HSBC, BlackRock CEOs tell Saudis future is bright post-Khashoggi furore

Relations with Saudi Arabia are important for HSBC, which gets most of its revenue from Asia

LONDON • After skipping a Saudi conference last year in the wake of Jamal Khashoggi’s murder, the man who runs Europe’s biggest bank took the stage in Riyadh and said he expects investors to pour money into the oil-rich desert kingdom.

“We are excited about the role that we can play here,” HSBC Holdings plc CEO John Flint (picture), one of several prominent figures attending a high-profile conference, said at a panel discussion yesterday.

“This is an economy we have a lot of confidence in. I think the future is bright.”

The British banker’s optimism echoed that of BlackRock Inc CEO Larry Fink, who said his firm is opening its first Saudi office and called reforms in the kingdom “amazing”.

Both men cancelled their attendance at a similar gathering just six months ago, but are at this year’s Financial Sector Conference — a sign of how the kingdom’s oil wealth, geopolitical importance and the lucrative promise of advising on reform makes it difficult for international financiers to disengage.

Last year, most Wall Street CEOs dropped out of the Future Investment Initiative event amid the international outcry over the murder of Khashoggi, a critic of the Saudi government who wrote for the Washington Post. The US has blacklisted 16 Saudi nationals for their role in the killing.

As Fink and Flint made their remarks, their Saudi hosts took the opportunity to welcome another international bank.

Credit Suisse Group AG has received a local banking licence, Finance Minister Mohammed Al-Jadaan told the conference.

Saudi Arabia has been home to some of the world’s hottest deals this year as Europe and Asia have languished.

JPMorgan Chase & Co, Morgan Stanley, HSBC, Citigroup Inc and Goldman Sachs Group Inc this month helped Saudi Arabian Oil Co (Aramco) raise US$12 billion (RM49.56 billion) of bonds in one of the most oversubscribed debt offerings in history.

For BlackRock’s part, Fink said he sees “very large opportunities” across the Middle East after investing in Aramco’s inaugural dollar bond, saying the region is “becoming more secure” and increasingly in need of retirement investments.

Relations with Saudi Arabia are important for London-based HSBC, which gets most of its revenue from Asia. Its local unit is in the process of buying a rival part-owned by Royal Bank of Scotland Group plc, a US$5 billion deal to create the kingdom’s third-largest lender. HSBC is one of the most active international banks in the kingdom, employing more than 3,000, and has been the top advisor for initial public offerings (IPOs) since 2010, according to data compiled by Bloomberg.

The relationship goes even deeper than deals: In January, Bloomberg News reported that Saudi Arabia hired HSBC banker Rayyan Nagadi to establish a privatisation unit.

Other HSBC veterans to join the Saudi government include Mohammad Al Tuwaijri, minister of economy and planning, and Fahad Al Saif, head of the kingdom’s debt management office.

“We often joke in the senior levels of HSBC that we are exporting a lot of talent to the government of Saudi Arabia,” Flint said. “That’s been a privilege of ours, to see so many of our ex-colleagues actually in the audience and serving their country now.”

Other attendees discussed prospects for further economic development.

Luke Ellis, who runs London-based hedge-fund manager Man Group plc, said he hoped to open an office in Riyadh. “It’s amazing how far the Saudi debt market has come in a short space of time,” he said. “The quality of companies that IPO-ed here has been higher than in other places.”

Speaking on the same panel as HSBC’s Flint, Daniel Pinto, one of JPMorgan’s most senior executives, warned that Saudi Arabia still has work to do. “If you want to succeed, you really need to have a very strong capital market,” he said.

Flint pointed to the progress made in gaining the approval of index providers, whose decisions can influence whether billions in passive money is allowed to invest.

Last year, MSCI Inc said it would include Saudi Arabian stocks in its emerging-market gauge after the kingdom implemented measures aimed at broadening investor access.

“The inclusion of the indices is clearly going to result in an inflow into the country, and there is a wonderful opportunity to create the right environment,” Flint said.

Saudi Arabia’s reform push, aimed at easing dependence on oil, has been driven by Crown Prince Mohammed Salman. After garnering international plaudits with measures including allowing women to drive, a series of developments undermined his image as a moderniser.

Khashoggi’s disappearance in Istanbul, and the steady disclosure of details about his fate by the Turkish government, followed a move to jail hundreds of businessmen, royals and activists in an alleged crackdown on corruption.

The day before the conference began, Saudi Arabia executed 37 citizens found guilty of various terrorism-related charges — the first mass execution in the country since January 2016. — Bloomberg