The central bank governor said the kingdom will continue to defend the Saudi riyal's peg to the dollar, noting that the current pressure on the peg is much lower than when oil prices crashed. AFP
The central bank governor said the kingdom will continue to defend the Saudi riyal's peg to the dollar, noting that the current pressure on the peg is much lower than when oil prices crashed. AFP

Banking

Saudi Arabia will not penalise foreign banks that boycotted investment forum, central bank chief says

Financial institutions can still apply to obtain banking licences in the kingdom, Sama boss tells Al Arabiya

The National

October 25, 2018

Foreign banks which pulled out of an investment forum in Saudi Arabia amid an outcry over the killing of Saudi journalist Jamal Khashoggi will not be penalised, the kingdom's central bank governor said.

Financial institutions which boycotted the Future Investment Initiative in Riyadh can still apply for and obtain banking licences in the kingdom, Saudi Arabian Monetary Authority's governor Ahmed Al Kholifey, told Al Arabiya on Wednesday.

"We deal in a professional manner," Mr Al Kholifey said in the TV interview.

Many high-profile global finance and company executives declined to attend the Future Investment Initiative that started on Tuesday but sent mid-level representatives instead, in a sign they wanted to maintain business relations with the kingdom. Saudi Arabia forged ahead with the second edition of the conference in Riyadh, where it announced more than $50 billion worth of deals on the first day.

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Read more:

Saudi Arabia to sign deals worth $50bn as Future Investment Initiative begins

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The Saudi central bank has received four applications from banks in the region to set up in the kingdom, which are still under study, although no international lenders have applied, Mr Al Kholifey said.

Credit Suisse said in July it is seeking a full banking licence in the Middle East's biggest economy, while Citigroup obtained an investment banking licence that will allow it to return to the kingdom after a 13-year absence. Dubai lender Emirates NBD said in September it expanded its network to three cities in the kingdom with the addition of a branch in the oil-rich eastern province of Khobar.

Profits at Saudia banks are set to outperform their Gulf peers this year as the economy improves on greater government spending and higher interest rates boost net interest margins, Moody’s Investors Service said in March.

The central bank governor also said the kingdom would continue to defend the Saudi riyal's peg to the dollar, noting that the current pressure on the peg is much lower than when oil prices crashed.

The riyal started falling against the dollar on October 15 amid concerns that the circumstances of Mr Khashoggi's death may affect foreign investors' appetite for business opportunities in the kingdom. The dollar is currently trading at 3.7515 against the riyals compared with 3.7526 on October 15.

Analysis

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Brief scores:

​​​​​​Toss: Pakhtunkhwa Zalmi, chose to field

​Environment Agency: 193-3 (20 ov)
Ikhlaq 76 not out, Khaliya 58, Ahsan 55

Pakhtunkhwa Zalmi: 194-2 (18.3 ov)
Afridi 95 not out, Sajid 55, Rizwan 36 not out

Result: Pakhtunkhwa won by 8 wickets

The specs

Engine: 2.0-litre 4-cylinder turbo

Power: 258hp from 5,000-6,500rpm

Torque: 400Nm from 1,550-4,000rpm

Transmission: Eight-speed auto

Fuel consumption: 6.1L/100km

Price: from Dh362,500

On sale: now

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

The specs

Engine: Dual 180kW and 300kW front and rear motors

Power: 480kW

Torque: 850Nm

Transmission: Single-speed automatic

Price: From Dh359,900 ($98,000)

On sale: Now

The specs
Engine: 2.4-litre 4-cylinder

Transmission: CVT auto

Power: 181bhp

Torque: 244Nm

Price: Dh122,900 

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