Bankers’ salaries surging amid hiring spree in Saudi Arabia

A pay boom in Saudi Arabia is driving a hiring spree among plentiful banking jobs and surging pay, even as most of the global financial community contends with layoffs and lower bonuses, reported Bloomberg on Wednesday.

Driven by the expansionist zeal of Crown Prince Mohammed Bin Salman, or MBS as the de facto ruler is known, cash from oil sales is driving the push towards turning the economy into a financial powerhouse.

State vehicles like his Public Investment Fund, with more than $600 billion of assets, are hiring at breakneck speed, often recruiting staff from foreign firms based in the country, added the report. Wall Street banks are also looking to expand, driven by the promise of deals linked to an outsized attempt at economic reform.

On the ground, however, restrictive social regulations are curbing quality hiring.

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Meanwhile, experienced local employees are also in short supply, fueling a further fight for talent and boosting salaries.

Recruiter Hays Plc estimates that most banking professionals in Saudi Arabia can earn roughly 20% more than their counterparts in Western financial centers. Those expat executives willing to relocate to the kingdom from neighbouring Dubai can ask for 20% to 35% extra, reported Bloomberg, quoting headhunting firm Mark Williams. Senior hires are able to command an even higher amount.

Saudi Arabia “is like China two decades ago,” added Carmen Haddad, Citigroup Inc.’s vice chairperson for the Middle East and country officer in the kingdom, quoted as saying by Bloomberg.

At the same time, the kingdom’s fast-paced economic reforms also bring “fresh challenges such as an ongoing battle for talent in the financial sector,” said Haddad, who helped to rebuild the bank’s presence after a 13-year hiatus.

The Saudi boost comes in a few ways. Vice president roles, typically a mid-level title for bankers in their 30s, carry an annual salary of $225,000 to $255,000 in Saudi Arabia, added Bloomberg, quoting a Hays survey.

That’s about 10% to 20% higher than London salaries at top banks for the same level, according to a 2022 Dartmouth Partners report. Bonuses are usually more than 100% of a banker’s salary in good years, added Bloomberg.

In addition, recruiters say that people with fewer years of experience can acquire a higher title and thus a higher salary than they would in bigger financial centers.

This is in addition to other perks along with no income taxes.

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But there’s a catch

MBS has emphasised that if international companies want to do business in the kingdom they need to have an on-the-ground presence.

A recent rule has also required firms to recruit a certain proportion of Saudi nationals. With many expats reluctant to make Saudi Arabia their home, locals believe they have more negotiating power.

Meanwhile, the PIF has been hiring and expanding rapidly as it invests to wean the country off its reliance on crude. It now employs about 2,000 people from just 40, about a decade ago.

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Most packages also include perks such as housing and school fees, flight tickets home, as well as a tax-free salary, meaning that expats moving to Saudi Arabia from countries such as the UK receive a huge boost.

In a bid to retain employees, foreign firms are having to try to match those packages or hire less-experienced local staff, people within the financial industry said.

To stay ahead, the PIF has been hiring staff from banks such as Goldman Sachs Group Inc. and HSBC Holdings Plc.

Saudi Arabia: a paradigm shift–II

Among the city’s financial community, the British lender — which employs about 200 investment bankers in kingdom — has become known as a “training center” for local bankers and officials, detailed Bloomberg.

The bank holds an annual alumni event in Riyadh, which has swelled as a rising number of local employees leave for top government jobs or more senior roles at rivals.

The churn of staff can give banks a network among their biggest clients, but it highlights some of the growing pains Saudi Arabia faces as it intensifies its efforts to diversify its economy. Global banks face a particular challenge when expanding in the kingdom: while they rely on deals from entities such at the PIF, those same state vehicles are complicating those growth plans.

“Saudi bankers are in high demand and so talent is scarce,” said Zaid Khaldi, regional co-CEO for Goldman Sachs, which has been boosting headcount and plans to move into bigger offices this year to expand further.

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Dubai shuttle

Many global banks such as Goldman and Citigroup only started to make a real push into Saudi Arabia in recent years as the kingdom embarked on an ambitious plan to diversify its economy by investing in new industries and selling stakes in state-owned companies such as oil giant Saudi Aramco.

For years, bankers and consultants preferred to shuttle between Dubai and the kingdom, taking the 2-hour flight to Riyadh.

With most of the United Arab Emirates recently shifting to a Monday to Friday work week, the commute isn’t as easy as it used to be and forces many bankers to work a six-day week.

To attract foreign workers for the long term, Saudi Arabia is taking steps to ease rules, such as those around strict dress codes, gender segregation and women driving.

But many foreigners are reluctant to move to a place that lacks the infrastructure, thriving social scene and availability of alcohol that make other global finance centers appealing.

Expats also regularly complain that Riyadh is a dull, desert city with little entertainment and little to do for kids.

Despite being offered attractive salary packages, many senior bankers prefer to stay in Dubai instead of moving their families permanently to Riyadh, added the report.

Some expats are also reluctant to move to an unpredictable, authoritarian nation that has often drawn criticism from human rights organizations for imprisoning even peaceful dissidents.

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While MBS has sought to place Saudi Arabia on the global stage, he’s struggled to shake off reputational fallouts from controversies like the murder of columnist Jamal Khashoggi and his 2017 purge when hundreds of powerful Saudis were arrested and rounded up at the Ritz Carlton.

“Becoming a trusted financial center will ultimately take time,” said Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute in Washington, was quoted as saying by Bloomberg.

“Financial institutions and professionals want to be confident that all of the reforms and economic decisions add up to a favorable socioeconomic environment over the long run.”

The kingdom has built a $10 billion business hub — lion business hub — the King Abdullah Financial District — in Riyadh, which is now showing signs of life after standing virtually empty for several years. The sprawling district houses Chinese tech behemoth Alibaba Group Holding Ltd. as well as a number of local banks. Goldman Sachs plans to move into the center later this year.

Still, outsized pay packages and the dearth of talent is keeping some investment firms away.

To be sure, not all expats land in Saudi Arabia with bumper packages, and for some the boost in income is mainly due to lower taxes in the country. Also, banks sometimes choose to promote staff already on the ground.

The Saudi government has signaled to international firms that they need to set up their regional headquarters in the kingdom by the beginning of next year or risk losing business, meaning that the fight for talent may only intensify. Many banks remain confused about how exactly the rules will apply to them.

Yet as they expand into the kingdom, foreign banks will be well aware that when they hire someone new “there’s always the risk they’ll lose that person,” Chris Cornwall, who co-founded Mark Williams, was quoted as saying.

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