DUBAI, (Reuters) – J.P. Morgan Chase & Co expects its private banking business in the Middle East to post double-digit growth in 2011 as the U.S. bank further expands its footprint in the region to tap the ultra-rich market.
With double-digit revenue growth in the private bank unit last year, the bank is targeting a class of investors from the oil-rich region who have turned more cautious and risk averse since the financial crisis.
“In the Middle East, you need patience and you need perseverance. You need to stay the course,” said Paolo Moscovici, managing director of the bank’s private banking business in the Middle East.
“That’s the tough challenge I have. I still need to produce numbers every year. And the numbers have to make sense.”
JP Morgan’s private bank, which has around $700 billion in assets globally, caters to those among the wealthiest in society. This means family businesses and individuals valuing anywhere from $100 million to several billions of dollars.
But the region saw heavy wealth erosion during the crisis as oil prices fell sharply and some family-owned businesses were hit due to exposure to toxic assets and heavy debt exposure.
Moscovici said that navigating through the storm meant asking investors to diversify their portfolios and finding new investment opportunities.
“Within the equities space, we went back into what we thought would be growth positions that would pull the world out of recession,” he said.
“That was mainly emerging markets and that served us well.”
But working with clients in the region is quite different from serving the wealthy in New York or even Texas, Moscovici said. While a typical U.S. individual’s portfolio would have 1 percent to 2 percent invested into emerging markets, a Middle East investor would have invested 15 to 20 percent.
“This part of the world has always been much more comfortable in emerging markets,” he said.
The private banking industry in the Middle East has a number of players including pure-play banks such as Julius Baer and Credit Suisse competing with global banks including HSBC and UBS for a share of the oil wealth.
NOT ASIA
Despite the double-digit growth, Moscovici said the region would still lag growth rates seen in fast-growing markets such as Asia where private bankers have been ramping up operations to meet the rapid pace of emerging millionaires.
“I don’t want to exaggerate, it’s hard to grow 25 percent. If I could stay in the 10-20 percent range, that’s where it makes sense,” he said.
Global private banks are increasingly turning their eyes to Asia, where — with the exclusion of Japan — wealth is expected to grow at nearly twice the global rate, according to the Boston Consulting Group.
JP Morgan employs around 50 people in the Middle East and Moscovici’s plan is to hire “selectively”, shifting people and resources closer to the region and looking for talent locally.
“If you know HSBC, and UBS, the numbers are in the hundreds,” he said. “Actively, for JP Morgan, is always going to be selectively.
While the current core businesses and main source of growth is in Saudi Arabia and Kuwait, JP Morgan is looking to expand its presence in places such as Abu Dhabi, Dubai and Bahrain.
The bank recently set up private banking operations in Doha, Qatar, the tiny Gulf Arab state which recently won a bid to host the 2022 football World Cup and whose economy has been growing at a phenomenal rate.
The executive believes the bank’s long-running presence in the Middle East and its global reputation will help it in winning clients and competing against other global names active in the region.
“Our clients have an eye for brands. They like Gucci and Prada and they prefer to deal with names like Goldman and JP Morgan,” Moscovici said.