Why are international banks still building their Saudi presence?

Barclays and Sociéte Générale are the latest firms to kick-start Saudi operations a time when revenues in the kingdom are falling through the floor. Even more strangely, it seems that international investment banks are keen to build their teams in the region.

Investment banking revenues in Saudi are very bleak indeed. In the first half of 2009, banks made just $7m in the region, according to figures from Dealogic, which is a stark contrast to the $115m generated during the same period last year.

This has not gone unnoticed by investment banks in the region, and in May Deutsche Bank pared back its Saudi team.

But Barclays and SocGen have just been given the green light to kick-start investment banking operations in the kingdom, following a similar move by UBS in July.

Abdulrahman al-Tuwaijri, chairman of the Capital Markets Authority told the Financial Times that firms: "Are not looking at this year or next year - they are looking at the potential of this country."

There's a temptation to conclude that the banks could simply be starting representative offices for suitcase bankers to man, rather than building on the ground. But headhunters think not.

Alex Cormack, director - head of Middle East at Sheffield Haworth, says: "International banks are definitely looking to add staff. Obviously, Saudi has experienced problems in the last six months, but it's still a large part of investment banks' Middle East growth ambitions."

These problems include an economy with much shallower growth prospects for 2009, and increasing problems for large family offices, the depth of which is hard to gauge because of the relative lack of transparency in the country, which impacts the financial sector.

Bill Allum, managing director of headhunters Execuzen, says: "Initially I think firms will focus on the sales and origination side of the business. But some banks are also looking at substantial corporates in the region, with a view to offering them more sophisticated products and they'll eventually need people on the ground to do this.""

Nonetheless, it's still difficult to find investment banking talent, says Ian Thomas, head of international recruitment at Banque Saudi Fransi: "There simply isn't a big enough pool of qualified Saudi nationals. Any bank coming here will struggle to find and maintain good teams locally and will have to import a lot of them."