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Right place, right time

Youssef A Nasr took over as CEO of HSBC Bank Middle East on June 1 this year. In his 32nd year with HSBC, Nasr’s career spanned New York City, London, Paris, Toronto, Vancouver, Sao Paulo and now Dubai. All set for the challenges ahead of him, Nasr speaks to Mohana Prabhakar in an exclusive interview

How has it been all these years with HSBC?
Great, because if you look at how the group has grown both in terms of geographic footprints and size and the businesses we have been involved in, there's been a great variety. Thirty one years doing the exactly the same thing might have got a little tedious but 31 years with this kind of change in countries, change in functional responsibilities, getting exposed to new things and seeing the group rise from being a medium-sized regional bank to being one of the leaders in the global banking industry has been very satisfying.

Where did you join HSBC?
In New York City. I went to do my university studies in the UK and I graduated a month after the civil war started in Lebanon. I was very fortunate in that my father could see that this was going to be a very protracted affair. He called me and suggested that I better not come back and rather get started on my career as he assumed it was going to be a while before anything became available in Lebanon. So I moved to the US and joined the bank.

Is this the first time that someone of Arab origin has been the CEO of HSBC Middle East?
Yes. But it is more coincidental than anything else. I have been CEO of a Canadian operation, as well as US and South American operations.

Is this a positive or negative in any way?
It's too early to say, but I think it's a positive on balance. Again, it's something where I think you'll have to be careful about having a person come in who has had experience elsewhere in the world, otherwise it may seem like tokenism.

What is the one attribute, which you think you have which has helped you get where you are?
There's one thing which is very important, and we emphasise that very much: being able to get along, being multicultural. If you want to have a long career at HSBC you are going to be expected to move around the world. Some people choose a career path that requires frequent movements and others want to spend their career primarily in the country. They have that option, but if they aspire to be in top management positions, then we expect them at least once and preferably twice to work in a different continent and a different type of market so they get the experience. For this to work, you need people who are very quick to acclimatise themselves to the new country. The motto of the group is 'the world's local bank' so we will try to the maximum extent possible to appear like a local institution with intimate roots in the community in every one of the countries in which we operate. To achieve that we need people who are able to blend in quickly, get along with very different cultures, national pastimes, national interests and so on.

Is it too early or have you already identified any particular areas that you would like to look at first, now that you've taken over?
Let me explain how HSBC works. I am on what is now the Group Management Board, previously called the Group Executive Committee. The ten most senior executives are in the group and we get together once a month, rotating the meetings around the world again, to get that 'world's local bank' flavour. We go over all our businesses around the world, so any one of us should have, first of all, a knowledge base about any of the regions in which we operate, and should be up to date on it. We get reports about what's going on – whether it's from a business, financial, legal or any other point of view. The group reviews each strategic plan. So when you walk into one of these positions, you don't spend six months learning all about the market to then start formulating plans. You come in with a fairly good sense of what the group's expectation is of the direction in that region. The more important thing then is to just establish personal contact with the clients, colleagues, with the government regulators and so on, because that's what you don't have.

Your predecessor, Niall Booker had talked to us about Islamic finance growing into a possible very big opportunity for HSBC.

Absolutely. We prefer now to use the term Shari'a compliant finance. I think we identified this as a very important opportunity many years ago in all parts of the business. Also it has applicability in a wide range of countries: you have countries that have predominantly Muslim populations, but you also have Muslim communities in countries that are not predominantly Muslim. Here too, clients would like, to the extent possible, to adhere to sharia’a compliant products.

If they don't have the option, they are at an economic disadvantage compared to other people in those countries. In countries that are predominantly Muslim it is an absolutely
critical product to have to be a player at the international level. In the other countries, it is a way to get close to a community that has been, we feel, underserved, historically, so we see a tremendous opportunity there.

Is Oman the only market in the Middle East where it's not allowed?
My understanding of the rule is that they don't want it to be known by the name 'Islamic banking', and this is not the right name. I believe there is going to be a set of rules that is going to be promulgated at some stage that will make clear products that can be offered to people who are otherwise unable to be in the banking system. I think someone who has extra liquidity is disadvantaged if, in order to be sharia’a compliant, he ends up putting his money in a non-remunerative account because that's the only way to avoid the Riba.

There is an estimated US$2tn floating around in the Middle East for private banking. What are HSBC's plans for that?
We have had to continue to grow a very significant offshore presence in the private banking business. Way before we acquired any of the entities that specialise in private banking we always had an office of what used to be called the British Bank of the Middle East based out of Geneva that specialised in catering to the Arab world. And then we made a number of acquisitions like Republic National Bank, Crédit Commercial de France etc that increased public awareness of our private banking presence.

In the region, the big change that we saw started about two or three years ago. Unlike some previous oil booms when most of the money at the private level was shipped to the international financial centres, there was a lot more being invested in the region. We get into the market and then over time we assess the proposition, so for example the UAE and Saudi have moved to having full onshore capability.

Now the other thing that has changed a lot is the increased sophistication in product offerings and advisory services in private banking. Twenty years ago it was mostly money markets, foreign exchange, precious metals, high quality equities etc. Now you have hedge funds, you have many more exotic equity funds, emerging market bonds and also you have a lot more tax planning as more of the private banking goes onshore.

You now have wealth being transmitted from generation to generation so you have to look at estate planning; you have to look at trusteeship arrangements and so on. You have more and more of the very high net worth individuals who are establishing family offices. A lot of the wealth that has been created in the last ten or 20 years was through entrepreneurs who are still active in the business.

They created wealth as opposed to inheriting it, and in this case you cannot separate your private banking proposition from your commercial banking proposition. This is a business opportunity and so we have created a much closer tie-in between the private bank and the commercial bank, because more and more of our clients expect support in their businesses as well.

What is your outlook on the region?
According to the latest reports, there is about US$3tn of infrastructure spending that's going to take place in the GCC between now and 2020 and the share of the finances sector is one third. You are talking about one of the biggest financing opportunities in the world. The average is assumed to be of US$100mn in size, so a trillion would be 10,000 transactions that need to be done over the next 13 years. Roughly this means 1,000 transactions a year and with 250 working days, it will be four transactions a day of US$100mn each. That is something! Now obviously some will be a billion dollar transactions, but this is just to give an idea.

So do you believe you have come here at the right time?
Absolutely. With all the changes in the region, when I was approached I thought this was a wonderful opportunity. It's fascinating. In the previous two oil booms, a lot of the investment went into infrastructure like roads, sewage systems etc, and so a lot of it was underground or barely visible. Now that the basic infrastructure is largely in place, the investment boom is going to be above ground, like shopping malls, and housing units. This opens it up for a lot more small and medium contractors, so business will be much more spread out. It's going to be fascinating to go and analyse these projects and assess the financing needs and become part of the development.