The drop in oil prices is having varied effects in the Middle East. How countries respond could determine their long-term prospects.
Growth plans vary between banks as to strategy and reasons. Al Ahli Bank CEO Michel Accad views his mandate as redefining the bank’s risk appetite. “It doesn’t mean that you want to necessarily take more risk in everything that you do, but it means that there are certain areas where you would decide you… will accept more risks,” he says. These areas include the contracting sector. “If you manage it carefully, you can grow,” he says, adding that targets include increased work with medium-size businesses.
Growth at Gulf Bank means putting aside its past crisis, according to González-Bueno. In 2009, Gulf Bank narrowly escaped bankruptcy. But it has moved steadily ahead and posted operating profit before provisions of 106.8 million Kuwaiti dinars ($342 million) in 2014. It recorded a net profit of 35.5 million Kuwaiti dinars. That’s a 10% increase over 2013.
Now, González-Bueno says: “We have very specific plans about growth. We are in the process of implementing them and finalizing.” He did not reveal specifics.
UAE countries have enjoyed a unique cachet as a safe haven for people and money for over a decade. The reputation reminds one of the safe-haven status of Hong Kong before China assumed control of the former British colony in 1997. “You could make that parallel,” says Montasser Khelifi, senior manager, global markets, at Quantum Investment Bank, during an interview in Dubai. The reputation is strongest in Dubai, given its well-developed infrastructure and sound legal framework, but the reputation generally applies across the emirates and means that capital and people from other, more troubled areas of the Middle East gravitate toward it.
Moreover, if negotiations between Western powers and Iran conclude successfully, Dubai would reap financial benefits, owing in part to its historic relationship with Iran, according to Smith at Control Risks. “Should Iran emerge from these nuclear negotiations with sanctions relief, then Dubai will be positioned to continue to play a role for Western businesses which [want] to go back to Iran.”
Expansion of retail wealth management product rosters figures prominently in growth plans for banks across the region. QNB Asset Management, a unit of Qatar Group, has 17.4 billion Qatari rials ($4.8 billion) in assets under management, offers funds in equities, fixed income and commodities and has plans to expand its fund universe. Al Ahli Bank takes a different approach. The bank does not plan to expand its proprietary fund offerings from its current two funds. Instead, it aims to grow its fund business by building a platform enabling it to offer third-party funds from other financial institutions.
Growth can also mean increased activities in Africa. Capital flows from the Gulf to Africa fall into four categories, according to Zin Bekkali, CEO of Silk Invest. During an interview in Dubai, he listed them as portfolio flows, remittances and foreign direct investment, as well as a trickle of aid from Europe. “The big majority of established Gulf companies today definitely have their sights on Africa,” Bekkali says. “We are talking about a region today which has about 800 million people above the poverty line. This number will grow by at least 500 million in the coming ten years.” He says that although no figure specifically for the Gulf appears available, dollar flows from FDI and remittances from across the Middle East to Africa amount to between $50 billion and $60 billion annually for each category.
Qatar National Bank is probably the most aggressive bank in enacting its African expansion plans. As well as the usual means of communicating its ambitions, the company paints the phrase “Our vision—to become a Middle East and Africa Icon by 2017” on elevator doors at its corporate offices in Doha. QNB sees its 20% stake in Togo-based Ecobank as a conduit to 36 countries. “Our [goal with the] Ecobank investment is basically to have a platform in Africa,” explains QNB group CEO Ali Ahmed Al-Kuwari.