Makram Azar

Chairman of Banking EMEA and chairman of Barclays Bank PLC, MENA.

E   Where do you think the next economic bubble is?

It’s the broadly defined technology sector, in which you need to differentiate how you approach and analyze each one of these ventures because some of them will be very successful – as the 90s showed us with Amazon, Google, Apple, etc. – yet, many of them will not be successful. So with experience you learn how to do due diligence on companies, but I think there are certain aspects or segments of the technology and media sector that people are excited about today that you have to analyze very carefully.

E   What are the big changes you have noticed since the crisis in the banking industry?

There have been many changes in the banking industry … [it] is in a much better place now, from a regulatory and compliance standpoint. I think, from a deal-making standpoint, there was obviously more excitement for leverage before the crisis that has come down a little bit, though we are seeing some improvements in these levels over the last couple of years. However, in terms of mergers and acquisitions (M&A), the activity and deal-making is back to the levels we had reached before the 2008 crisis, and one can observe many large transactions that have been announced over the last few months on both sides of the Atlantic. Therefore, I think M&A is back, and the backdrop is relatively healthy at the moment, but with the uncertainty recently created in elections around the world, there has been a bit of caution, so we will see what happens next.

E   If we turn to the United States, President Trump’s economic agenda now seems a little bit uncertain given what happened with the healthcare bill. Do you think there will be a major, or even a small setback with the tax reform, given the divisions that exist in the Republican Party?

I don’t have a crystal ball, but I don’t think the same would apply to taxes [as] usually the Republican side is in favor of reducing taxes. They will therefore probably be less resistant than on the healthcare reform. On the tax side and deregulation, I expect those to go through. We are, however, still in the early days of the new administration.

E   With regard to the UK, now that Article 50 has been triggered, what do you think will be the downside for the country?

The British Pound has already taken a hit following the referendum, so I don’t expect much more pressure there – it even reached levels under 1.20 against the [US] dollar on the cable – and now we are back to a better level. But, I believe it is a double-edged sword, as the low currency makes investments in the UK, as well as exports, more attractive – it works both ways. Moreover, following the referendum, the expectations were for a much more negative economic performance, but the reality surprised everyone. In fact, there has been a lot of resilience in the UK economy following the Brexit referendum and the decline in the pound. The next couple of years will probably provide some uncertainty now that Article 50 has been triggered, and uncertainty is never really good for investments or for people with a long-term view, given that they need to have visibility. It is, however, in the benefit of both the UK and the rest of the European Union to agree to a good deal, because the EU also benefits from the UK. If you look around this neighborhood, whether Belgravia, South Kensington or London more broadly, there are many Europeans that live here and work in the City, so the UK should be able to negotiate a reasonable deal that is beneficial to both parties – as Prime Minister [Theresa] May has mentioned several times. I, however, believe that it will take time to have that visibility, and it will also depend on the elections in France, Germany and other countries that are important for the European Union, and on the [upcoming] negotiations. So, it’s [too] early to say. However, we have seen, through the recent announcements from the Qatari delegation, billions of pounds [worth] of investment in the UK, irrespective of Brexit, and the same was announced by other countries from the Gulf over the last months. The UK has a long history of being a good trading partner for many regions around the world, not only for Europe. I strongly believe that given the importance of the City of London – not only as a financial center for the rest of Europe, but also as the deepest pool of capital in Europe – it’s in the benefit of both [the EU and the UK] to reach a good deal, and I think the worst case scenario, as Prime Minister May has mentioned, is no deal, instead of a bad deal.

E   You just mentioned that politics will continue to be at the fore in Europe, so what do you think is the next shock in Europe? A Frexit, with France leaving the EU?

Well, that would be a big one, but nothing is surprising anymore. I think the fact that there are two rounds in French elections, unlike the referendum in the UK, or the elections in the US, make it harder for Mme [Marine] Le Pen to be elected in the second round on May 7. But, we’ve been surprised before, both by Brexit and the US elections. It’s hard to predict, but Germany and France are at the core of Europe, so obviously if one of the two goes, it would be a big blow to the concept of Europe.

 The Dutch elections showed a new turn in the populist movement in Europe, and the next big test will be in France 

E   So, where do you think we will be in December 2017?

Ha! I learned a long time ago not to make such predictions because I was actually in Davos – where I go every year – in January 2008 with all the big CEOs of the Wall Street banks, alongside the private equity firms, and we all saw what happened less than a year after that. When I went back in January 2009, many of those CEOs had lost their jobs. So, it is hard to predict what could happen in less than a year from now. All the more so, 2016 was another lesson; it was very hard to predict the black swans that were Brexit and Donald Trump in the White House. Nevertheless, I’m cautiously optimistic. The Dutch elections showed a new turn in the populist movement in Europe, and the next big test will be in France. If the French elections go as planned, there will be less to worry about. Moreover, on the US side, at least from an economic standpoint, [things] are going well, so on that basis I am cautiously optimistic for the rest of the year.

E   Based on that, do you still think the euro will still be around in 10 years?

Well, if I cannot predict one year, it’s hard for me to predict 10! But it really depends on the French elections, so we will find out soon.

E   You are originally from Lebanon, if you were the Lebanese president what would be the first thing you would do?

I left Lebanon a long time ago, but I still take a vested interest in its politics and future direction. It’s obviously a tough question, and I think it would take a lot of political headache to achieve, but I strongly believe that if we can overcome the religious fragmentation in Lebanon, it would be a great achievement – so, any move in that direction would benefit the country and would benefit the region because more religious tension can only lead to conflicts, pressures and obstacles.

E   How attractive do you think it currently is to have deposits in Lebanon?

For a Lebanese person it is very attractive because they get a very attractive return on their deposits, even in dollar terms, much more so than what they can get outside the country. It is a timely thing that you mention, but in the context of Barclays [and Eurobonds], we raised $3 billion in the last [few] weeks for the Republic of Lebanon, which is a record amount of capital raised for the country in a series of transactions, as there were three tranches. We saw demand of over $17.5 billion for the $3 billion that we closed on, so it was almost six times oversubscribed. Interestingly, a lot of the demand came from Lebanon, obviously, but a record level of demand came from international investors, much more so than at any point in the past. This also highlights that Lebanon has become increasingly attractive as a destination for foreign investors, which is a good thing to see in the context of Lebanon, given what is going on in the Levant.  It’s a positive indication of the direction of travel that Lebanon is taking, particularly after the recent election of the president and the more peaceful arrangement that the parties have reached – all the more since the economy is on a better track now as well. So, to answer your question, deposits are attractive for both Lebanese investors and foreign investors.

E   Are deposits/Eurobonds the least risky investments in Lebanon, appreciating the level of political risk in the country?

I believe the components are very linked, in Lebanon in particular. Given the interconnection between the central bank and the Lebanese banks themselves being the main buyer of sovereign paper and the bonds, I think the three components are very well linked to each other.  So, I don’t think it is very risky to invest in deposits in banks because those are very well regulated by the central bank, and have been for a very long time, and in turn, I think the Lebanese banks support the government in their bond issuance, so the three components are there to safeguard the security of the investments of investors and depositors.

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