Sunday, Jun 19, 2016
Dubai: The region’s rivate banking business continues to grow despite a decline in oil prices and geopolitical issues, thanks to the continuing growth in the private wealth of regional high net worth individuals and their continued to desire to preserve and grow their wealth through judicious global investment strategies, senior managers of HSBC Private Bank told Gulf News in an interview.
“Our Middle Eastern clients continue to invest heavily in their businesses in the region. Despite global and regional economic challenges, many of these businesses are doing well, adding to their wealth creation activities. Many of them are keen to preserve their wealth through [the] diversification of their portfolios. This is where we assist our clients,” said Franco Morra, HSBC’s regional head of Global Private Banking for Continental Europe and the Middle East and North Africa (Mena).
According to the 2015 BCG World Wealth Report, the Mena region continues to see robust private wealth creation — with the UAE leading over the next five years with a projected compounded annual growth rate of 10.7 per cent to $1 trillion (Dh3.67 trillion). The sharp fall in oil prices over the last one year is yet to show any major impact on private wealth in the country.
Even if low oil prices are to persist over a longer period, the impact on existing private wealth is negligible while the creation of new wealth could be affected to some extent. While much of the regional wealth is getting reinvested in the region, many are exploring global opportunities as part of diversification and wealth preservation efforts.
“Diversification is very much part of the regional investors’ strategy. As per the traditional diversification principle followed in the region, a third of the wealth is invested in the business, a third in real estate and a third in financial assets. Diversification, both in terms of asset classes and geography, is not a concept that is far from the region’s wealthy,” said Sobhi Tabbara, global market head for the Mena region at HSBC Global Private Banking.
Wealthy individuals in the Middle East have become more cautious on their asset allocation strategies over the past 18 months due to the high volatility in asset prices.
With the economic slowdown globally and falling oil prices, there has been some impact on their risk appetite, with clients becoming focused on wealth preservation. That meant a bigger demand for defensive products and higher yields assets. Clients in the Middle East have traditionally invested in real estate and that continues — but with some focus outside the region.
“HSBC’s global footprint — particularly in emerging markets — enables us to connect these clients to international private banking centres, and also to bring international opportunities to the table. Wealth preservation, risk diversification and succession planning is at the heart of our work as private bankers. When we sit down with clients, we try to understand their financial objectives, their business, risk exposure and appetite, family situation and succession plans,” said Morra.
The emergence of a number of local regional players in private banking wealth management has not deterred HSBC from expanding its business in the region.
“We believe the entry of local and regional players is complementary to what we offer to our clients. Local/regional players have certain core competencies in regional asset classes, but when it comes to global asset classes or investment opportunities, we continue to remain a preferred choice,” said Morra.
HSBC’s long-standing links with the Middle East over more than 70 years are supported by the bank’s association with trade and close links to world’s leading emerging markets.
“HSBC was founded 150 years ago through East-West trade between China and Europe. Today we have operations in more than 71 countries and 6,000 offices. It is therefore in our DNA to pursue international opportunities for our clients and connecting the East and the West, particularly in international trade financing,” Tabbara said.
The bank’s extensive global footprint, particularly in emerging markets combined with strong regional/local presence, enables the bank to connect clients to international private banking centres.
“Some of our clients from the region prefer to diversify part of their wealth outside the Middle East — use our global footprint to connect them to leading private banking centres like Switzerland in Europe and Hong Kong or Singapore in Asia while seamlessly communicating with their relationship managers to manage their funds held internationally,” said Morra.
By Babu Das Augustine Banking Editor
Gulf News 2016. All rights reserved.
