Start local, go global

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HSBC obviously had Youssef Nasr (pictured above) in mind when it launched its global branding initiative as “the world’s local bank”. The chief executive officer of the bank’s Middle East business symbolises the cosmopolitan ambitions of the giant multinational organisation, yet simultaneously roots the bank in its regional division headquarters in Dubai.

 

The 53-year-old Lebanese has worked for the bank for the past 21 years, and in that time must have clocked up enough air-miles to keep him in business-class travel for the rest of his life. He left his native Beirut to study mathematics at Cambridge University in the United Kingdom, and then moved on to earn an MBA at Harvard’s premier business college in the United States.

 

Then came stints in senior HSBC executive positions in Canada, the US and Brazil before the move to Dubai earlier this year brought him back to his Middle East origins. It has given him a panoramic outlook on global business and finance, which he is willing to share, to a degree unusual in regional banking circles.

 

“I think it is important for Dubai to develop a forum for the discussion of big topics, from real estate, currency and international policy. These are the burning issues, and they should not just be the subject of cocktail party chit-chat,” he told me in an exclusive interview with Emirates Business.

 

He was talking in his surprisingly spartan executive base in HSBC’s offices in the Dubai International Financial Centre. He is fresh and alert for our early morning meeting, and looks as though he keeps in good shape despite clocking up many hours in the air.

 

A new perspective

 

His views on the “burning issues” are refreshing and candid too. He speaks from the hip. “How do we invest our sovereign wealth finances? It is a huge issue, and not just for the national security aspects. We need to know, for example, what is the European policy on SWF. We have some idea of US policy, but what about France, Germany, Britain? Should there be a common EU policy on SWF? It is a big question for decision-makers in all the Gulf’s governments.”

 

It is not just a theoretical issue for Nasr. As managing director of HSBC’s strategic investments unit, it is his job to advise, at group level, on the big global projects the bank is involved in, as well as considering the crucial issue of external shareholdings in the bank itself.

 

He has been busy of late. HSBC advised Borse Dubai on the intricate detail of the tripartite deal that saw the UAE link up with New York’s Nasdaq, the London Stock Exchange, and the Scandinavian market OMX – a deal that has propelled Dubai to centre stage of the world’s financial markets.

 

Nasr believes the Nasdaq side of the deal will get an easier ride from the US authorities than DP World did over its ill-fated purchase of P&O’s American ports.

 

“The US system has been simplified and modernised, and we in the UAE have learnt from what happened before. The old US process was dominated by the civil service – now with the new Committee on Foreign Investments in the US (CFIUS) there is much better policy. We can talk about the proposed deals earlier and get clearer guidance. So, for example, there was hardly any official blow-back over the Adia deal with Citigroup. We, and they, are learning.”

 

That is good news for Borse Dubai’s deal with Nasdaq, and may also herald a long-term solution to the stand-off between Dubai and Qatar over their shareholdings in the London Stock Exchange, which is thought to have been discussed at the recent Gulf Co-operation Council meeting in Doha. Nasr believes there is room for compromise between the two Arab states, for the long-term stability of the LSE.

 

It will also benefit the Dubai International Financial Centre, which recently received a life-saving boost in the form of the flotation of DP World shares. “I think DIFX will make it now.  There is a great desire for surplus liquidity from energy to be recycled in the region rather than in London or elsewhere, and also a desire to get into equities”

 

He warms to this theme: “I think the tide is turning against the trend for large industrial groupings to be government-owned. This is being reversed, and I think we will see a swathe of IPOs and privatisations across the region. This will mean more listings on DIFX, and we have already seen the start of this trend with the large number of convertible bonds and sukuks – at some stage, these will be converted into equity I believe.”

 

The mortgage market

 

HSBC must confront more urgent challenges as an immediate priority. The bank – like all the giant financial institutions in the world – has suffered from the sub-prime crisis that hit the US last summer, with ongoing global implications. That is a problem that has consumed much management time at group level, but is not an immediate issue for Nasr’s division. “No, I do not see it as a serious scenario. We are not going to face a wave of problems in mortgages based on low-quality earners. Our mortgage to balance sheet ratios all look good from here. The mortgage market in the Middle East is not mature enough to have attracted low-quality borrowers.

 

“Our challenges are different. I think the property market is going to face another surge, for example in Abu Dhabi. There is a direct relationship between a country’s standard of living and the value of its property. In Abu Dhabi, the regulatory regime needs to change, and that is happening. There is still a low rate of penetration in the mortgage market there, and that is a challenge for the HSBC mortgage business.”

 

Nasr talks with authority on the detail of managing HSBC’s workforce and other internal initiatives (see panel), but you get the sense his mind is more comfortable with grand strategy. The group has recently taken on some big Middle-East investors, in the shape of Dubai International Capital and the Saudi Maan Al Sanea. Which brings us back to the concept of the “world’s local bank”.

 

“We always wanted long-term strategic shareholders from this part of the world, because we have always been focused on global markets. We will see the benefits of these long-term relationships, as we are doing now in China,” says Nasr.

 

The synergies between local and global have never been more apparent than at HSBC in the Middle East.

 

Emiratisation crunch

 

Employment policy is right at the top of Youssef Nasr’s in-tray at HSBC. A bank’s reputation depends to a large degree on the quality of service it provides customers, and even in the days of online transactions and automated banking, personal experiences can make or break a banks’ reputation.

 

“Most parts of the world have been going through economic boom times, so finding the basics of our skilled labour force is becoming more difficult,” he says. “That is why we are spending so much on training, development and recruitment. But it is getting more difficult – the market for top-level staff in Europe and India is still competitive, and it’s getting tougher in the Middle East too.” With the rest of Dubai expanding rapidly, other potential employers, like DIFC, are also in the recruitment market.

 

And there is still the crucial issue of Emiratisation. The UAE Government wants to increase the number of Emiratis in employment, especially in the private sector. But there is a crunch ahead, which Nasr explains with mathematic precision: “The GDP is growing at more than 10 per cent, the financial services sector at 20 per cent. But the local population is only growing at two per cent per year. If we are to maintain the pace of Emiratisation, these ratios are going to come under pressure. There is a mismatch between how fast we are growing and how fast we can hire locals,” he concludes.

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