Why big banks are still getting it wrong in the Middle East
Big banks still can't make it work in the Middle East, according to Manuel D. Ron, global head of co-development and investment banking at Integration Capital & Trade (ICT) – an international firm that focuses on Saudi Arabia. Ron, a former US army lieutenant who began his career at Citigroup in the 1980s, has worked in the industry for over 25 years, but still doesn’t consider himself a ‘banker’.
“My background isn’t that of a typical investment banker, and I’ve always viewed myself more as an entrepreneur,” he said. “I’ve been envious of people who always had a clear idea of what they wanted to do. My career up to this point has more been about deciding what I didn’t want to do.”
Having worked for both large international corporations and founded his own boutique investment bank, ICT, in Saudi Arabia, he is clear on one thing – the big banks still haven’t found the secret sauce to making their Middle Eastern operations work. Taking a transactional approach to investment banking in the region simply does not open doors, he said.
“The traits that work well for top performers in the US can be traits that may generate different, perhaps opposite outcomes when dealing with local investors and business people in the Middle East,” he said. “Slow and steady wins the race, but I don’t know if the international banks can compensate for pace and traits.”
Last year investment banking fees across the Middle East hit $536.1m, a 20% increase on 2011 and the largest haul since 2008, according to figures from Thomson Reuters. However, this hasn’t been enough for most firms to maintain a significant presence in the region. Previously, low revenues in the Middle East were supplemented by earnings elsewhere in the world, but as profits tumbled in Western markets, headcount has been cut in the region.
Morgan Stanley, Credit Suisse, HSBC, Deutsche Bank, Nomura and UBS have all cut staff in the Middle East.
Investment bankers who have committed to the region, and developed relationships with key institutions and individuals, have then moved across to jobs with the regional players. This month Michael Katounas left his role as a director at Credit Suisse to join QInvest in Qatar, while Khaled Eldabag resigned from Goldman Sachs’ Dubai operation and Simon Penney left his role as MENA CEO at Royal Bank of Scotland. Last year, Khalid al Subeai left Morgan Stanley in Qatar to join local firm The First Investor.
Ron has worked for a number of years in both Saudi and Oman, but unlike most expat investment bankers never viewed them as a temporary opportunity to boost his CV. “While most people were there as an employee, I was there as an investor. Living in Saudi as an investor exposes you to different things than a typical expat employee. I have very close Saudi friends, I’m not sure many expats have the opportunity to experience the ups and downs and benefits and challenges involved in developing long lasting friendships.”
Succeeding in Saudi requires building trust with the people you do business with, argues Ron, and this requires both persistence and open-mindedness, something he believes has served him well throughout his career.
He has an MBA from New York Stern University and a Doctor of Law from St John’s University, yet ended up being an entrepreneurial investment banker. There was no 'big break' in his career, but a series of small failures that provided valuable lessons and made him more prepared for future challenges, he said.
“I went to the US Army airborne school twice because I fractured my foot the first time I tried when at college,” he said. “When I went on active duty after graduating I had to compete all over again for another slot at the school. The competition for a place at the school was much stronger this time because now I had to be better than a bunch of highly fit, motivated and smart engineer officers rather than a bunch of college cadets. It forced me to really pick up my game.”
If you’re pondering a move to Saudi, the most important thing is to have your family's support, because life can be very difficult without it, said Ron. “When my wife married me 22 years ago, she didn’t really sign up for the life of an entrepreneur, which can be very trying. She’s never doubted me even in the face of economic disaster and even if she did not fully understand the risks and I admire her because I’m not sure I could have done the same.”