Investment Banking in Saudi Arabia: The Hottest and Most Overlooked Emerging Market in the World?
What do you think of when you hear “emerging market”?
And then maybe Dubai, Eastern Europe, Southeast Asia, and a couple others.
But Saudi Arabia is probably not at the top of your list.
That could be a big mistake, as we’ll find out in this wide-ranging interview with a reader who works in investment banking in Riyadh.
We’ll cover why it’s a great place to be right now, how the finance industry there works, how a social scene without models and bottles works, and whether you should head over there.
How It All Started
Q: Most people don’t start out planning to work in the finance industry in Saudi Arabia. Were you from the Middle East? How did all of this start?
A: I was born and raised in the UK, and went to university there. I did an internship in equity sales before moving into investment banking.
At the time, the market was good so it wasn’t quite as difficult to make it through investment banking interviews and win offers – I went to a large bank and planned to work in London for 2 years, and then spend my 3rd year abroad as part of the graduate program.
Q: So were you thinking of moving to Riyadh even back then? Where were you planning to go?
A: At first I was thinking about New York, Hong Kong, or Singapore – this was back at the peak of the bull market, and all of those seemed like good options.
Two years later, the sky had fallen and finance was completely different – and it seemed like those markets were now the worst ones to go into.
Around that time, my boss approached me to join his new team in Saudi Arabia – my bank wanted to focus on expansion into emerging markets, and they had asked my boss to lead our efforts there.
I didn’t know much about it at the time, but it seemed more promising than my other options, so I jumped on the opportunity.
Q: Ok, but wait a second here: you weren’t from the Middle East and I’m assuming you didn’t know Arabic. Was any of that a problem?
A: There were no language requirements – most business is conducted in English. Knowledge of Arabic helps, but it’s not required.
Since it’s an emerging market, they value people with strong technical skills from London and other finance hubs – they’d rather have someone from the West who had a strong grounding in finance vs. a local native speaker who didn’t know as much.
Moving to Saudi Arabia
Q: Interesting. So what’s the finance industry like in Saudi Arabia? I know nothing about it.
A: It’s very, very underdeveloped – which means that the growth potential is huge. Even though there’s a high per-capita income, there hasn’t been much of a finance market until recently.
Most deals are IPOs and M&A is still underdeveloped, though that’s starting to change.
Any banker coming from the US or Europe can quickly make a name for himself in this market, because it’s the equivalent of the Wild West right now.
Over the next few years there will be a surge in M&A activity as recently listed companies begin to consolidate, and ECM activity will continue to be strong.
Government intervention also helps – for example, there was a royal decree awhile back that ordered certain cement manufacturers and insurers to list over the next 2 years.
Q: Sounds like a good place to be. What about your clients – I’m guessing they’re mostly oil companies?
A: It’s certainly the biggest industry here – but there have been a lot of IPOs in the $100 million to $700 million range in recent years across many industries, including retail and transportation.
Beyond the oil companies, we also do a lot of work with local families.
In Saudi Arabia, around 20 families control the majority of major corporations and decide which companies to acquire and where to invest their assets.
Even though Dubai is close-by, they’d rather use advisors on the ground in Saudi Arabia so they can get day-to-day attention and build close relationships.
More so than other regions, all business in this country is relationship-based: once you get close to a certain family and build a relationship with them, it’s almost impossible for other banks to come in and steal their business away.
Once we start working with them, we advise on everything from acquisitions to IPOs to asset disposals – I even got to work on a Restructuring deal awhile back and worked directly with CEOs and other senior executives.
Q: Wow, so you’re getting a lot more responsibility than in London?
A: Exactly. Clients love the fact that I’m UK-educated and then worked in finance in London for a few years to learn the fundamentals really well.
A lot of times senior bankers and clients just let me run with ideas and don’t give me much guidance on what they want to see – it’s a huge change from other regions, where everything is micro-managed.
Much of what we do here is more “conceptual” than what you see in London or New York – since the industry is immature and since most businessmen speak English as a second language, they want simple explanations.
Just as one example, we don’t spend time scouring for dozens of non-recurring charges, adjusting Enterprise Value for capitalized leases and pensions, and being 100% scientific about everything because no one cares.
