BEIJING // Profit doubled at the Middle Eastern division of China's biggest bank last year as its business expanded on the back of growing trade between GCC countries and the world's second-largest economy.
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The Industrial and Commercial Bank of China (ICBC) announced this week that its Middle Eastern unit, based in Dubai, generated US$31.77 million (Dh116.6m) of profit in the first 11 months of last year.
This is more than double the figure for all of 2010, Tian Zhiping, the bank's Middle Eastern chief executive, told China's state-run Xinhua news agency, also reaffirming the company's desire to build a retail presence in the Emirates.
Mr Tian said the state-owned bank had been little affected by the unrest in parts of the Middle East last year, as on-balance credit exposure is concentrated in stable parts of the region, principally the UAE, Qatar, Kuwait and Saudi Arabia.
ICBC, which entered the Middle East in 2008 and has branches in Dubai, Abu Dhabi and Doha, has since March last year been offering the Chinese yuan as a means to settle transactions, and the growth in profit has been partly driven by more companies using the currency to close deals.
Ben Simpfendorfer, the managing director of Silk Road Associates, an economic and political consultancy based in Hong Kong and specialising in the Middle East and China, tied the rapid growth of ICBC's profit in the Middle East two factors.
"The first is that these banks have only recently opened up [in the Middle East], so they will be picking up business from Chinese businessmen who were banking with foreign banks," he said.
Second, he said, ICBC was a "natural beneficiary" of the growth in commercial relations between the Middle East and China. The real revenue generator for ICBC in the Middle East is trade finance, and there have been many indications that UAE-China trade was increasing rapidly.
Abu Dhabi's Department of Economic Development indicated that in the first six months of last year, non-oil trade between the emirate and China jumped nearly two thirds to Dh2.16 billion, from Dh1.32bn for the same period in 2010.
"Consumer goods trade has always been fairly strong. It's picked up more since the [economic] crisis," Mr Simpfendorfer said of China trade with the Middle East.
"Chinese firms will be looking to source construction materials. Not all of that will be direct from China. Some will be imported by wholesalers. That's probably where they're doing better business - supporting companies," Mr Simpfendorfer said. "I wouldn't be surprised to see a growing number of firms doing business in North Africa and deciding to settle some of their business out of Dubai."
Mr Tian reiterated to Xinhua that ICBC wanted to open retail banking operations in the UAE. This would aid the bank in offering products such as remittance services and credit to the 200,000 Chinese citizens living in the UAE. ICBC is also looking to offer asset management and investment banking services in the UAE, Mr Tian said.
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450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
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4,926
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”