Investment banking loses its allure

Dubai: Dubai may no longer be the kind of haven for investment banking industry professionals it once was because of the global financial sector's spreading woes.

With many large Wall Street firms in tatters after their risky investments went awry, financial services companies in Dubai would be cautious about launching similar business models for their own growth, people familiar with the regional banking industry feel.

Mohammad Kamran Wajid, global head of financial institutions at Emirates NBD, said: "Those who were thinking of replicating the Wall Street investment banking model are left with no choice but to take a backseat and seriously reconsider their business plans.

"The area of structured credit products is a major victim of the crisis that started with the US mortgage meltdown."

International companies based at the Dubai International Financial Centre (DIFC) have been aggressively pursuing their expansion in the region to benefit from huge liquidity generated by oil export revenues.

The investment banking sector in Dubai and the region is likely to be affected by the global financial troubles and places like the DIFC may not be able to absorb those losing jobs in the West and other places.

More than 80,000 jobs have been lost in the banking business worldwide in the last 18 months of the turmoil.

Layoffs

British bank HSBC recently said it had laid off 1,100 people globally in its global banking and markets division.

A spokesman in the UAE declined to say how jobs are being cut at the regional office in Dubai. HSBC Middle East employs about 10,000 people, including several hundred in investment banking.

Benoit Demeulemeester, managing partner of Strategic Partners, a financial sector-focused human resource consultancy, said: "Overall people have become very cautious in the hiring process. Most projects have been put on hold with very few exceptions."

However, he said Dubai should now be able to attract some of the brightest banking minds from the failed US banks such as Lehman Brothers.

"Some of the big names were not willing to come here earlier, but now Dubai has an opportunity to cherry-pick who it wants because there are job losses in the US," Demeulemeester explains.

However, hopes for finding opportunities in Dubai may not be as bright for the lesser mortals who have lost their jobs.

"If you have lost your job in the Middle East, then it will be very difficult [to find a similar position]. The most affected sector is the debt sector, and to a lesser extent equities," Demeulemeester said referring to the tightening situation in the region's financial services industry.

But Wajid believes that even the top class product specialists of Wall Street banks have limited chances of landing plush jobs in Dubai because of the reluctance on the part of locally-based companies to venture into the risky investment banking model of Wall Street that has lost its credibility.

Banks have suffered billions of dollars in losses due to bad investments in exotic securities linked to mortgage loans in the US.

"In the ongoing turmoil, the global banking fraternity is seriously reconsidering the principles preached in the past by the failed investment banks.

"When companies are cutting down on services, how do you expect them to create new jobs?" Wajid said.

"The outlook for the global banking sector in the medium-term remains bleak with tight liquidity, depressed credit sentiment and market volatility," he said, adding that in such conditions it is unlikely that the banking industry in the emerging markets will be able to absorb the influx of bankers with specialised structured credit background.