The National Commercial Bank (NCB) of Saudi Arabia is studying the feasibility of boosting trading activities at its Bahrain offshore banking unit (OBU).
The kingdom’s largest bank, which is implementing a radical restructuring programme, is also moving to upgrade the dealing room at its Jeddah head office. Jeddah is the main trading centre since NCB’s London and New York branches were closed in 1992 (MEED 20:8:93).
‘For a bank in Saudi Arabia to be successful, you must have a robust treasury operation that has the capacity of intermediating markets throughout the world,’ says treasurer Don Hill, who last summer moved to NCB from Citibank where he was head of market risk policy for Europe, Africa and the Middle East (MEED 20:8:93).
Hill says that Bahrain may help NCB achieve that goal. ‘In Saudi Arabia there are no brokers,’ he says. ‘Telecommunications are not really adequate. There is no place where traders can get together to talk about markets. In short, there is not a market like we know it in other parts of the world.
‘Bahrain represents an interesting opportunity for us to engage in certain activities where it is important to have brokers, important to have a place where traders can get together,’ Hill adds. ‘In other words, it is a place which is very rich in trading.’ At present the Bahrain office is a booking centre only. There is a small treasury at NCB’s only other overseas branch in Beirut.
Hill had a taste of working in Bahrain in the early 1980s when he was chief trader at Citibank’s OBU before working as treasurer at Saudi American Bank in Riyadh. He argues that the island could be a good place to send young staff for training.
‘At the same time, I don’t want to do this at the cost of this treasury,’ he says. ‘You have to have a very strong treasury inside the kingdom to serve both the needs of the bank and its clients. My idea is to start a trading activity in Bahrain but operate it as a remote desk of our operations here.’
NCB was completing this summer a study into the viability of opening in Bahrain. The last element of the analysis is evaluating potential revenue. ‘This is a non-starter if all you get is the same revenues and a higher expenses base,’ he says.
Hill says that NCB is upgrading its ability to do deals in sophisticated treasury products. It is installing a front-end dealing system and evaluating analytical packages for derivative products. Says Hill: ‘It is going to take six months to put all the technology in place and another six months to learn how to use it.’