Following PBI analysis on Islamic finance and a country survey on the UAE, Valentina Romeo interviews Steve Troop, CEO of Qatar-headquartered Barwa Bank, to find out how the debut of the private banking division has been and how the bank is set to satisfy highly demanding clients.
Formed two years ago, Barwa Bank’s private banking division has witnessed a rapid development in the last year, experiencing a seven-fold growth of its assets under management (AuM).
Go deeper with GlobalData
With Islamic banking in Qatar and the GCC region continuing to develop, the youngest and supposedly fastest-growing sharia-compliant bank looks well positioned to lead the trend.
British-born Steve Troop, who was brought in to kick start the business back in 2010, talks to Private Banker International in an exclusive Q&A.
How successful has the launch of the private arm at Barwa Bank been?
How well do you really know your competitors?
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By GlobalDataThe Bank’s Private Banking (PB) division commenced operations in the last quarter of 2011. Our formal launch event occurred a year later with a unique function at the Museum of Islamic Art in Doha. Held jointly with Asprey of London, the event raised QAR 700,000 through a charity auction of coloured diamonds, with Barwa Bank being the first corporate donor to Qatar Foundation’s Educate-a-Child initiative.
Over the last two years, the rationale for setting up our PB division has proven correct. We now have a class of valuable clients that the Bank would not have attracted, had the PB division not been in place.
What challenges have you had? And what are your future expectations in terms of AuM growth?
This is, above all else, relationship driven market, where it takes time to build profile and deepen relationships with Private Banking clients, all of whom have existing banking relationships. Being the newest bank has meant that we have needed to be flexible and innovative in attracting these clients.
In a booming commercial environment where clients expect – and usually achieve – more than 15% net return from their businesses and local investments, the benchmarks and expectations tend to be higher.
How do you see your group in the region and amongst your competitors?
The Barwa Bank Group is rather unusual in Qatar in that it can draw upon the expertise and capabilities of a wholly-owned investment bank subsidiary, professional asset managers and a sophisticated treasury division, capability that is reflected our breadth of product, proposition and opportunity.
We are an Islamic bank group and all are activities are shariah-compliant.
A particular area of focus is in the provision of exclusive investment proposition: our investment banking subsidiary, The First Investor, has particular expertise in the creation of private closed-end funds, usually associated with income-generating real estate. Good examples would be our UK fund focused upon logistical & warehousing opportunities and a Qatar-focused fund that is building private fee-paying schools.
In addition, we aim to launch our first structured, equity-linked note – "manufactured" in-house – later this year.
How many staff do you have in the private division? Are you planning to hire new talent?
We are currently a team of 6 professionals and we always happy to identify and bring on board new talent based on the business needs and requirements.
What is the current HNWI size in Qatar?
Based on leading market studies, research reports and our own market intelligence, Qatar has an estimated 5000 dollar millionaires and 300 UHNWIs (with over USD 30m in investable assets).
Qatar’s wealth is highly concentrated. It is estimated that Qatari nationals – who represent less than 20% of the population – hold almost 90% of investible assets. Even amongst Qatari nationals, asset concentration is high. Long-established Qatari families hold more than half of all investable assets.
From which geographical regions are you seeing the most clients?
More than 90% of the PB client base is Qatari. Their needs/demands are wide ranging, and include deposit & account services, asset management & custody and investment: leveraging/ financing of opportunities – locally and internationally – is also an important component.
What are the core investment trends in the region? Can you tell more about sukuk transactions?
Income-generating opportunities are of genuine client interest at present and can be met through sukuk or real-estate based investment. In addition, Gulf equities are seeing increased interest as confidence returns across the region. Profits (and dividend flow) from regional companies are expected to remain high, with continued government spending.
The Sukuk market will continue to attract interest from issuers and investors. Barwa Bank has recently launched a sukuk custody service, to complement its origination activity in the Islamic Capital markets, a service well received by PB clients.
And what about alternative investments? And is most asset allocation onshore or offshore?
A large proportion of alternative investments structures based on commonly used derivatives are non-shariah compliant and, as such, we do not offer them to our PB clients. However, PB in conjunction with the Bank’s structuring teams are exploring and developing innovative capital protected structures. PB AUM assets are currently split evenly between regional and offshore assets.
Qatar has seen the highest growth rate in Islamic banking markets within the Middle East. What are the future prospects for Islamic finance in this region?
We believe that the market for PB services to shariah-sensitive HNWIs and UHNWIs is under-serviced and represents significant opportunity in both Qatar and the region though the development of suitable products that match customers’ expectations is a particular challenge.
We also believe that products which have been successfully structured, within the framework of the restrictions and cautious approach inherent in Islamic Banking will resonate across the market, beyond Shariah sensitive clients.
What are the main advantages Barwa Bank has for local clients compared to international players?
For legal and regulatory reasons, there are services that only local institutions can effectively deliver: examples include legal charges on property and financing against locally held investments.
From a business point of view, both the in-depth market reach and the ability to respond quickly to a client’s Qatar/regional needs, is an advantage local institutions enjoy over the International private banks.
Local and international private banks/wealth managers have different strengths and generally cater to different client needs. However, as local/regional institutions partner with specialist service providers, the gap in services provided when compared to their international counterparts, is narrowing.
In a domestic context, we turn our relative size to our advantage: as a "small" bank we have a flat hierarchy, readily accessible top management and make decisions quickly. Whilst a local bank with genuine insight to Qatar, we are also internationally-minded: our senior management team is a judicious mix of both experienced Qatari nationals and seasoned international expatriates. Both dimensions – responsiveness and internationalism – are valued by our PB clientele.
Already the bank has performed well in its short existence. Tell me more about your future plans to drive the business forward?
Barwa Bank’s primary objective is the maximization of the opportunities presented by one of the most dynamic economies in the region (and indeed the world.) At the same time, and with our eyes on the medium-term horizon, we are evaluating a number of different overseas possibilities and, clearly, the needs and requirements of our PB clients will feature strongly in those deliberations.
