11 minute read
The Right Combination
A working blend of heritage and dynamism describes both the region and the bank we talk with in our cover story this issue. Anthony Habis Managing Director, Head of Middle East & Africa, highlights the transformations and unique qualities marking the region as of real potential, and why BNY Mellon is well suited to it
BNY Mellon has been operating in the Middle East for decades. What aspects of this region’s market underpins and maintains your commitment to being here?
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BNY Mellon enjoys a long history of operating in the Middle East. It is a dynamic region, and we are most excited to be a part of the tremendous growth and transformation that is currently inflight. In particular, the developments in core market infrastructure as an enabler for diversification and catalyst for FDI, which strongly aligns to our core strengths and capabilities as we build for future-proofed leading-edge financial markets infrastructure and provider for platform solutions.
Anthony Habis, Managing Director, Head of Middle East & Africa, BNY Mellon
The Middle East and Africa is a high growth region for BNY Mellon. We are extremely committed to the region, where we serve a wide range of clients, including sovereign wealth funds, regional central banks and government entities, financial institutions, offering asset servicing and ancillary services, corporate trust and treasury services. BNY Mellon has been in Abu Dhabi since 1998 and we opened our first regional representative office in Lebanon in 1963.
There is a deep and fast-growing wealth management sector in the region, particularly across the Middle East, as governments are diversifying their economies from dependence on hydrocarbon revenues and accelerating non-oil growth. With the financial industry opening up and foreign direct investment shifting to regional markets as well as continued fiscal and economic reforms, the region has some of the bestperforming bourses in the world, which has created a number of increasing opportunities for banks such as BNY Mellon.
The region is also home to seven of the largest fifteen sovereign wealth funds with $3.5 trillion in assets under management. There are a number of increasing opportunities for banks such as BNY Mellon as global custody banks are seeking to gain access to a significant asset owner base. For example, the Kingdom of Saudi Arabia has seen a hotbed of activity in recent months; we are also deeply aligned with Saudi Arabia’s Vision 2030 and delighted to collaborate on shared objectives to drive the country’s economic transformation - recently exemplified by our partnership with SNB Capital, a unit of Saudi National Bank, the biggest lender in the Kingdom, to provide global securities services to institutional and large asset owners in Saudi Arabia.
As a platform provider in both B2B and B2C including trade finance, payment flows, custody operations, investment, and asset management services, coupled with our open architecture and a host of new and existing talent, technology, and data assets.
In addition to our focus on building digital infrastructure, both asset management and wealth management are priority segments for us. As the Gulf’s sovereign wealth funds embark on a diversification agenda as well as privatizing certain state-owned assets, the medium to long term growth for the asset management industry is inevitable.
In terms of our wealth management business, we view the Middle East as a key market for our Global Family Office business. As more families create formal family office structures, we are experiencing increasing demand for our services. We are often asked to assist families as they explore the advantages of creating a formal family office entity.
The service array we provide helps our clients improve efficiency and goal-driven investment performance for the families’ wealth. We are seeing demand for master custody services increase significantly, as more families move to a master custodian relationship for safety and efficiency.
As an investment manager, we are definitely not product focused, but instead we tailor investments to meet the unique needs, goals and objectives of each client. Our investment management model brings to clients the best of both worlds: specialist expertise from eight world-class investment firms offering solutions across major asset classes, backed by the strength, scale and proven stewardship of BNY Mellon. We develop an investment policy statement (IPS),
delivery ecosystem and an innovative approach towards partnerships, as well as helping regional issuers of debt and equity access global markets there is a natural alignment between BNY Mellon’s strategic outlook, and the region’s aspiration for transformation.
Which sectors of the regional banking and financial markets are the most interesting to BNY Mellon at this time?
Our goal is to orchestrate opportunity for the region through our leading-edge digital and data capabilities. We believe data has emerged as its own asset class and view data management as a core capability as capital markets evolve, driven by a demand for more and more transparency. With our extensive history
of providing world-class data solutions to some of the most significant players in the market, aggressive investment in data management, and persistent focus on innovation, BNY Mellon is uniquely positioned to be a strategic ally for clients in the GCC at this market inflection point. We launched a groundbreaking data collaboration with Saudi Arabia’s SNB Capital in December 2021, which helps unite SNB Capital’s extensive local knowledge and infrastructure with BNY Mellon’s world-class solutions in data management and securities servicing to power innovative solutions. Our Data and Analytics Solutions combines the capabilities and resources of our market-leading Eagle product suite, our Intermediary Analytics business,
which defines what the client is seeking to achieve and how we are going to implement and manage the investments to achieve those goals. The IPS defines the investment guidelines. We develop an asset allocation to guide the investments and then actively manage that allocation based on our view of global markets. Our security selection is the final step of the investment process and aligns with the asset allocation and goals stated in the IPS for risk, return, liquidity and income. In general, our clients are broadly diversified across asset classes and their portfolio includes alternative investments to provide additional diversification in non-correlated assets.
What are your thoughts about the medium-term economic future for the Middle East & Africa?
While 2021 was a year of recovery for the region, this year is shaping up to be a year of growth despite uncertainties. The Middle East and North Africa economies are expected to grow 5.2 percent in 2022, the fastest rate since 2016, on the back of higher oil prices, but the Ukraine crisis and threat of emergent COVID-19 variants add uncertainty to the outlook. It is still premature to determine the extent of the consequences of the Russian-Ukraine conflict, but we can already point to signs of difficulties affecting oil importing middle income countries.
