Citi infamously shuttered a sun-soaked Spanish outpost in April after a brief three-year stint. Here's why the offices springing up in Riyadh, Abu Dhabi and Dubai will avoid, or perhaps meet, that fate.
Major financial institutions open and close satellites all the time. But one such installation's rapid rise and famous fall made more news than usual this year - when Citi abandoned its experimental office in Malaga, Spain.
The outpost, dreamed up post-pandemic to attract to talent interested in stronger work-life balance, was highly promoted by the bank. But its sideways performance and a noted lack of professional networking for junior bankers became an object lesson, instead.
Perhaps that outcome was foretold in that few of Citi's rivals chased the same idea. Conversely, firms are now moving en masse into GCC cities where the sun, sand, and sea (or in Riyadh, the heat) feel a lot like Southern Spain.
The culture is quite different, of course. The attraction in this case is likewise far clearer: the region's influential public investors and burgeoning private wealth are aggressively eyeing up ways, and partners, to better tap capital markets and globally allocate capital. There is little doubt of the herd mentality now at play.
Much like the Malaga project, it's the details that may make some of these oases work, and others not so much. Let's consider a few.
All in or catching up? Every new player in the Gulf will say they are fully committed, but their starting points widely vary, importantly from a relationships and talent perspective and perhaps even in clarity of purpose. Expertise, bandwidth and level of commitment will all be measured; for some investment houses, as Brevan Howard showed earlier this year with Lunate, that could extend into staking the firm in exchange for equity ownership. Some of the I-banks, like aforementioned Citi, have been in the region for decades and will need to adjust to heightened competition.
Hub and regionality: Malaga failed in part because, while its time zone was easy enough to manage, it didn't add anything new - to offer the wider firm or for the local team to own. That cannot be said for the GCC forays, being both positioned to serve Eastern Africa and Southeast Asia, and fast-growing relationships with Turkey, the Caucasus and Central Asian frontiers to the north.
With new locations opening up every week, much has been made of which microstate - or the KSA, or in some cases both - is selected and why. Thinking wider is probably a better bet, not just for the perception value but in understanding the opportunity contour the same way clients do - as regional. This month, State Street made a point, upon officially opening in Riyadh, of deeming it a new headquarters, as an example.
Burnishing talent: Oddly, the biggest on-record gripes as Malaga wound down surrounded lack of professional development and networking: that there wasn't a willingness to exchange the "work-life balance" for career value. (Citi, for its part, disputed that idea and simply called the closure part of a wider simplification of firm structure).
While the GCC is growing by leaps and bounds in stature, it still isn't London or Singapore or New York. For now, specialization here - while surely valuable enough, and increasingly so, to sustain an outstanding financial career - remains as just that: a niche.
Firms that win will get deals done and grow their connectivity with key stakeholders of influence. But they will also position experience here as global and vital, with investment backing that assertion up, and not just in the near term. The Malaga case shows how important this aspect is, that a satellite is truly about belief in something bigger; yet it is one that many financial firms struggle with.
OQ View: There can be little doubt that a few years from now, certain Gulf outposts will fall away - more quietly than the Andalusian experiment did for Citi. Some of these may even be more transactional, and intended internally as such, even if the news announcements say otherwise. That is the nature of a land race, and of competition. Of which still more is coming every week.
For those making a real effort of it, avoiding the Malaga malaise means a willingness to spend; dedicated strength and coordination with key GCC touch points beyond the GCC; and by convincing new talent that this is a place to be seen making their mark.
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