Citigroup Inc's private banking unit expects to be managing about $40 billion on behalf of wealthy Gulf Arabs within five years as it expands into Saudi Arabia and Kuwait, a senior regional executive said on November 28.
Gulf investors, having ridden a wave of economic growth driven by a tripling of oil prices since 2001, are looking for new ways to invest, particularly in Asia, said Akbar Shah, Citigroup's head of global wealth management for the Middle East.
Citigroup Private Bank expects the assets it manages of clients in the world's top oil-exporting region to grow by about 25 percent a year, Shah told Reuters.
"A reasonable target over the next five years could be about $40 billion in assets under management in the (Gulf)," he said, declining to specify how much the bank manages just in the Gulf region.
"The wealthy are getting even wealthier, so you are talking about exponential growth. We're preparing for a huge boost in our business," he said.
Citigroup Private Bank manages $80 billion in private wealth in Asia and the Middle East, home to nearly a quarter of its 25,000 global clients, Shah said.
In 2005, there were 300,000 dollar millionaires with $1.2 trillion in wealth in the Middle East, up 19 percent over the previous year, according to the 2006 World Wealth Report, compiled by Merrill Lynch and Capgemini.
Gulf investors, who account for the bulk of this growth, are beginning to move away from traditional investments in Europe and North American into Asia as their appetite for risk increases.
"I think Asia is becoming far more popular," Shah said.
A growing number of Citigroup's regional private banking clients, who must have at least $5 million in income for investment, are putting more money into fixed income, equities, currencies, hedge funds, private equity and real estate finance in Asia, he said.
"European investments in general have been yield driven - but Asia now is more of a capital appreciation play. The yields are lower but the capital appreciation is so fast - there is interest in that," Shah said.
Key to the private bank's growth will be Saudi Arabia, the world's biggest oil exporter, which Citigroup quit in 2004, when it sold its 20 percent stake in Samba Financial Group.
Citigroup, in which Saudi billionaire Prince Alwaleed is the largest single shareholder, is in talks to set up in Saudi Arabia, Shah said, declining to be more specific.
About 20 percent of the private bank's regional clients are Saudi - a number that could grow significantly if the bank had an operation on the ground, he said.
"Saudi is home to 23 million people. It has huge, deep pockets," Shah said. "Today clients want to invest locally - they need a local platform."
The private bank also expects to get a license to operate in Kuwait in 2007 and already has a branches in Abu Dhabi and Bahrain.