Dubai: The Gulf economies must guard against potential consequences of the latest round of economic challenges faced by Europe and the United States, a top banker said.
"With subdued GDP growth ahead, inflation risks are rather low and will give Western central banks the possibility to continue with their loose monetary policy," Rohit Walia, Executive Vice-Chairman and CEO, Bank Sarasin-Alpen and Alpen Capital Group, told Gulf News in an exclusive interview.
"GCC economies also have to prepare for some challenges ahead. Weaker global GDP growth is likely to put some pressure on oil prices," he said.
Gulf News: How do you see the global economy after the recent fiasco over the extension of US debts and rating downgrade?
Rohit Walia: The global economy faces a difficult second half of the year. The US economy is possibly on the brink of recession after the turmoil in US politics and in Western financial markets [especially the uncertainties stemming from the Eurozone debt crisis] aggravated the downturn seen in the US economy in the first half of the year. European economies also show clear signs of weakness as the strong momentum seen in the German economy in the first quarter of this year has faded. Emerging market growth is robust but the recent rate hikes by emerging market central banks in order to fight inflation will dampen the growth outlook in the second half of the year.
Do you see any potential impact on the GCC economies, banks' lending operations and corporates?
With the global economy facing some headwinds in the next quarter, GCC economies also have to prepare for some challenges ahead. Weaker global GDP growth is likely to put some pressures on oil prices. Furthermore, an elevated level of risk aversion in global financial markets is not helpful for the GCC's banking sector as well. The banks in the region remain robust however with high liquidity levels.
Is there a way out from the current global meltdown? Especially after QE2, in which direction are the Western economies heading?
Western economies face an extended period of lacklustre economic growth as public and private debt have to come back to more sustainable levels. With subdued GDP growth ahead, inflation risks are rather low and will give Western central banks the possibility to continue with their loose monetary policy. Western economies with sound fundamentals, like Germany and Switzerland will benefit from the ongoing catch-up process of emerging market economies whereas debt-loaded economies like the US, the UK, Spain and Italy will suffer more in the next years.
Many people see it as the ‘Crisis of Capitalism'. Do you think capitalism is in crisis?
It's more an unwinding of imbalances, which have been built up in the last 20 years. The liberalisation in the banking systems and the globalisation process after the fall of the Berlin Wall have led to a build-up in debt (private and public), which is not sustainable in the long term. The deleverage process will exert a drag on economic growth in the next years but in the end strengthen the foundations of market-based economies.
How is the private equity business doing in the region? Has this become difficult?
The private equity business has become difficult for those who have high valuation expectations. However at realistic levels, a number of smaller transactions are still getting done.
What is the state of mergers and acquisition activity in the UAE and GCC?
M&A activity in the region and the UAE has been growing at a reasonable pace as a large number of family houses look towards consolidating their various business interests in order to focus on their core line of business. This has resulted in a number of cross-border [GCC] transactions being concluded. However, outward M&A activity of the GCC entities acquiring businesses in international markets has been low but is expected to pick up early next year.
How do you see the slowdown affecting the region's private banking sector?
In the private banking industry in the region, there has been a drive to move towards a more tailored approach to meet client requirements rather than pushing products.
From a client's perspective, they are now more aware of the risks associated with the investments and have wealth preservation at the back of their minds even when they evaluate opportunities for wealth creation.
Has private wealth management become more complex due to the current situation?
Private wealth management is very simple: keep your clients' money safe and look at opportunities to grow it without too many risks. This is the basis of private banking and it is unfortunate that for many organisations it took crises to see that!
What is the best investment option open for a high net worth individual — among stocks, bonds, property, etc?
In the short term, the best option is to keep a lot of cash in fundamentally strong currencies [like the Swiss franc or emerging market currencies] and cash substitutes like gold. In the longer term, high net worth individuals should invest in real assets like stocks, property and commodities. Among these assets, stocks have the biggest long-term potential and also offer a steady income stream.
If you are to advise a rich client on investment — what would it be?
