Why it matters that senior investment bankers are leaving the Middle East
What started as a trickle of senior investment bankers leaving, or being fired, from Middle Eastern operations is in danger of becoming a flood. With fees in the region remaining in the doldrums and more firms likely to give up on the idea of being global players, the significance of these moves shouldn’t be underestimated.
Phil Southwell, head of Bank of America Merrill Lynch’s MENA operations since May last year, and Ziad Awad, a managing director at the firm in Dubai, are both leaving. This, in itself, isn’t significant, but it’s the latest in a growing line of senior departures in the Middle East this year.
Bassam Yammine, Credit Suisse’s most senior banker in the Middle East, resigned in October, Tamim Al Kawari left his position as CEO of Goldman Sachs in Qatar to join local firm QInvest, Morgan Stanley’s Qatar head Khalid al-Subeai resigned to join Barwa Bank, while Deutsche Bank and Nomura have cut jobs in the region recently.
Data from Thomson Reuters shows that for the first nine months of 2012, investment banking fees in the Middle East were $402m, which is an increase from $327.5m at the same point in 2011. However, this has to be split between some 20 international investment banks. Local players also dominate the syndicated loan market, which accounted for $135.4m of fees this year.
The Middle East has always been heralded as a growth market, but investment banking fees still hang far below the heady days of 2006-07. The question is, how many banks will stick around and wait for any potential pick up?
The number of truly global investment banks – able to compete in every region – is likely to diminish. Anshu Jain, co-CEO of Deutsche Bank, speaking at a recent conference in the DIFC said that “only a few” universal banks will remain. “The price of being global has gone up dramatically, and the desire to be a global bank has dropped off,” he said. The Middle East could suffer.
There are certainly fewer job opportunities in the Middle East currently. “I’m not expecting many more redundancy announcements within the international investment banks, but few are building their teams on the ground,” says Barbara van Meir, managing director, MENA at headhunters Pemberton Partners.
Now, however, is the time for investment banks to truly nail their colours to the mast when it comes to committing to the Middle East. Some have already done so – J.P. Morgan’s Sjoerd Leenart said that stronger equity capital markets could fuel an investment banking recovery in the Middle East, while Barclays has reiterated its commitment to the region.
Similarly, Omar Mehanna, managing director, head of investment banking for the MENA region, told us previously that he’s “optimistic” about prospects for M&A in the region, as price expectations of large corporates become more realistic in the wake of the Arab Spring.
“Then there’s distressed M&A; in the current climate, corporates in the region need to stop living in denial and wake up to the reality that they need to restructure and deleverage their balance sheets,” he says.
The question is whether big hitting investment bankers will remain in the Middle East, or seek opportunities in faster growing markets. Also, how many will stay within larger institutions rather than look to more niche operations?
May Nasrallah, the former head of Morgan Stanley’s investment bank in the Middle East, left to set up deNovo Corporate Advisers three years ago; Pushpak Damodar worked at Deutsche Bank before setting up Global Frontiers Advisors in 2009 and Zaid Maleh left VTB Capital this year to start a company called DACH Advisory.
From a career point of view, the advice for those in the international banks is to consider alternatives. “There are also opportunities outside of the bulge brackets – local banks are developing their investment banking teams, while there’s also a demand for the sort of expertise that investment bankers can bring within the finance teams of large regional corporates,” Nasrallah told us previously.
