November 30, 2023

Investment Banking

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Banker Pay Surges For Those Willing to Work in Saudi Arabia

(Bloomberg) — Even as the global financial community contends with layoffs and lower bonuses, banking jobs remain plentiful and salaries are surging in one unexpected corner of the world: Saudi Arabia.

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It’s a pay boom driven by the expansionist zeal of Crown Prince Mohammed Bin Salman who is flush with cash from oil sales and determined to make the economy a financial powerhouse. State vehicles like his Public Investment Fund, with more than $600 billion of assets, are hiring at breakneck speed, often recruiting staff from foreign firms based in the country. Wall Street banks are also desperate to expand, drawn by the promise of deals linked to an outsized attempt at economic reform.

But on the ground, hiring is proving to be a challenge. While MBS, as the de facto ruler is known, has eased many social regulations, alcohol is still banned and extramarital relations and homosexuality remain punishable as ‘moral crimes.’ The severe rules and the prospect of a monotonous lifestyle in Riyadh often make expats reluctant to move. Meanwhile, experienced local employees are in short supply. That’s fueling a fight for talent and boosting salaries, bankers and headhunters say.

Recruiter Hays Plc estimates that most banking professionals in Saudi Arabia can earn roughly 20% more than their counterparts in Western financial centers. Those expat executives willing to relocate to the kingdom from neighboring Dubai can ask for 20% to 35% extra, according to headhunting firm Mark Williams. Senior hires are able to command even higher amount.

Saudi Arabia “is like China two decades ago,” said Carmen Haddad, Citigroup Inc.’s vice chairperson for the Middle East and country officer in the kingdom. At the same time, the kingdom’s fast-paced economic reforms also bring “fresh challenges such as an ongoing battle for talent in the financial sector,” said Haddad, who helped to rebuild the bank’s presence after a 13-year absence.

The Saudi boost comes in a few ways. Vice president roles, typically a mid-level title for bankers in their 30s, carry an annual salary of $225,000 to $255,000 in Saudi Arabia, according to a Hays survey. That’s about 10% to 20% higher than London salaries at top banks for the same level, according to a 2022 Dartmouth Partners report. Bonuses are usually more than 100% of a banker’s salary in good years.

In addition, recruiters say that people with fewer years of experience can nab a higher title and thus a higher salary than they would in bigger financial centers, and employees in Saudi take home more through various perks and no income taxes.

Highest Paid

MBS has emphasized that if international companies want to do business in the kingdom they need to have an on-the-ground presence. A recent rule also requires firms to recruit a certain proportion of Saudis. With many expats reluctant to make Saudi Arabia their home, locals believe they have particularly high negotiating power.

Senior executives at two international investment banks said they recently rejected Saudi candidates who had asked for salaries that would have made them some of the highest-paid employees at those firms globally.

Meanwhile, the PIF has been hiring and expanding rapidly as it invests to wean the country off its reliance on crude. It now employs about 2,000 people from just 40 about a decade ago.

The sovereign fund has been tempting some potential employees with a 30% hike over existing salaries, according to people with knowledge of the matter. Increases were sometimes previously even higher, but the fund has in recent instances used 30% as an informal cap to stop packages from getting out of hand, according to the people, who asked not to be named discussing information that isn’t public.

Most packages also include perks such as housing and school fees, flight tickets home, as well a tax-free salary, meaning that expats moving to Saudi Arabia from countries such as the UK receive a huge boost.

In a bid to retain employees, foreign firms are having to try to match those packages or hire less-experienced local staff, people within the financial industry said.

HSBC Alumni

To stay ahead, the PIF has been hiring staff from banks such as Goldman Sachs Group Inc. and HSBC Holdings Plc.

Among the city’s financial community, the British lender — which employs about 200 investment bankers in kingdom — has become known as a “training center” for local bankers and officials, according to one senior executive who asked not to be identified.

The bank holds an annual alumni event in Riyadh, which has swelled as a rising number of local employees leave for top government jobs or more senior roles at rivals.

Among the Saudi nationals who have made big moves are Abdullah Shaker and Fahad Al Saif, who joined the PIF in senior positions and had previous stints at HSBC. The PIF’s governor Yasir Al-Rumayyan himself joined the fund from the investment banking unit of Banque Saudi Fransi that until recently was backed by Credit Agricole SA.

The churn of staff can give banks a network among their biggest clients, but it highlights some of the growing pains Saudi Arabia faces as it intensifies its efforts to diversify its economy. Global banks face a particular challenge when expanding in the kingdom: while they rely on deals from entities such at the PIF, those same state vehicles are complicating those growth plans.

