Middle East financial services 2009: Good year vs. bad year

Picking out the positives after a turbulent year for the Middle East financial sector is no easy task. However, here's our considered opinion on who has fared better, and which sectors have suffered.

2009 was a good year for...

Sovereign wealth funds:

Some comparatively risky investments have paid dividends for the Middle East sovereign wealth funds this year. Most notably the Qatar Investment Authority's $1.1bn profit on its Barclays stake sale and Kuwait Investment Authority's $1.1bn profit on its Citigroup deal.

A steady stream of recruitment, particularly within Abu Dhabi's SWFs, has persisted throughout the year.

In exploring new avenues, they've managed to attract investment banking talent from international firms for new M&A advisory businesses - such as Alex Carré de Malberg joining Invest AD from Rothschild who has been building his team since. Abu Dhabi Investment Authority also hired Bill Schwab from JPMorgan in January to lead its real estate investment team.

Still, whether these good times persist is debatable. According to reports in the FT, Gulf SWFs are coming under pressure to pump money into ailing local firms, rather than extending their investments globally as has been the case over the last year.

The attractiveness of Abu Dhabi, Qatar and Saudi:

Even in the current turbulent times, Dubai remains the financial services hub for the Middle East region and the majority of professionals are based there. Nonetheless, the attractiveness of relocating to other areas of the GCC has increased - particularly in the wake of redundancies earlier in 2009 and a lack of new job opportunities in the emirate.

Qatar has been handing out investment banking licences with increasing frequency this year (though operations remain comparatively small), many international firms have realised the benefits of a more significant Saudi presence, and some firms have been building in Abu Dhabi.

The prospect of moving beyond the cosy confines of the DIFC may have seemed unimaginable to some expat bankers before 2009, but many have been required to explore other options.

Wealth management:

On the face of it, firms hiring for wealth management roles in the Middle east this year seems a little counter-cyclical. Wealth has declined by over 16% in the region and high net worth individual numbers have slipped by nearly 6%, according to figures from the 2009 Merrill Lynch-Capgemini Global Wealth Report.

Nonetheless, sentiment around the long-term potential of wealth generation in the region remains bullish, and both international and local banks have been building their teams.

Barclays Wealth, Lloyds TSB International Banking, Royal Bank of Canada, SG Private Banking and Standard Chartered have all been hiring this year. Meanwhile, Emirates NBD has also ventured into the private banking space - a comparatively rare move for a local firm - and has hired some 70 bankers in the last six months. Dubai Islamic Bank is now also targeting high net worth individuals.

And 2009 has been a bad year for...

Job security

The actual number of financial services professionals laid off in the GCC seems comparatively small compared to the thousands of redundancies in more developed markets. Nonetheless, many firms have been forced to trim their ranks - something that was unthinkable only two years ago.

High profile job cuts such as those at Gulf International Bank, HSBC, and within international investment banks, may have hogged the headlines, but redundancies were widespread.

Figures from GulfTalent show that 13% of jobs in the Middle East banking sector were lost in 2009 - second only to the 15% lost in the beleaguered real estate sector.

Keeping big hitters in the region:

The fanfare surrounding the arrival of a few big-hitting deal-making investment bankers in Dubai last year was such that you'd be forgiven for thinking there weren't many left in New York or London.

But their departure has gone comparatively unnoticed. Alasdair Warren, formerly co-head of investment banking in the UK at Goldman Sachs, moved back to London after less than a year in Dubai.

Similarly, Dennis Cornell, brought to Dubai to target SWFs for Morgan Stanley in 2008 along with another two senior bankers, has moved back to New York.

Roger Jenkins , formerly executive chairman of the Middle East division at Barclays Investment Banking and Investment Management, also moved to the US to start his own business and be closer to his family.

It hasn't been all once way traffic, though - Gary Dugan, formerly chief investment officer of Bank of America Merrill Lynch's wealth management division in Europe, moved to Dubai to lead Emirate's NBD's new private banking division.

Bonuses and pay:

Bonuses in the Middle Eastern banking sector are not subjected to onerous tax and regulation, as is the case in the UK, but they're likely to be more diminutive this year.

Conservative estimates peg them level with 2008 payouts, while the more pessimistic are estimating drops of up to 40%.

The trend of offering rapidly escalating salaries has also been slammed into reverse. More "realistic" salary expectations have led some to suggest that salaries are around 30% lower than last year, and that expat bankers can be lured to the Middle East for significantly less.