Why investment banks in the Middle East may soon get by with less than 10 staff

If investment banking advisory work is your bread and butter, the Middle East is not a great place to be right now. Rothschild’s decision to pare back headcount in its regional office is evidence of this.

Over the last year, Rothschild has reduced its Middle Eastern headcount from 17 to eight people, according to Reuters, as deal volumes dwindle in the region.

In the first quarter of this year, fees for investment banks’ M&A businesses fell by 42% year-on-year and 2011 was already a poor year, according to Thomson Reuters figures. In total, despite an uptick in debt capital markets activity, investment banking fees were down 8% to $90.9m in Q1.

Rothschild has been losing some key staff in the region anyway. Energy banker Khodar Mattar resigned to join Singapore’s sovereign wealth fund, Temasek, in March and Herve Sawko, its Middle Eastern investment banking chief, is moving to Paris. Chris Hawley, currently head of M&A for the region at Rothschild, is set to lead the regional team.

"For a pure play financial advisory like Rothschild, double-digit staffing in the region is clearly not making sense given activity has slowed so much,” one source told Reuters.

This is a worrying sentiment for any large international banks in the region. The regional operations are already small, but in the current climate a team of less than 10 seems more than adequate. More firms could start cutting again if deal activity doesn’t pick up soon.