In early March 2008, HSBC announced that its UAE brokerage arm, HSBC Middle East Securities (HMES), had received a license from the Emirates Securities and Commodities Authority (ESCA) to operate as a broker on the UAE’s bourses and that it would start trading within the same month.
Executive met with Keith Bradley, HSBC’s Regional Head of Commercial Banking, and Charles P. Hall, CEO of the bank’s Lebanon Head Office, to talk about this new step and the HSBC’s strategy.
E What value-added does this license as a broker in the UAE bring to HSBC?
Bradley: It gives us presence and allows us to offer a range of services. There is a surge of investment in the GCC and so far trading had to be done through third parties, so we decided to eliminate the middleman and go directly onto the floor.
E Why the UAE? Why not Kuwait or Oman or Saudi Arabia?
Bradley: Most of the business is done in Abu Dhabi and Dubai. Of course, should large volumes develop elsewhere, say in Kuwait, then sometime in the future we might also think of other bourses.
E What do you think of Abu Dhabi having its own Securities Market now? Does the UAE need another one?
Bradley: One of the strengths of the Gulf is innovation. Also there is a keenness for competition, and this in turn will fuel innovation and enhance quality. I did my degree in history, and studied the renaissance period in Italy, where many city states competed with each other and in so doing created a tremendously innovative culture. Today, I see something similar in the Gulf.
E With the advent of the WTO regionally, banks are consolidating and preparing themselves for fierce competition. How do you foresee HSBC’s strategy after lifting foreign bank restrictions and you can be as aggressive as you want to be?
Bradley: Of course, we would like to open faster, and thus after WTO we’ll accelerate development.
Hall: Lebanon is at the forefront of liberalization. Next we want to go into insurance and once we do, we’ll be a major player.
E What type of banking are you looking to develop — corporate, private, retail?
Bradley: We are very committed to a variety of business streams. Corporate and private banking is now so intertwined that it is hard to see them as entirely separate sectors.
E With the liquidity and opportunities in the region, there’s also risk from political developments. How do you perceive the risk and how do you protect yourself?
Bradley: We’re committed to the region and we’re committed to Lebanon. During the 2006 War in Lebanon the bank stayed open. Even during the Lebanese Civil War we did not close. Like every other financial institution, we have a Business Recovery Plan and a Business Continuity Plan. Because we operate in emerging markets, we have experience with political risk and backup sites.
E Looking at your Lebanon profile, would you say that HSBC is for wealthy people?
Bradley: There is a differentiation of services. Local banks have more branches, larger geographical penetration, and thus are better set up for low-end retail. For historical and risk reasons we do not have the market share. Also, we are not allowed to invest in government eurobonds, and so we cannot subsidize lending. Our split is about 25% corporate and 75% personal banking.
Hall: We are very specific in targeting customers. For example, we provide them with an Internet cash-supporting system, where customers who go regional can monitor cash-flow and everything else from abroad.
E Do you have any plans to limit your presence in Lebanon?
Bradley: HSBC is very committed to the Middle East. At the Group level, the Middle East will be a key market for the next ten years. For the first time, accumulated wealth is invested locally. The main developments are in the private sector, and HSBC is traditionally a private sector bank … And at HSBC, we have the best footprint in the region, having been present and involved in the Middle East for over half a century – in Lebanon since 1946 – and thus know the region and have long-lasting and deep relationships.
Hall: I can categorically reassure you that HSBC is staying in Lebanon. Indeed, we are opening a new branch. We are the biggest player in motor finance and one of the biggest in housing.
