After many years in the doldrums, private banking in the Middle East is showing signs of a comeback. The region's private wealth sector has taken a hit in recent years thanks to lower oil prices, which put a damper on wealth creation as economic growth slowed down.
But the prospect of economic recovery on the back of higher oil prices has brought many of the bankers back, tempted by one of the world’s highest concentrations of wealth per capita, with the number of high net worth individuals in the region forecast by Knight Frank to grow by 39 per cent over the coming decade
Nowhere are the perceived rewards higher than in Saudi Arabia, the region’s largest economy. Big names such as UBS, Credit Suisse and Julius Baer are rapidly expanding their businesses in the kingdom, where over half of the region’s wealth resides.
Such optimism comes in spite of the seismic transformation occurring in Saudi Arabia, which is looking to diversify its economy and cut spending to lessen its reliance on oil revenues. The Institute of International Finance (IIF) expects the country’s economy to contract slightly this year, before rebounding next year.
Bankers remain confident that the country’s economic reforms, while causing pain in the short-term, will bolster the country’s economic growth in the medium term, leading to a surge in wealth and opportunities.
This is not blind optimism on the part of the bankers. Index compiler MSCI recently put the Saudi stocks on a watchlist for inclusion in its much-tracked Emerging Markets index, while the prospect of a sale of shares in national oil company Saudi Aramco continues to generate excitement internationally.
But the IIF notes that unemployment in the country is worryingly high, with the government needing to do more to create jobs for young Saudis.
The kingdom’s rulers are well aware of the need for economic refocusing and have already taken major steps to address many of the issues it faces. But the bankers must be hoping against all hope that the government stays the course, so that the country’s economy, and therefore its private wealth growth, return to good health before too long.