UBS is further extending its wealth management reach by setting up operations in Saudi Arabia. While instability in the kingdom may continue to be a problem, it remains an important wealth management market, and the complementary investment banking and asset management businesses envisioned by the group will provide a sound basis for building its wealth management operations in the region.
UBS is expanding its footprint in the Middle East, where it has operated for more than 40 years, having received conditional approval to set up wealth management, asset management and investment banking operations in the Kingdom of Saudi Arabia. The group's announcement coincides with its application to the Qatar Financial Centre Regulatory Authority for a license to open and operate a branch in the Qatar Financial Centre, and complements its existing on-the-ground wealth management operations in the UAE (Abu Dhabi and Dubai), Bahrain (from which it also serves clients in Kuwait), Lebanon, Israel and Egypt.
No doubt the dramatic wealth accumulation enjoyed by the oil states was partly responsible for UBS's decision to commit more fully to Saudi Arabia, and the group's plan to build its business in the region should be successful, providing that its focus is on the local population rather than on expatriates. Indeed, terrorist attacks on Westerners in the past few years have caused instability and shifted the expatriate population in the country, which accounts for the majority of workers in Saudi Arabia (over three million). Furthermore, as most expatriates in the kingdom do not stay on a long-term basis, they form a transient customer base (although expatriates may stay with the bank when they move to another country).
The local population, however, should present more than enough opportunities for UBS. According to Datamonitor's Global Wealth Model, in 2007, there were nearly 20,000 residents with onshore liquid assets of at least $1 million. These residents held $58 billion onshore between them. This compares to less than 4,000 high net worth expatriates in the kingdom (according to Datamonitor's Expatriates study in 2007).
UBS's extensive operations in Switzerland (and several other offshore centers) will also give it the chance to effectively manage these residents' offshore wealth, which is substantial. Furthermore, its intent to link wealth management with asset management and investment banking in the kingdom should provide referral opportunities for clients between the businesses, providing UBS with the opportunity to extend its share of wallet from wealth management to business banking and vice versa.