Citi’s decision to relocate Alberto Verme, global co-head of investment banking, to Dubai, is the highest-profile move to the Middle East so far. He will be the most senior investment banker from a western institution in the region.
This is good news for Dubai, which is cementing its position as the region’s financial centre. The move also says something about Citi’s strategy. Vikram Pandit, chief executive at Citi, says the bank is “convinced of the region’s long-term and immense growth opportunities”.
There are no other investment bankers approaching Verme’s calibre based in the region. Heads of Islamic banking are there, as are regional heads, and then there are the senior bankers following the coat-tails of sovereign wealth.
Most global investment banks, like multinational corporations, have boosted their Middle East operations. Lehman Brothers is an example: it is transferring Makram Azar, previously head of European media, consumer and retail investment banking, to Dubai, where he will become global head of sovereign wealth funds. Citi itself is also relocating Atiq Rehman, who previously ran emerging markets debt capital markets, to the city, where he will be co-head of EMEA capital markets origination.
But up to now only Singapore and Hong Kong have attracted global (rather than regional) banking chiefs outside the traditional centres of New York and London.
This provides Citi with an opportunity. A number of the biggest sovereign wealth funds and high net-worth individuals, for example, are based in the Middle East. Citi itself has just been propped up by a $7.5 billion injection from Abu Dhabi. Saudi Arabia’s Prince Al Waleed remains one of the bank’s biggest individual shareholders, after bailing it out in 1991.
The bank’s history in the region is chequered, though, specifically in Saudi Arabia, the most important economy in the Middle East. Perhaps Verme’s relocation could help to heal the damage caused to Citi’s reputation in the Kingdom after it left in Saudi’s hour of need in 2003. Citi sold its remaining 20% stake in Samba, one of the country’s biggest banks, at the height of the Saudi Islamist insurgency. Powerful people in the Kingdom have never forgiven Citi, which wants to re-enter the country.
Other global divisional heads will surely follow Verme’s lead. Given that several investment banks are increasingly reliant on Middle Eastern money to prop them up, it would seem a good idea. And with the oil price at more than $130 a barrel and set to rise further, investment opportunities in and by the region will only continue to grow.
Of course, the corollary is also true. When demand for oil goes down, so does interest in the Gulf. So it remains to be seen how long Verme – or his successors – will stand the desert heat.
