The average annual increase in demand for financial professionals in the GCC is expected to reach 30 per cent during the next few years. For individual sub-sectors within banking and financial services, the pace is expected to vary between 20 and 120 per cent per annum, according to a study by Hewitt Associates.
"Being a high-growth region, the GCC, and the UAE in particular, is seeing increasingly high levels of demand for talent in the banking and financial services," said Debabrat Mishra, consulting business leader, Hewitt Middle East.
"The GCC is estimated to have about $2.5 trillion (Dh9.18trn) to $2.6trn available for project finance. Add to that the slowdown in the US market and the trading pattern now shifting to be South-South, these factors explain why this region is fast becoming a major global financial hub," Mishra said.
Hewitt Associates has carried out a study on the banking sector in the Middle East to create a profile of the current and emerging trends in rewards and compensation practices among the leading banks across countries in the region. In total, 26 leading banks, both regional and multi-national, were included in the sample.
The study was carried out in banks in Bahrain, Qatar, Oman and Jordan. The most important result of the study is that average salaries paid out in 2007 constituted approximately 60 per cent of total operating expenses of banks.
Also, it showed that actual training and development expenses across all asset sizes were between two and five per cent of total employee expenses.
In terms of compensation structure, while basic salary contribution is fairly consistent across levels and countries, allowances form a much larger portion of total pay in Qatar, and Oman represented 23-41 per cent, whereas in terms of composition of total pay, the variable pay contribution is the highest in Bahrain at 13-38 per cent across levels versus 6-18 per cent in other countries.
Mishra affirmed the clear shortage in national manpower in the banking sector due to the limited number of national professionals in banking services. "However, most banks are dealing with this problem through training programmes. The issue is that training takes time and the number of nationals for higher positions in the banking sector is very tight. With a shortage of national banking professionals, high cost of living and strong competition from local banks, international players in the region are finding themselves in a difficult situation, both in hiring new national graduates and retaining their talented staff," he said.
Lee Slater, head of resourcing for the Middle East and North Africa at Standard Chartered Bank, sees a strong competition from local banks, especially in national branch managers, customer staff and asset management professionals.
"Demand for banking professionals in the UAE and GCC is massive. We have need to hire UAE and GCC nationals, while the market is becoming tighter with the growth of local banks."
"This competition, along with the few number of highly qualified national banking professionals, is fuelling the salary increase in the region. Every bank is the region has plans for expansion and growth and we are all calling for the same limited manpower. This created more challenges."
"We, as employers, get feedback from recruitment agencies and the growth in salaries varies. In some areas the growth is much higher than 11 per cent this year. We see high increase in salaries of customer-experienced staff in branches, a category that represents the bank in front of clients such as tellers and customer services representatives. We [international banks] see strong competition from local banks in this area as local banks are paying higher salaries for experienced staff [than international banks] to acquire staff quickly," Slater said.
"Salaries of new graduates are also increasing significantly because of the availability of new positions and expansions. We see also shortage in asset management professionals, traders in corporate banking and corporate advisory services."
"There is a tight shortage in national branch managers. We have a training programme to promote their skills. We have training for two categories. We offer international graduates two-years' training programme to prepare them for international positions. The local graduates programme brings in national graduates and is focusing on the local market," he explained.
"Local and international banks are planning for major expansions. We, in Standard Chartered, have a projected 28 per cent annual increase in the number of staff. Given increasing competition and expansions of other banks, the required number of new staff will be increasing significantly over the next three years," he added.
Singer and Hamilton, a recruitment agency specialised in providing senior staff for the banking sector, arranged an informal meeting for HR departments in banks last week.
The meeting unearthed some challenges facing the banking sector in the GCC. Walid Sinno, managing partner in Dubai, told Emirates Business that local banks were late in responding to their needs. "They should have strong training facilities to prepare nationals for senior positions in the banking sector because this is a long-term process, and the best way is to find local professionals who understand market trends and clients' needs."
"The top management in banks needs to understand that the banking sector is going global and it needs a mixture of global expertise along with local professionals. This mixture can play a major role in the development and expansion of the banking sector. We see UAE nationals in banks, but if these nationals did not receive proper training, the banks will have nationals in clerical level not in mid or senior management," he said.
Eric Singer, founding partner of Singer and Hamilton, said the meeting also revealed very important issues that are common among HR departments in international banks in the region. "It was clear they are all worried about inflation in salaries and its impact on operating costs. They are wondering how to explain inflationary pressures in the GCC market to their head offices, for example in London or New York. The impact of the sub-prime crisis and the credit crunch in Europe and the US is huge and the economy is slowing down there, so the head offices cannot understand the high growth in the UAE and the GCC, and this issue is becoming a challenge for HR departments."
Singer said the annual basic salaries of mid to senior management in the UAE banking sector reached to a range of $180,000 to $250,000 this year, a 10 per cent increase compared to salaries in 2007. There are also allowances and annual bonuses, which can reach three or four times of the basic salary, according to performance and profits.
"Despite the UAE's need for large numbers of banking professionals during the next three years, there are several challenges for overseas professionals. They may have deep understanding of the banking services and products, but they do not understand trends in the GCC market, clients' needs and their risk appetite. So even if we found overseas professionals who would like to move to Dubai, they will need training on the market needs and clients' investment attitudes."
Opportunities for growth of Islamic banking have been well established. However, the ability of Islamic banks to address the talent challenges will be a significant differentiator between banks, said the Hewitt Associates study.
Debabrat Mishra said the growth in Islamic banking is attracting significant attention in the financial services sector worldwide.
"We foresee three critical talent challenges in the near future," he said.
"There is increasing demand and premium for innovators. The future growth of Islamic banking hinges on the ability of institutions to rapidly innovate on product development. There will be a premium for talent that has in-depth understanding of traditional products and can use this knowledge to develop Shariah-compliant products."
The second issue is to create adequate talent pool that understands Shariah principles. Our studies showed that Islamic banks are likely to succeed if they adopt a strategy to balance between "build vs buy" trends.
"Organisations that base their strategy primarily on hiring experienced talent from the market will ultimately grapple with the premium that this limited talent pool will eventually command. Developing this talent pool from scratch is unlikely to work. Islamic banks are, therefore, best placed in partnering with educational institutions in building a ready talent pool. They would also invest substantially in in-house training and development to build skill sets for competitive advantage," Mishra said.
The third challenge is the increasing demand for market development skills. The Hewitt study showed the biggest growth opportunities will be for those who identify unmet demand in existing markets and new markets based on customer segments. Therefore, Islamic banks will need functional depth in understanding customer needs and identifying market opportunities.