If you have the privilege to be an investor with a long-term horizon and if you can take short-term volatility you should invest the biggest part of your portfolio in stocks [60 per cent], then commodities [10 per cent] and the real estate [10 per cent]. To protect yourself against a debasement of the major currencies a sizeable portion in gold [20 per cent] is also sensible as long as real interest rates remain close to zero.
How has the investor appetite changed over the last three years?
Investors have become more risk-averse and ask for more transparency. Complex structured products, which have been popular among investors before the sub-prime crisis and the Lehman collapse have lost their appeal.
How is Bank Sarasin Alpen doing in terms of business? Could you elaborate a bit on your operations in the UAE and the GCC?
As you know, Bank Sarasin-Alpen is the subsidiary of the Swiss private bank, Bank Sarasin. We started our operations in Dubai way back in 2005 and since then have managed to establish a strong footprint across most GCC countries with offices in Dubai, Abu Dhabi, Doha, Muscat and Manama.
In addition, we have also expanded to India with offices in Mumbai and New Delhi. The fact that we are present in most of the GCC countries ensures that we are available to meet our clients when they want to see us and move away from the concept of suitcase banking.
In terms of business, we are doing very well. Our tag line is ‘Sustainable Swiss private banking since 1841' and especially in today's times this motto has really helped us grow our business and gain client confidence. We have expanded our offering in the last year by launching family office services as well as a comprehensive Islamic wealth management offering for our clients.
In addition, we also provide value-added services to our clients via our associate Alpen Capital which provides investment banking advisory services. I feel this model really works as the investment banking advisory business of Alpen Capital adds value to the private banking business of Sarasin-Alpen. We also have an asset management company — Sarasin-Alpen and Partners in Dubai which offers clients an opportunity to invest in the GCC through the GCC Equity Opportunities Fund and in India through the Sarasin Nifty Fifty India Equity Fund.
We also continue with efforts to strengthen the operations across all locations and look for new opportunities.
Going forward, where do you see the growth come from?
The Sarasin Group has identified Asia, Middle East and India as its core growth markets. This is one of the main reasons for our presence in these countries and we plan to continue expanding in these regions.
wealth of experience
Rohit Walia set up Bank Sarasin-Alpen and Alpen Capital in 2005 at the Dubai International Financial Centre. He is the Executive Vice-Chairman and Chief Executive Officer of both the organisations.
Over the last few years, Bank Sarasin-Alpen and Alpen Capital have made great strides in the banking industry.
Walia has also been instrumental in expanding the operations of Bank Sarasin-Alpen and Alpen Capital to Qatar, Oman and India. He has also set up two asset management companies - Alpen Partners and Sarasin-Alpen and Partners Limited in the last five years.
A seasoned banker with over 25 years of international banking experience, Rohit has previously worked with Mashreqbank - Dubai and Bank of America and American Express Bank in India.
In his last assignment at Mashreqbank where he spent over 11 years, he was the Divisional Manager for Commercial Banking Group where he was responsible for formulating and executing aggressive business plans as per the strategy of the organisation.
Growth story
Bank Sarasin-Alpen is a subsidiary of Bank Sarasin, Switzerland — an organisation which is known for Sustainable Swiss private banking since 1841.
Established in Dubai in 2005, Sarasin-Alpen expanded to Qatar and Oman in 2008,to India in 2009 and to Bahrain and Abu Dhabi in 2010. Bank Sarasin-Alpen functions in all these locations with its investment banking associate, Alpen Capital which forms a unique business model wherein the private banking activities of Bank Sarasin-Alpen are complemented by the Investment Banking advisory business of Alpen Capital
Bank Sarasin-Alpen provides a complete range of private banking solutions to private and institutional clients in GCC and South Asia. It has witnessed tremendous success in this short period and have been awarded the ‘Mohammad Bin Rashid Al Maktoum Business Award' in 2010 as well as the ‘Best Private Bank' award during 2007, 2008 and 2010 at the Banker Middle East Industry Awards.
Bank Sarasin's majority shareholder, ‘AAA' rated Rabobank puts us in a strong position.
The Dutch Rabobank is considered one of the safest banks in the world and has been rated ‘AAA' by prominent international credit agencies like Standard and Poor's, and Moody's.
