We have a strong and diversified business model: Al-Tuwaijri |
Arab News - 13 June, 2012
HSBC, and its affiliate Saudi British Bank (SABB), has received seven awards at this year’s Euromoney Middle East awards — the most prestigious international banking awards in the industry.
The awards are: Best Debt House in Saudi Arabia — HSBC, Best Bank in Saudi Arabia — SABB, Best Cash Management House in the Middle East — HSBC, Best Flow House in the Middle East — HSBC, Best Project Finance House in the Middle East — HSBC, Best Equity House in the Middle East — HSBC, Best Debt House in the Middle East — HSBC. This figure beats last year’s four awards and is a testament to HSBC’s breadth of offering to its regional clients: Whether they are looking to raise money with a bond, or issue an IPO.
Arab News spoke with Mohammad Al-Tuwaijri, regional head of global banking and markets, HSBC Group, Middle East and North Africa, for his views on the awards and banking in the Middle East.
Why do you think you’ve won so many awards this year?
I think the key is how we’re structured here. We are a ‘full-service’ bank and these awards reflect that. What I mean by this is that we can issue bonds for our clients, but we can also deal with their day-to-day financing — so for our clients who buy and sell, we can help them with their risk management and also, for those clients who trade cross border, we can help manage this foreign exchange risk. So, we’re there for clients who are doing major transactions and need advice or financing, but we can also help with regular financial products. That’s very significant, as historically, many clients have seen banks as falling into either category — rather than both.
This year saw the Arab Spring: why have you chosen to stay and will you continue to be based here?
Absolutely. The Middle East and North Africa (MENA) region is incredibly important to us, and remains so. The events of the Arab Spring were swift, and I don’t think that anyone could have predicted the pace or scale of the change we saw. During this time, two issues were important for banks: the need to adapt quickly to the challenges this presented and second, the need to separate what was a temporary issue from those which were more fundamental.
In the short term, the challenge was to remain open for our customers on the ground. Therefore, the events of the Arab Spring — tragic as they were — did not get exasperated by, for example, wages not being paid. And we succeeded in this and remained open in Egypt and kept the flow of money going. However, this issue was temporary and immediate rather than fundamental.
Secondly, I think it’s important that we appreciate that the events didn’t affect the fundamentals of the region, which continue. The region remains hydrocarbon rich and young in population. And this young — growing — population brings its own challenges. If you take project finance, for instance, it’s even more important than ever as the region builds for future population growth. The region has a real need for more power, more water treatment plants and so on, and banks can play a significant role in helping provide these.
Does this mean you predict a growth in project finance?
Yes, I do. When we look at the scale of the projects we’re likely to see in the region, I think we’ll see a growth in both the sector and banks’ roles in that. No government can — or in my opinion, should — pay all of this themselves. What’s required is an efficient use of funds and that’s where banks can help, bringing in investors to meet the cost of these projects. Otherwise, the burden remains squarely on the governments, and that’s not a sustainable position to be in. Project finance might not be the most glamorous aspect of international financing, but I’d argue that it’s one of the most essential.
We’ve seen many banks shrink in the Middle East — are you planning to reduce your presence here?
No. While we’ve enjoyed a long history here — we’ve been in the UAE for over 60 years — I think it’s more significant to look at why we want to remain central to the region’s banking sector. At HSBC, we’re in a unique position. To our local clients, we’re a local bank — we’re here and can provide them with whatever they need, whenever they need it — but also to our international clients we are a international bank, meaning that we can help them trade internationally.
What this really means is that we’re in a sweet spot — we’ve got the experience in the Middle East, but also the reach to help them go into Asia, Latin America or Europe. Our competitors just can’t do that to the same degree. So, when we did the region’s first RMB bond for a local issuer, it wasn’t significant just because of the size, but also because it was HSBC taking a local issuer to Asia investors. As the center of the financial world shift ever more toward the East, this is important. Our clients are telling us daily of their Asia, Latin American or Middle East strategy and they want their banks to be able to help them.
So while we operate globally, our model is different. We are present here — in scale — and don’t just fly in from London or New York to execute a deal and leave. For instance, while our global competitors have closed their local trading desks, we’ve kept ours open. The reason for this is very simple. That’s the best way of us helping our customers with our regional knowledge. Our customers can be sure that we are committed to MENA, and that consistency is incredibly important. This isn’t the kind of market you can step in and out of.
Does this mean you’re still hiring?
Yes, it does. But we’re selective. We’re in the position of already having scale in the Middle East, so there’s no need to go out and hire a huge amount of people. But we’re always reviewing to ensure we have the best people — not just the most. And, where we need to we do hire. In the UAE, where I’m based, we have a large number of UAE nationals working here, and a great graduate program. But we want more, and recruitment isn’t something that you ever finish.
How do you think you’ll make more money in the Middle East?
HSBC in the Middle East and North Africa reinforced its position in 2011 as the leading international bank in the region, reporting $ 1.5 billion in profit before tax. In view of the social and political events that took place in MENA last year, this near-doubling of profit before tax is a clear demonstration of the progress we have made.
However, when we look at the Global Banking and Markets business — our core strategy hasn’t changed as a result of the Arab Spring. We are committed to helping our international customer base succeed in MENA. We are committed to the region, and committed to joining up the world for our customers.
Out team here is committed to finding international opportunities for clients. Not because there’s no opportunity in the MENA — far from it — but because our clients think globally and have an expectation of us digging deeper for them. When we look at the M&A deals we completed recently, there’s been a real mix of international companies coming to the region — but also local companies looking at opportunities in the West. This is a good example of the growing maturity of the banking model in MENA.
Do you think we’ll see growth in 2012-2013. Is the worst over and our troubles behind us?
I think it would take a brave person to say that all the region’s troubles are behind us! But there are at least some signs of an improving environment in the Middle East. Only last month, we saw France Telecom acquire a 94 percent of Egyptian mobile phone company Mobinil in a tender offer. With this deal, the French group has taken control of a significant sector player in a volatile but important emerging market. It’s a deal we advised on — and one we see as significant for the market. More than anything, it shows that the market is not in paralysis. Deals are being done — but they are selective. Confidence hasn’t fully returned and I don’t think we should expect to see a flood of deals. Deals are a product of confidence and opportunity — we have the second but we still need more of the first.
We have done well because we have a strong and diversified business model.
We made money with custody and clearing even when — for example — equity markets dropped. And, as we entered into 2012, what was interesting was the initial flurry of sukuk. Part of that was issuance from entities that didn’t want to launch bonds or sukuk last year. But we should not ignore the fact that this was a clear sign that people are at least a little more confident. There are also signs that the maturing of the regional markets is gathering pace. It remains to be seen whether the UAE and Qatar will form part of the MSCI Emerging Markets Index this year. This certainly isn’t a foregone conclusion — but if successful, this would lead to more international money come into the region as global Emerging Markets funds will flow toward these important markets. At present, these markets are classified as “Frontier” and very little institutional money follows the MSCI Frontier indices.
Finally, you nearly scooped all the regional awards this year. Does this mean you can stop?
Not at all! I don’t think, in this business, you ever stop. Clients have new demands, and look for new opportunities — it’s our job to continually grow our business and evolve our products. We’re incredibly grateful that they chose us to do business with us. Of course there are other banks, and competition is a great thing for the industry, but we have the people and the expertise to keep moving forward. I still look forward to coming in to work everyday. I initially trained as a fighter pilot, so I’m used to fresh challenges. We keep focused and we keep pushing forward, and I’m not going to let that change.