. Part of the problem for investment banks is that a larger volume of deals tend to happen below the $200m mark, and these are not big enough to justify the effort from bulge brackets. Therefore, former senior bankers at large international firms spy an opportunity.
Ziad Awad, a former Bank of America Merrill Lynch managing director in the region, now runs Awad Advisory; Ali Asghar, the most senior banker at Lazard in Dubai, left to form his own boutique firm Emerging Circle in August, while deNovo Corporate Advisors, started by former Morgan Stanley managing director May Nasrallah in 2009 targets areas “not getting adequately served by the bulge-bracket institutions”.
By their nature, these smaller firms are not likely to offer voluminous job opportunities, but are still providing some positions, that are proving alluring to experienced investment bankers in the region, believes van Meir.