Dubai loses status as haven for bankers
Dubai is no longer a haven for investment bankers. When heads started to roll last year in London and New York, the joke used to be: “Shanghai, Mumbai, Dubai or Bye-Bye.” Not anymore. Now, bloated investment banking teams sitting in some of the world’s most expensive office space look set for a downsizing.
In the past few years, Western banks have rushed to cash in on the Gulf petrodollar boom. Dubai’s tax-free status and relaxed attitude toward Islamic norms made it a natural destination for banks looking to set up regional headquarters. They expanded rapidly. Morgan Stanley and Citigroup, two of the largest teams, are each thought to have about 50 investment bankers in Dubai alone.
Yet the mega-fees have not materialized quite as expected. Finding advisory roles was always going to be tough in a region dominated by family-owned businesses and shallow public markets. But bankers also quickly realized that when it came to extracting cash from some of the world’s richest governments, mundane share-handling and asset management were the real money-spinners.
An overcapacity of bankers has made the problem worse. Desperate to get a foot into the few deals there are, banks have aggressively bid for mandates. Insiders say it is now common for initial public offerings to be managed at cost, and deals brokered for free. The hope is that such tactics would redeem themselves by bringing profitable business to other parts. Yet that’s difficult to measure.
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