Larger local banks in the GCC (Gulf Cooperation Council) are approaching saturation in their home market and hence starting to venture out to attractive markets such as Africa, according to Ernst and Young (EY).
“Although market shares between local and international banks may fluctuate, the region is now arguably overbanked. With high levels of protection in the GCC markets, some of the larger local players are starting to focus on markets further afield,” George Triplow, Middle East and North Africa Wealth and Asset Management leader, EY, said in a report.
Many African clients own property in the GCC, spend more time in the region and have a strong affinity to many of the brands, EY said in the report.
Finding that local lenders are increasingly entering private banking, EY said given the sizeable numbers of affluent families in the Gulf, the wealth management market in the region is extremely active and covers everything from family offices, ultra-high net worth and high net worth individuals and, increasingly, the growing affluent market.
Although European banks have historically had strong market share, serving clients who wished to send money out of the GCC for various reasons, it said however, people have begun to understand the importance of an onshore presence, and the European centres have lost attractiveness due to regulatory issues and rising compliance standards.
“While the trend to have family wealth managed externally had retreated in recent years, the oil price decline and challenging geopolitical situation in the region has encouraged a return to sending money out,” Triplow said.
Local private banks have recognised that they need a value proposition across different segments, he said, adding they have been working hard to compete by recruiting experienced staff, including former relationship bankers from their rivals, and tailoring their offering to local needs, from Islamic investment products to tag-on lifestyle services, ranging from advice on philanthropy, to access to premium airport lounges.
They also have an advantage in their ability to book locally, and their knowledge and relationship networks facilitate client onboarding, he said.
Highlighting that the regional retail wealth management sector faces the ongoing issue of lack of transparency and independence; EY said high fees are often hidden in opaque commissions on funds and other products and advice shaped by narrow sales interests.
“We see many in the industry who would welcome commission disclosure across all financial products. The key would be to provide lower costs, genuinely independent advice and technology-supported portfolio diversification with a focus on passive funds and exchange-traded funds, rather than complex structured products,” he said.