Q: This sounds much better than standard investment banking already. Since you get more senior exposure, can you move up quickly there?
A: Absolutely. Some of my friends have started as Associates and then moved up to the Director-level in only a few years – that would be impossible anywhere else, even in a frothy market.
The capital markets are growing faster than the domestic Saudi labor supply can support, and talent is scarce.
If you’re a Western-educated, Arabic-speaking investment banker there’s no better place to be.
Saudi Arabia vs. Dubai
Q: Let me stop you right there. You said “there’s no better place to be,” but what about Dubai? That’s more visible on most peoples’ radar vs. Saudi Arabia.
A: This is all my opinion, but Dubai would have been more promising back before they experienced massive growth (and then massive problems, and so on).
Most bankers in Dubai actually want to be involved with Saudi Arabian deals, but it’s a thorny political issue and Saudi companies prefer advisers in their own country.
The other issue is the cost of living – in Dubai it’s not much different from developed countries because of all the expats, but in Riyadh it’s incredibly cheap. I save over 70% of my pay even after accommodation and travel.
Q: Wow, you’ll have to tell me your secrets on how you pulled that one off. Even if you view Saudi Arabia as superior to Dubai, what about other regions in the Middle East? Is anything else “hot”?
A: There are a couple other promising places here – Bahrain, a tiny island country off our coast, has always been a hub for ex-pats and could also be good. Qatar is also promising, but it’s much smaller.
But these days most multi-national firms are choosing to go outside Dubai to establish a presence in the Middle East – for example, McKinsey is now setting up an office in Riyadh and they’re recruiting a lot of Saudi nationals rather than exclusively foreigners.
Life Without Models and Bottles
Q: Everything seems rosy so far. But let’s talk about the downsides of living in Saudi Arabia. You haven’t mentioned models and bottles yet – are there any?
A: No. Do not come here if you like going out, clubbing, and drinking.
Living in Riyadh only appeals to a certain type of banker – you have to like activities other than partying or you’ll have a miserable time here.
The social scene here is centered on “compounds” – residences for Westerners living in the country. Women can wear normal clothes there, there are no Saudi nationals, and you can drink alcohol.
Q: Wow. So what exactly do you do for fun in Saudi Arabia if drinking and clubbing are not options?
A: Mostly sports and outdoor activities – I play rugby, golf, and I’ve gone scuba diving here a lot as well. I’ve also traveled all around the Middle East, which is convenient because plane tickets to other countries are quite cheap.
Q: The social life sounds pretty surreal. What advice do you have for someone looking to work there?
A: Don’t even attempt to come here alone and figure things out – you can’t even get a tourist visa unless it’s during the pilgrimage or you’re on certain guided tours.
Everything needs to be done through your bank’s HR department – just make sure all your forms are in place and that your housing accommodations are set up before you get here, because it’s very, very tough to find housing by yourself.
The visa situation is also complicated because you need to get an exit visa to leave the country even if you have a work visa – and to make things even more fun, all the dates are according to the lunar calendar so you could easily end up with an expired visa.
As far as actually living here, I recommend starting out in a compound and building your social circle there before you move off to live in an apartment.
Q: What about family visits? Can relatives visit you at all?
A: Usually family trips are part of your contract – that’s standard in the region. Just make sure it’s spelled out explicitly.
Culture, Hours & Pay
Q: It sounds like the social experience is quite a bit different, to say the least, in Riyadh – but it also sounds like you’ve had free time for other activities. What are the hours like?
A: To start with, we have a standard holiday of 42 days per year along with 10 national days – so effectively we get 52 vacation days total each year.
That means I get to go back and visit friends and family every 2 months, which is a huge improvement over standard investment banking.
On average, I work around 50-60 hours per week. It is very, very rare to work more than 90 hours and I haven’t pulled any all-nighters in the 2 years I’ve been here so far.
During Ramadan, the hours are 10 AM to 3 PM for an entire month – and the senior bankers can’t even make you work more than that, because clients are just not there.
Q: Ok, I like the hours. Are they shorter because you don’t do as much busywork?
