Bank Sarasin & Co. Ltd, a leading Swiss private bank with a strategic presence in the region through its DIFC-domiciled subsidiary, Bank Sarasin-Alpen (ME) Ltd, is very sure of leveraging its status as being backed by the only 'AAA-rated private bank in the world' to its advantage in the region.
Joachim H. Straehle, the Bank's Global CEO, was in Dubai last week, just days after Rabobank, the world's only AAA-rated private bank, exercised its option to acquire all outstanding Sarasin class A shares held by Eichbaum Holding Ltd, thus becoming the majority shareholder of Sarasin with a 46 per cent stake in its equity capital and 69 per cent of its voting rights. In a freewheeling discussion, Straehle talks about the bank's AAA-rated parent, the private banking environment in the Middle East and why margins for players with a customisable product will never come under pressure.
Q&A with Joachim H. Straehle, CEO, Bank Sarasin
Q. Let's start with your operations here. You began operations in the DIFC 18 months ago – obviously you were present in the region much before that… How do you evaluate the last year-and-a-half and how has your subsidiary here added to your overall business?
A. The GCC is clearly a growth market for the business we are in – 'private banking'.
Our unique Business Model at the DIFC which combines Investment Banking through Alpen Capital (ME) Ltd, and Private Banking of Bank Sarasin-Alpen (ME) Ltd. has really worked.
As you're aware, real growth nowadays is coming not out of Switzerland anymore but from regions such as the Middle East , Asia, Eastern Europe and Latin America etc. With this, the growth strategy that we have now has a clear focus on the GCC and indeed the whole of the Middle East where we are building our strength and hiring more people.
Also, with Rabobank exercising its option in end-December [becoming the majority shareholder of Sarasin with a 46 per cent stake in its equity capital and 69 per cent of its voting rights] means that we are now owned by a AAA-rated Bank and with this, we're probably the only private bank in the world that has a AAA rating.
How does Rabobank increasing its stake in Sarasin impact you operationally?
See, that's the good thing – when large clients deal with a private bank, they are concerned about security. Being the only AAA-rated private bank will definitely help us get more clients who are concerned about this – and from my experience, I can tell you that, typically, large clients are concerned about the security of their investments. Therefore, this will change for sure.
But nothing else will change – not even our board. We will remain a Swiss bank, listed on the SWX Swiss Exchange and will retain our operational independence. The only thing that will change is that we are now consolidated into the balance sheet of Rabobank.
You mentioned earlier that the growth for your business is no longer coming from Switzerland but from other parts of the world. Is that phenomenon limited to your bank or is it an industry trend?
Well, the industry as a whole is evolving and if I'm not mistaken, roughly 51 per cent of the world's population lives in Asia and adjoining areas. When you look at the growth in India and China , it's clear that much more wealth is being generated in these markets, along with here in the Middle East and elsewhere in Asia that it is being done in the traditional markets of Europe. So, to grab a piece of that growing pie is 'easy.' Having said that, the lack of local talent is an issue in these markets, and that's a challenge that everybody in the industry is facing.
Growth-wise and size-wise, where would you stack the Middle East among these growth markets that you've pointed out?
Well, in terms of pure population, China with 1.3 billion people and India with between 1.1 and 1.2 billion people are clearly the winners and the Middle East is not as huge in size. However, there is substantial oil wealth accruing to the region, as it is to parts in Eastern Europe , Russia and Latin America . I would put the Middle East right after India and China .
Have you noticed a marked change in the clients' needs over the last five years?
Oh, big time! When you look at the typical investor, you can clearly see that they've become much more global. The previous generation wealthy sent their kids to universities across the globe and businesses have expanded to overseas markets – China, Europe , you name it. So, people now have a much more global view and therefore you need to offer them a global network. Typically, with a local content, but a global network is very important.
What are your expectations from the GCC markets in the next, say, couple of years?
Looking at Dubai , I see tremendous growth. Dubai is a good starting-point for us in the region but we obviously have plans to offer our services to other countries of the region and see how we can further grow. The potential that we have realised in the last year-and-a-half has been tremendous and with the AAA-rating, we should be able to tackle much more. The AAA is a big differentiator for us.
