Full circle

The suitcase investment banker is returning to Dubai. The Gulf financial hub has witnessed an exodus of top talent as big international investment banks return to their pre-boom business model of flying in top advisers from London or Paris only when they are needed. With the global economic crisis and the Arab spring taking a toll on fees, it’s a necessary but risky adjustment.

Nomura is the latest bank reviewing options for its Middle East M&A unit, according to a person familiar with the situation. Credit Agricole has already decided to run its regional M&A operations from Paris. Meanwhile, Deutsche Bank and Citi are relocating their top Gulf equity capital markets bankers, Christopher Laing and Adam Key, to London. The shift allows bankers to keep busy elsewhere at a time when there’s little going on in the region. Fees in the Middle East have been abysmal, totalling just $317 million during the first nine months of 2011, according to Thomson Reuters. That’s a 35 percent decline from the same period in 2010 and less than a quarter of the 2007 peak. While the Gulf continues to try and build up financial centres in Qatar, Abu Dhabi and Dubai, it is barely generating enough activity to support one big hub, let alone three.

Most of the banks that are sticking around are relying on a senior banker or a handful of multi-skilled advisers to chase the region’s most powerful clients. That makes sense: the four biggest M&A deals in the region this year were led by government controlled entities in the UAE and Qatar. Moreover, three of those transactions targeted assets beyond the Middle East, making it even less important to have bankers based permanently in the region. The suitcase banking model can be made to work: Goldman Sachs has a successful Middle Eastern business, despite appearing to have fewer senior people on the ground. As government investors become more sophisticated, the pressure on banks to show commitment by locating top employees in the region has also eased. But for banks that lack the strong relationships to maintain a successful business in West Asia, the switch to suitcase banking might just be another phrase for retreat.