Good year/bad year 2008

Was 2008 the year in which the Gulf bubble was popped? Not necessarily. Here we give our considered opinion on the highs and lows of 2008.

2008 WAS A GOOD YEAR FOR...

Talent pool

At the end of 2007 there was a talent shortage in the GCC and banks were vying over a limited pool of people. However, as the financial crisis worsened in Western markets in 2008, this situation changed.

What started out as a trend for redeploying top bankers within international investment banks to the Gulf region, soon escalated into a flood of out-of-work Western bankers desperately looking to the GCC for sanctuary from the financial crisis.

"In November 2005, we had 500 applications per week through our website," says Jason Armes, managing director of Hays in the Arabian Gulf Region. "Now we have around 3,000 per week from new entrants to the region."

Saudi Arabia

Often dubbed a 'hardship posting' for Western bankers, the figures coming out of Saudi Arabia this year have made it an increasingly alluring destination.

Equity capital market volumes swelled by 163% to $9.3bn at the end of September, according to figures from Thomson Reuters. Property funds are showing increased interest in the kingdom as it opens itself up to new channels of financing and the Institute of International Finance (among others) is tipping Saudi to become the dominant economy in the Middle East.

Not surprisingly, international banks have been building up their presence in the kingdom. New entrants in 2008 included Credit Suisse, Nomura, Societe Generale and Intesa SanPaolo. Even beleaguered bank UBS unveiled plans to double its staff numbers.

What's more, Shuaa Capital says it has plans to divert resources away from Dubai and towards Saudi in 2009.

National Bank of Kuwait

Last year, Middle Eastern investment banking revenue rankings (encompassing M&A, equity capital markets and debt capital markets) were entirely made up of international firms. It's a pretty similar story this year, with one exception - the National Bank of Kuwait (NBK), which is in second place, according to figures compiled by Dealogic.

NBK took a 5.7% share of the market and raked in (an admittedly modest) $44m in i-banking revenues to December 2008. Net profits for the year are expected to exceed $1bn, up around 10% on last year.

It was also named Middle Eastern bank of the year for 2008 by The Banker magazine. Not a bad effort really.

Islamic finance

The reputation of Islamic finance has only been enhanced by the global financial crisis, and many are tipping it to not only emerge unscathed, but to actually benefit from the current situation.

Ernst & Youngsays the industry will grow by 20-25% annually over the long term, and 55% of respondents to a Financial News survey of Islamic finance firms said they had seen an increase in interest in their products throughout 2008.

AND 2008 WAS A BAD YEAR FOR....

M&A

At the beginning of 2008, the number of M&A deals anticipated in the Middle East was expected to eclipse 2007, and international investment banks were bolstering their teams as a result.

In fact, M&A volumes in the Gulf region actually fell to $19.8bn as at November 2008 - a 46% slump on the same period last year, according to Dealogic.

Not surprisingly, some international banks - such as Credit Suisse, Goldman Sachs and Morgan Stanley - were forced to trim headcount, and appetite to hire in this space has largely dried up.

"Many of the existing multinational players have downsized their teams. Advisory firms are turning down business because they don't have the resources or the headcount approvals to meet client needs. The support from London is not there, because those ranks are thinning out as well," says Jonathan Duckfield, executive director of executive search firm Options Group.

Bonuses

Bonuses in the GCC may not have suffered as much as other markets, but they are down nonetheless. The Options Group is predicting that bonuses in Dubai will shrink by 10-15% this year, which compares relatively favourably with the 40-50% drop expected in London and New York.

More pertinent, perhaps, is the fact that the guaranteed bonuses which were commonplace this time last year have gone out of the window. Firms now have a greater pool of talent to choose from, so such retention incentives are no longer needed.

"People were demanding guaranteed bonuses as recently as three months ago," Peter Greaves, director of financial services at Dubai-based headhunter McArthur Murray said in September. "You can forget that now."

Goldman Sachs

A glance at the Middle Eastern investment banking revenue league tables will tell you why Goldman's Dubai team weren't excluded from the bank's scheme to reduce its headcount by 10%.

Last year they were top of the pile, hording a 7.6% share of the market and making $108m in revenues, according to Dealogic. Now they're fourth, behind HSBC, NBK and Morgan Stanley, and have made just $33m.

Stock markets

GCC stock markets have lost $538bn from market capitalisation - or 47.5% - since the beginning of the year, according to Kuwait-based Global Investment House.

Leading the way in the slump stakes is the Kuwait stock market, which is dominated by the particularly badly hit financial stocks. Gulf Bank, the country's fourth largest lender, posted losses of over $1bn to October and was forced to accept a $1.4bn government cash injection.

The slide has forced many brokers to realise massive losses, which could see some of the smaller firms facing bankruptcy or being swallowed up by larger rivals, according to the Securities and Commodities Authority. This would obviously be bad news for jobs.

eFinancialCareers' editorial team is now taking a Christmas break (but will be intermittently available to answer your questions and moderate your comments). We wish all our readers a very, very Merry Christmas!