Another local, Eyas AlDossari, had stints at Goldman Sachs and HSBC before joining the fund.

“Saudi bankers are in high demand and so talent is scarce,” said Zaid Khaldi, regional co-CEO for Goldman Sachs, which has been boosting headcount and plans to move into bigger offices this year to expand further.

Representatives for the PIF and HSBC declined to comment.

Dubai Shuttle

Many global banks such as Goldman and Citigroup only started to make a real push into Saudi Arabia in recent years as the kingdom embarked on an ambitious plan to diversify its economy by investing in new industries and selling stakes in state-owned companies such as oil giant Saudi Aramco.

For years, bankers and consultants preferred to shuttle between Dubai and the kingdom, taking the 2-hour flight to Riyadh on a Sunday morning and returning on a Thursday evening. With most of the United Arab Emirates recently shifting to a Monday to Friday work week, the commute isn’t as easy as it used to be and forces many bankers to work a six-day week.

To attract foreign workers for the long term, Saudi Arabia is taking steps to ease rules, such as those around strict dress codes, gender segregation and women driving. But many foreigners are reluctant to move to a place that lacks the infrastructure, thriving social scene and availability of alcohol that make other global finance centers appealing. Expats also regularly complain that Riyadh is a dull, desert city with little entertainment and little to do for kids.

Despite being offered attractive salary packages, many senior bankers prefer to stay in Dubai instead of moving their families permanently to Riyadh, according to several senior executives who asked not to be named. One Dubai-based Credit Suisse Group AG banker, who asked not to be identified, said they rejected an offer from the PIF just days after the UBS Group AG deal was brokered because of the Saudi lifestyle.

Some expats are also reluctant to move to an unpredictable, authoritarian nation that has often drawn criticism from human rights organizations for imprisoning even peaceful dissidents.

While MBS has sought to place Saudi Arabia on the global stage, he’s struggled to shake off reputational fallouts from controversies like the murder of columnist Jamal Khashoggi and his 2017 purge when hundreds of powerful Saudis were arrested and rounded up at the Ritz Carlton.

“Becoming a trusted financial center will ultimately take time,” said Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington. “Financial institutions and professionals want to be confident that all of the reforms and economic decisions add up to a favorable socioeconomic environment over the long run.”

The kingdom has built a $10 billion business hub — the King Abdullah Financial District — in Riyadh, which is finally showing signs of life after standing virtually empty for several years. The sprawling district north of the capital has a skyscraper-studded skyline. Chinese tech behemoth Alibaba Group Holding Ltd. has offices there, as well as a number of local banks. Goldman Sachs plans to move into the center later this year.

Still, outsized pay packages and the dearth of talent is keeping some investment firms away. One major private equity fund plans to set up its regional base in Doha or Abu Dhabi – despite coming under pressure from the Saudi government to open in Riyadh – because the costs are too high, according to its top executive in the region.

One Dubai-based boutique advisory will keep its headquarters in the city, even though it’s winning more business in Saudi Arabia, because the costs for local staff are restrictive, its managing director said.

‘Saudization’

To be sure, not all expats land in Saudi Arabia with bumper packages, and for some the boost in income is mainly due to lower taxes in the country. Also, banks sometimes choose to promote staff already on the ground.

Morgan Stanley elevated its Saudi Arabia chief executive officer, Abdulaziz AlAjaji, to joint regional head of its Middle East and North Africa business, replacing a Dubai-based veteran at the US bank.

Lazard Ltd. recently appointed Sarah Al Suhaimi — one of the kingdom’s most seasoned female bankers — to lead its Middle East and North Africa advisory business out of Riyadh. It also plans to make the Saudi capital its regional base, making it the first global bank headquartered out of the kingdom.

Other banks may be soon left with little choice on whether to make the move. The Saudi government has signaled to international firms that they need to set up their regional headquarters in the kingdom by the beginning of next year or risk losing business, meaning that the fight for talent may only intensify. Many banks remain confused about how exactly the rules will apply to them.

Yet as they expand into the kingdom, foreign banks will be well aware that when they hire someone new “there’s always the risk they’ll lose that person,” said Chris Cornwall who co-founded Mark Williams. “There’s a general acceptance and everyone knows it, if you’re good it’s just a matter of time. Saudization is part of life.”

–With assistance from Fahad Abuljadayel.

(Updates with added details on salary comparisons)

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