A: That’s definitely one reason. As I mentioned before, we don’t spend time scientifically adjusting comps for capitalized leases, pensions, off-balance sheet items, and so on – clients are just not sophisticated enough to notice or care.
Presentations are rarely more than 20 pages – English is a 2nd language for 90% of our clients, so they want very simple explanations. Pitching presentations are occasionally longer but 75% of the materials are standing/generic and require little to no updating.
M&I Note: To give you an idea of what 20 pages means, it’s rare to have a presentation less than 20 pages in the US – and pitch books can sometimes go on for 100+ pages.
Q: So what’s your average day like? Is there much downtime?
A: I’m usually pretty busy throughout the day – there’s not as much downtime as in other regions. I finish most of my work around 6 PM, but I might stay in the office for a few more hours depending on what’s going on at the time.
Q: What about the pay? Is it the same as London, minus the taxes?
A: It’s even better than that – in Saudi Arabia there are absolutely no taxes on anything. No income tax, no sales tax, and no VAT.
Salaries and bonuses are similar to what you would get in London at the junior level, but it’s all paid out in the local currency and we pay no taxes.
The currency is pegged to the US dollar, so there’s not too much FX risk if you’re a US citizen.
As far as bonuses, in peak years junior bankers could get around double their base salaries – but in bad years bonuses could drop to nothing or almost nothing.
When you get to the mid-level and up, a top Associate or VP in London will definitely make more than someone in Riyadh – but you might be working twice as much and you’ll lose a lot to taxes.
Q: Aha, so that’s how you save over 70% of your income. No taxes, no going out, and solid bonuses – what’s the cost of living like in Riyadh?
A: Very low. I spend about $5-$10 per day on food and non-rent expenses. Saudi Arabia is one of the few places that allows you to work 50% less and save 50-100% more than you would in New York or London.
Exit Opportunities: Working for “The Family”
Q: If you can get past the social scene, Saudi Arabia sounds like a pretty interesting place. Do you think you’ll be going back to London anytime soon?
A: Originally I was just planning to stay for a year, but I decided to extend my contract.
If you want to be an MD in London one day, coming here for 1 year to get the experience is a great idea – but if you stay longer than that, you’ll get used to 50-60 hour weeks and you’ll lose the cutthroat drive you need to make it to the top.
I may move back to London in the future, but it might be in a more specialized role (e.g. cross-border M&A) if I continue within investment banking.
Q: So it sounds like you move back to Europe quickly or you stay in the region long-term. What are the exit opportunities like after doing investment banking in Riyadh?
A: Similar to Europe, other parts of the Middle East, and everywhere outside the US, there is not as much of an obsession with exit opportunities here. Since the hours are good and the pay isn’t much different from London, many people don’t see the point in moving elsewhere.
If you do want to exit, private equity is a common route – it can sometimes be easier getting into top-tier funds here because many of them are relatively new to the scene and are looking for talent.
Q: What about sovereign wealth funds? I hear they’re kind of a big deal in Dubai.
A: Not so much in Saudi Arabia. The only “sovereign wealth fund” is the government itself, which has 2 organizations that use pension and state money to make investments. They don’t really use Westerners for any of these investments, and they’re focused on domestic infrastructure.
The #1 exit option is going to work for a “family” that controls major corporations here. They have between $200 and $300 million under management and would tell you, “Go invest our capital.”
You need to get approval before doing anything major, but they give you far more free reign with their capital than you’d ever get at a traditional PE firm or hedge fund.
It’s a nice arrangement and the only drawback, once again, is the odd social experience living in Saudi Arabia – you have to be open to it, or you’ll be miserable the whole time.
Q: So what’s your plan? Are you going to do banking and then work for one of these families? Or do you want to go back to the UK eventually?
A: I do want to return home eventually since I have friends and family back in the UK.
I’m interested in starting my own business one day, but at this point I’ll be staying in Saudi Arabia longer than I originally planned – lots of firms are coming into the region and setting up shop here, which creates some good opportunities if you’ve already made a name for yourself.
Q: Awesome, thanks for sharing your story. I think I learned more about Saudi Arabia in 1 hour than I have in the past 20 years combined!
A: No problem.
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