Of late, the number of players in the private banking arena has increased enormously. A lot of traditional banks too have started offering private banking services. How do you view that development?
Competition keeps us on our toes – we have 165 years of tradition and we don't think we have any match. People are putting much more emphasis on their investment and they have gone international. Traditional banks offering corporate banking services usually deal with the companies' CEOs and CFOs, who are usually wealthy as also are the family businessmen, who they then convert to their private banking customers.
Looking at the DIFC, when we came here the Gate District was empty but now it's hard to find a square foot of space here. So, looking at that, I feel many people think that the Middle East – particularly Dubai – is an area that offers you security and stability with the right regulation and legal framework, which we from Switzerland are used to working under.
Are margins under pressure?
For commoditised products, yes. But not for what we offer, which is customised offering. You cannot get a Rolls-Royce for the price of a Volkswagen. For us, it simply means that we've got to run faster than the competition. I believe that a combination of good products and great services will keep your margins at a good level.
With more and more private banks entering the arena, the market is getting increasingly crowded. What should clients look for while seeking a private bank?
The market is getting crowded, but with mass-produced, commoditised products. In a typically commoditised environment, the price falls and margins get affected. But we are not in that business. We would like to provide solutions to the client based on his/her needs. Then again, typically, security is one thing that people definitely look for. Now, they also want an international network and management, which is our differentiating factor as well. In fact, in Germany, we have been acknowledged as the #1 Private Bank.
Do you see any difference in the needs of clients from this region compared to those in other parts of the world? Or are client needs more global?
No I don't think client needs across the globe are the same – each region's client needs are different, with a different risk-profile. Even size-wise, you have more billionaires here in this region as a percentage of population than in most parts of the world. It also depends on their outlook – some are more international than others.
Have you seen an increased demand for alternative investments in the past few years?
Yes of course. It is a world of probably 8,000 or more hedge funds, with investors having difficulty in identifying the right one for them. Definitely, there are different styles of investment and depending on what situation you have in the economy, some styles are correct and some aren't. However, it is clear that hedge funds are now part of the game – we may see some consolidation and integration in the future. We may not see a strong increase in that number.
Which is your largest market in the region?
Saudi Arabia definitely, and then the UAE. But other countries are getting increasingly important as well. Kuwait, Oman… even Lebanon . Iran/Iraq will once again become an okay market for the industry after a while. Even Egypt . Qatar is an important market too … it has the highest per capita income in the region.
About Bank Sarasin-Alpen (ME) Limited
Bank Sarasin-Alpen (ME) Limited is a subsidiary of Bank Sarasin & Co. Limited. Apart from the UAE, the bank has an active presence within the GCC, and has plans for expanding into Saudi Arabia , Qatar, Oman and India before the end of 2007. Bank Sarasin-Alpen (ME) Limited provides advisory on investments and markets Bank Sarasin's full range of Financial Services in the region, including personal advice in financial investments, customised structured notes on UAE / emerging markets / India, AAA-rated capital guarantee by Rabobank, investments into Global Real Estate Investment Trusts (REITs) and award-winning Sarasin Funds. For more information on Bank Sarasin-Alpen (ME) Limited please visit www.sarasin-alpen.com
About Bank Sarasin & Co. Ltd
Founded in 1841, Bank Sarasin is today one of Switzerland 's leading private banking institutions. Its sustainable success is based on trust, confidentiality, expertise and dedication. Bank Sarasin's core activities include investment advisory and asset management services for private and institutional clients, as well as an investment funds business. Its complementary services extend to corporate finance, brokerage and financial analysis. The Sarasin Group - headquartered in Basel, Switzerland – employs over 1,100 staff. In addition to its headquarters in Basel , the Bank has offices in Zurich, Geneva and Lugano in Switzerland . Internationally, the Sarasin Group has offices in Dubai, Guernsey, Hong Kong , London , Luxembourg, Munich , Paris and Singapore. Bank Sarasin is a limited company. Its shares are listed on the Swiss Stock Exchange, SWX. Its strategic partner Rabobank is the only bank in the world without a state guarantee that enjoys a triple-A rating. For more information on Bank Sarasin & Co. Ltd, please visit www.sarasin.com
