It has a turbulent time for the world over 2024 and this has greatly affected markets and wealth management. How do you deal with geopolitical uncertainty when managing wealth?
Mashreq is one of the oldest banking firms in the Middle East and no stranger to managing difficult periods.
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PBI: How much of an impact have interest rates on private banking over the last year? Will this continue?
Vipul Kapur, head of private banking, Mashreq: Interest rates have profoundly influenced the strategies adopted by private banking clients over the past year. With rates at multi-decade highs, many clients have shifted their focus to locking in financial assets through bank deposits to capitalise on yields that have not been available for over a decade. For instance, UAE banks have reported an average fixed deposit yield of 4-5% in 2024, offering an attractive alternative for risk-averse investors.
On the lending side, clients have reassessed their exposure to leverage, particularly those with high levels of borrowing across their portfolios. We have observed a more conservative approach, with many proactively reducing their lending commitments to mitigate interest rate risks and ensure portfolio resilience in a dynamic market environment.
Looking ahead, while interest rates are expected to decline gradually in 2025, we anticipate that private banking clients will maintain a cautious approach. The focus will likely shift toward balancing traditional fixed-income investments with opportunities in alternative assets to optimise returns.
What other outside factors have this great an impact? How has the sector and Mashreq reacted?
The buoyant economic activity in the GCC, particularly in the UAE and Saudi Arabia, has had a transformative impact on the private banking sector. The UAE’s robust real estate market, and Saudi Arabia’s ambitious Vision 2030 initiatives have spurred a wave of new wealth creation. In parallel, the influx of high-net-worth individuals (HNWIs) relocating to the UAE has solidified the region’s position as a global wealth hub.
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By GlobalDataAt Mashreq, we have strategically positioned ourselves to seize these opportunities. Our initiatives include facilitating golden visas for eligible clients, a key enabler of residency and long-term commitment, alongside providing seamless digital onboarding to ensure efficiency and accessibility. These measures, combined with cutting-edge Investment services, reflect our dedication to meeting the evolving needs of our clientele in a rapidly changing landscape.
What are the most common conversations with clients in the GCC at the moment? Which are the most popular investments?
Private banking clients in the GCC are primarily focused on navigating a rapidly evolving market environment. Public markets have been exceptionally active, with GCC IPOs raised $1.7bn in Q3 2024, contributing to deepening market breadth and enhancing liquidity. Fixed-income issuance has also remained strong, with GCC Fixed Income markets witnessing $28.8bn in primary issuances during Q3 2024, making them a preferred choice for clients seeking steady returns.
We have also seen a surge in interest in private markets, particularly in private credit and private equity. This has been driven by global asset managers expanding their regional footprint and offering tailored opportunities. Real estate also remains a key area of focus, bolstered by the UAE’s resilient property market, where prime assets have shown significant growth.
Fixed income continues to be a cornerstone for many portfolios, particularly for those looking to balance risk and return. The elevated risk-free rate environment has made bonds across the credit spectrum particularly attractive for clients aiming to lock in secure yields.
What is the biggest opportunity and what is the biggest challenge right now?
The UAE’s evolution as a global financial centre represents one of the most significant opportunities for private banking. Historically, destinations like Switzerland, Singapore, and London were preferred for wealth management. However, the UAE’s favorable tax environment, advanced regulatory framework, and strong economic diversification initiatives have shifted global perceptions. In 2023, the UAE attracted $30.6bn in foreign direct investment (FDI), reflecting growing investor confidence in the region.
This presents an unparalleled opportunity for Mashreq to strengthen its position as a trusted partner for global clients, providing world-class wealth management services tailored to regional and international markets.
Nevertheless, geopolitical risks remain a key challenge. Increased tensions in certain parts of the world could impact investor sentiment and disrupt market stability. Our focus remains on proactively managing these uncertainties through robust risk assessment and transparent client communications, ensuring we continue to deliver value in any market environment.