For GCC economies, the World Bank estimates that GDP growth is expected at 4.5 per cent this year – buoyed by the increase in oil prices – but will not recover to pre-pandemic levels until 2023. Overall, we believe the region can weather this storm with the hope that recovery will take place this year.
We are also optimistic about the transformation we see ongoing in Saudi Arabia as part of Saudi Vision 2030. As the Kingdom’s market continues to evolve and diversify in line with the National Investment Strategy, Saudi continues to attract global investors, whilst developing first-class infrastructure, cybersecurity and data resiliency solutions. week to Monday to Friday to align with other major economies. Against this backdrop, we expect to see further growth in the custodial services and asset management. Naturally, given the region is home to some of the world’s largest SWF’s, central banks and pension funds, custodial services and safe keeping is at the core of our business strategy.
We see our purpose in the region is to power individuals and institutions to succeed across the financial world. To achieve that purpose, we leverage our unique and differentiated model to serve as a central orchestrator in functioning of global capital markets. We operate through a set of interconnected businesses, across three segments: a. security services, b. wealth and market infrastructure and c. investment and wealth management. All
of which play a systemic role in supporting our clients in imagining and developing their optimal operating model. We have a unique and differentiated model that distinguishes BNY Mellon. We have the scale and a global footprint of a global leader. We have one of the industry’s best client rosters – with connectivity and trust-based relationships to the most important institutions in the world. We run platform-like businesses that create scale and network effects, and we combine the strength, stability, and discipline of a 230+ year old bank with the business model, agility and growth mindset of an innovative fintech. Our early investments in data management,
BNY Mellon is well known as the world’s largest custodian bank. What role does custodian banking have in your regional business?
In recent years, the Middle East and Africa region, particularly the GCC, has become a key component to BNY Mellon’s overall growth strategy. As official institutions in the GCC continue to diversify their reliance on hydrocarbons, the opening of the financial sector and attracting foreign direct investment are key to the region’s economic overhaul agendas. We have seen both the United Arab Emirates and Saudi Arabia introducing laws to broaden their appeal to foreign investors. For example, the Saudi financial regulator, the Capital Market Authority, in January 2018 halved the minimum capital requirement
for foreign investors to $500 million from $1bn. FDI inflow to Saudi Arabia rose sharply in the first half of the year, climbing to $20bn.
The UAE on the other hand, which is the Arab world’s second biggest economy, has embarked on several economic, legal, and social structural reforms in recent years that are aimed at strengthening the business landscape and attracting FDI. Some of these reforms also include the expansion of longer-term residency visas to broader categories of residents, wide-ranging changes to personal and labor laws, allowing 100 per cent foreign ownership of onshore companies and the recent decision to change the working
including our mature, award-winning Data & Analytics Solutions franchise. These global capabilities, supported by a global perspective given our standing as the world’s largest custodian, and complemented by our local Alliances with National champions, uniquely position us to bring to clients leading capabilities, with deep and entrenched local market knowledge and coverage.
How does BNY Mellon stay at the forefront of innovation?
The pandemic highlighted the key roles that technologies such as AI, blockchain and robotics will play in the GCC’s future. It bolstered the need for Industry 4.0 (advanced, connected manufacturing), enhanced the positions of the world’s major tech players in the GCC, and accelerated the impact of technology on how citizens live, work, and consume. Given the region’s vibrant fintech and innovation community, at BNY Mellon we are invested in innovation and consistently tap into new solutions and technologies that optimize client offerings.
Whilst very solution focused, our approach is very much centred on and around the regional transformation and aligning our interest and incentives with our partners. We recognise the core objective of our clients which often aligns with government policies on driving innovations. Our solutions are based on a growing well of data and expansive relationships, the extent of which are available to only the very largest global institutions. We couple these capabilities with the agility and innovation of a fintech, one with industry-leading technology already at its disposal. More importantly, we utilise our client-centric solutions to provide value to clients while collaborating with leading technology providers to support the vast needs of investment managers and bring the data to where people are making decisions.
For example, when we first went live with BNY Mellon OMNISM, our Open Architecture platform three years ago, we were virtually the only ones in the market pursuing this. Following the successes, we now see a sharp uptick, with more companies embracing the approach globally. We certainly expect the trend of collaborations and open architecture to continue. In fact, we ourselves are actively pursuing it in the region and collaborating with regional fintech organizations. We are proud to be helping deliver a future-ready market infrastructure in the GCC based upon a common data management platform that connects market participants.
Currently, one of the technologies we are developing involves prescriptive analytics. The difference between descriptive and prescriptive analytics can range from a sunk cost, with negative value, to a billion-dollar insight that drives a business. We contemplate which factors will most contribute to long-term client success through this lens. Using the power of data and analytics, we believe that by helping our clients succeed, we can create a world-class solution.
What do you find most satisfying and rewarding about heading a bank in this region?
I have had the pleasure of being in the region for well over a decade, and I continue to be impressed by regional government’s commitment to setting new benchmarks and driving innovation. The region has always aimed to meet global best practice standards, however, in the last couple years, we are witnessing a very different and unique trend emerging in the region, particularly the core constituents within the GCC. The Gulf countries are no longer looking to meet world standards, but instead setting their own benchmarks. The region’s diversification plans from fossil fuels and the pace of sweeping reforms that have been taking place are phenomenal and we expect see a higher growth and market activity. I am certain in the next 15 to 20 years it will be exciting to watch what the region accomplishes.
