If you think you have a hard time in the bank in New York or London, then you should probably know that things could be worse: you could work as a banker in Saudi Arabia.
Banks have built their Saudi offices. This month Goldman Sachs hired Omar Al-Zaim, executive director of Citi at the head of the investment bank for Saudi Arabia. He replaces Eyas AlDossari, party for the local sovereign fund.
If you look beyond the lack of alcohol, the lack of female empowerment, and the apparent state-mandated murder of journalists, Saudi Arabia theoretically has some advantages for bankers. The Saudi government is privatizing assets it hopes will raise 55 billion dollars and embarked on a new privatization regime in July 2021. Western banks are already playing a role: Moelis & Co. is working with Saudi Aramco to develop a strategy to sell stakes in its subsidiaries, for example.
The activity is fueling hiring demand, but bankers who think there is money to be made in Saudi Arabia should be disappointed: Saudi customers aren’t paying.
Bloomberg reports that Saudi customers have long paid a fraction of the fees accepted by customers elsewhere. When HSBC worked on the Kingdom’s largest bank’s $ 6 billion IPO in 2014, for example, it only earned $ 6.7 million in fees, or 0.1% of the offer size. Likewise, banks working on the current IPO of Saudi Telecom’s internet services unit (including HSBC and Morgan Stanley) only share $ 12 million in fees, or 1.3% of the value of supply, despite attracting $ 125 billion in orders.
In the United States and Europe, by comparison, IPO fees are closer to 5% of the trade value. If you want to work extremely hard for relatively little money in a country where you can be whipped for drinking alcohol, the opportunity is here.
Separately, as Evergrande’s funding problems spill over into the market, think about its employees. The New York Times notes that the Chinese real estate developer had the good idea to force them to take skin in the game, and they appear to have been flogged now that the game has turned sour.
Evergrande employees had little choice to invest in their employers. Earlier this year, they were reportedly told that if they wanted to keep their bonuses, they would have to give Evergrande short-term loans. These loans are no longer being repaid and employees have been seen congregating in the Evergrande offices, shouting things like: “Evergrande, give back my money that I earned with blood and sweat!” As a bank stocks fall on Evergrande’s fears, bankers who have deferred equity premiums could try the same technique.
During this time…
Evergrande would have been trying to pay off some of his creditors with unfinished apartments or parking lots in his developments. (The temperature)
The real estate and construction sectors represent 29% of Chinese GDP. “A A 20% drop in real estate activity could lead to a 5-10% drop in GDP, even without the amplification of a banking crisis or without taking into account the importance of real estate as collateral. (AFR)
Evergrande must more than 800 billion yuan (124 billion dollars) due within one year, but only has one-tenth of that amount in cash. (Caixinglobal)
Shanghai-based developer Sinic Holdings Group Co. halted trading after its shares collapsed 87%. “It’s the same story as everywhere else – investors are concerned about liquidity.” (Bloomberg)
But Evergrande-inspired volatility could be good for banks’ business divisions. (Bloomberg)
UK City Minister John Glen said the EU’s bonus cap was under review, but there were no plans to announce any changes imminently. (Financial news)
Stripe plans to hire “dozens” of new employees in the UK ahead of its IPO. (Bloomberg)
Element Capital has hired Gertjan Vlieghe as Chief Economist. Until last month, Vlieghe was a member of the Bank of England’s Monetary Policy Committee. (Financial Times)
Minority banks like Samuel A. Ramirez & Co (Hispanic), AmeriVet Securities (owned by black and disabled veterans), Siebert Williams Shank & Co (owned by black and women) and Seelaus (owned by women) win more contracts as ESG-minded investors are pushing for diversity among financial advisers. (Yahoo)
Vaccinated British bankers will return to New York. (WSJ)
Described as “a strange, strange boy,” Peter Thiel (“Thin, dyspeptic and humorless “) appears to have been bullied at Stanford. (NYMag)