HSBC is planning to add staff to its Saudi Arabian operations to cope with additional demand for its services, as the kingdom’s economic transformations take shape.
The global banking giant’s regional chief Georges Elhedery revealed in an interview with Reuters, that the bank has already formalised plans to expand in the region to support the Saudi Vision 2030 plan.
As reported, Vision 2030 is the reform programme launched by Crown Prince Mohammed bin Salman last year, in a bid to diversify the economy and end its reliance on oil exports, there are more opportunities for investment banks and financial firms to do business in the region.
The Crown prince has outlined Saudi’s ambitious privatisation plans, including to raise US$100bn through its listing of 5% of state oil firm Saudi Aramco, on the Saudi stock exchange and within one or more overseas markets.
The plan has seen controversial moves by the UK financial regulator to change the London Stock Exchange’s rules in order to land the Saudi business.
Additionally, the opening up of the Saudi stock market – something that HSBC estimates could attract up to US$20bn in foreign capital – and encouraging local people to save more will provide the bank with a series of new business opportunities, Elhedery, HSBC’s Middle East and North Africa chief executive, said in his interview with Reuters.
“The transformation is probably unprecedented in the region and has few historic precedents outside the region for that scale,” said Elhedery.
He cited China’s economic reforms of recent decades and major changes in Britain under prime minister Margaret Thatcher in the 1980s as examples. “Saudi Vision 2030 fits there among these mega transformation plans,” he said.
Elhedery told Reuters that HSBC, which already has over 12,000 staff across the Middle East and North Africa, had no plans to go on a mass recruiting exercise. However, the London-listed bank would hire some new staff and relocate some existing employees to the kingdom from outside.
New additions would be incremental, he added, but declined to give a number.
HSBC, the largest international bank in the region, is the number one adviser for mergers and acquisitions and debt deals in Saudi Arabia, and the number five for equity capital markets so far this year, according to the latest Thomson Reuters data.
“Our economic estimate is that if you have FTSE inclusion, as well as MSCI emerging market inclusion for Saudi Arabia, the cumulative number can be in the range of US$15bn to US$20bn in inflows,” he said.
Another important part of Vision 2030 that interests HSBC is that it is encouraging Saudis to increase their savings from 6% of total household income now to 10%.
As reported, Saudi Arabia has been trying to encourage companies to employ more Saudi nationals and has recently introduced an expat levy and completed an amnesty period for expats that do not have the correct visas being given the opportunity to leave without penalties.
This has seen more than 600,000 expats leave the kingdom ascross the last three months. As reported, new measures are now in place to deport, fine and even jail any offenders still left in the kingdom without the correct paperwork.
Elhedery said the savings target created “fantastic” opportunities for HSBC’s Saudi operations, which include a 40% stake in Saudi British Bank (SABB), and a 49 percent shareholding in HSBC Saudi Arabia, its investment bank.
“When you increase the savings rate you need to give people products either through equity markets or asset management products or bonds or sukuk products,” he said.
The bank’s Saudi presence will be further strengthened with a merger between SABB and fellow local lender Alawwal Bank, the Reuters article added. This will create the kingdom’s third biggest bank and could, say analysts, involve HSBC acquiring the 40 percent owned by Royal Bank of Scotland in Alawwal.
HSBC has already made staffing changes to help its Saudi business, including the secondment in April of Samer Deghaili, co-head of equity capital markets in the region, to its Saudi subsidiary, Reuters said.