An exclusive interview with Dr. Farid Al-Mulla, CEO, Oasis Capital Bank, Bahrain for Bizbahrain, May 2016 issue
As the Banking industry emerges from global crisis of 2008, it was the end of one of the modern banking era’s most troubled and uncertain periods, which saw the near or actual collapse of well-known international wealth management businesses, and altered the face of competition and the behavior of wealthy clients. Despite those challenges, the region’s quick recovery, especially compared to some other markets, made the GCC an attractive market for local and global private bankers. The regional wealth market since has in fact grown even faster than anticipated, despite increased competition, pressure on proﬁt margins, and intensifying regulatory and compliance requirements. The ensuing years saw the impact of rising oil prices, as well as increasing government spending on megaprojects, infrastructure, further economic diversiﬁcation, and job creation all contributing to the growth of liquid wealth. This period showed considerable opportunities for private bankers that developed the right capabilities in the expanding affluent segment, along with the high net worth (HNW) and ultra high networth (UHNW) segments.
Middle Eastern HNWIs have traditionally tended to book a high proportion of their wealth in offshore centres, with Swiss banks in particular being favoured. Yet attitudes appear to be gradually shifting. Since the onset of the global economic crisis in 2008, Gulf nationals in particular have begun to prefer to book assets closer to home, opting to use local institutions with whom they have existing banking relationships and often greater cultural affinities. This change in preference corresponds with increased regulatory scrutiny of private banks in traditional hubs such as Switzerland and Singapore, which has prompted Middle East-based HNWIs to transfer wealth back home, but has also lead to a limited yet noteworthy transfer of wealth to the region by others, particularly from Europe, looking for a possibly less stringent tax and legal environment in which to operate.
A seasoned banker with a long and diversified banking career, Dr. Farid Al-Mulla has been involved with Oasis Capital since 2008, from the inception of the conceptual evolution of the business model together with the promoters of the project, Palm Capital, obtaining the required regulatory approvals, raising the capital and developing / executing the business plan and platform.
Dr Al-Mulla started his banking career with Gulf International Bank (GIB) in 1983, from where he joined Bank of Bahrain and Kuwait (BBK) in 1990, starting as Head of International banking and ending as CEO in 2001.
In a fascinating interview at the Capital Club with bizbahrain Group Editor Reena Abraham, Dr Al-Mulla talks about the changes and challenges he has seen in private banking and the ethics and principles that have built the foundation of his success. Here are some excerpts from the conversation.
Let’s start with the story behind Oasis Capital Bank. What defines it?
The story starts in 2007 when I was approached by the main promoters behind Oasis Capital with the idea to create a private bank. Initially I was skeptical, as I thought that the barrier for entry into private banking was huge and dominated by the Swiss banks and by international banks. Private banking for me was the ultimate because you have the confidence of the most successful, the HNWIs. There is a lot of secrecy and there is a lot of trust involved, and the trust is based on confidence and longevity. These older institutions have been around for years and years, literally hundreds of years and above all their performance have perpetuated their existence.
When we were established in July 2008, within two months the world was faced with the global financial crisis. We started looking very closely on what the repercussions of the crisis were on investment banking. Our capital was intact, but as an institution we did not have the pedigree. It was a tough introduction to the world of investment.
The learning curve must have been steep. What was the take away from the situation?
Fortunately for us, and through the hard work of our staff and the support of our board, we managed to exit all our investments by 2015. We made a 51 million-dollar profit, and distributed a good dividend in a very difficult market.
In private equity, you are not a long-term player. You come in, you put the house in order, and you move on. Somebody else will then take it to the next level. Somebody else could make more money than you, and good luck to them.
The increase in profitability resulted from successful exits from direct investments. Going forward, the plans are to leverage our track record and long-standing relationships with various partners and continue to look for suitable deployment opportunities in selective markets. Today, we have taken away the word “bank” from our name and function; we are an investment firm, and we are focused solely on private equity. In our second phase of investments, we have recently closed an investment in an online platform in beauty products in Europe
You reported 51.2 million for last year, that’s a nearly 4 times increase from the previous year, so how would you differentiate your investment strategy against other investment banks in Bahrain?
Having gone through the early experience and the massive challenges we faced, I think the important thing is to learn and to analyze your mistakes.
Is there one infallible rule or guiding principle that works for private banking?
Every firm will have its own distinguishing brand message, but perhaps there is one simple and universal rule; know your customer/investor and manage the product/asset well.
Also, while we worry about instabilities of markets, oddly enough we also welcome it. Volatility in markets create risks and opportunities, this is precisely the type of challenge we like to take.
We have streamlined our Business model to focus on key strengths and leverage our track record and longstanding relationships with leading PE firms. Oasis Capital will effectively provide its investors with access to “handpicked” individuals direct PE investments from top tier firms at very competitive ad transparent costs
What are the challenges for the banking sector, particularly the private banking?
We are not in 2008 with a financial and banking crisis, but I believe there could be a possible repetition here in the emerging markets, maybe not to the magnitude of 2008, but still at a high level.
What happened between 2008 and now, and I am putting it very simply, was to combat the down turn by making money cheap to keep the ship afloat. But the side effect is that it will create another bubble, and this is where I come back to the point, banking is not a science. What the international community did between 2008 until now, honestly, is experimenting and like many things in life, like medicine, you don’t know the negative side-effects until years later,
I think what happened between 2008 and now has been a near miracle. We are very fortunate as a world we didn’t get into a situation like the 1930s with huge unemployment, and poverty, and the end result of a world war.
In your opinion, what are some of the specific long-term reforms to create a stable and sustainable society?
I hesitate to answer because there are so many variables. You can take the simple route or you can go the complicated route. Sustainability requires the characteristics of a society. To take one example, the Americans have this DNA in them, they love challenges, they stand up to challenges. As Churchill said about them, “You can trust the Americans to get it right in the end after trying so many options.
But this is the way they go about it, they have the courage to try. We don’t. We are held back by our society, we are held back by our morals, we are held back by so many things.
I think this characteristic of meeting a challenge with courage is important. When you see the global situation around you, with problems that nations face, you look for the mettle of the people. I look at people and understand them through reading their history, and through interaction with them. I find there are people or nations that have got strong backbones, I think the Russians would also be in that category, as would the Germans. In their way, the Chinese would also, and in their way the Indians. Because I have interacted with the Indians, I think there is inner strength in the nation, and it is simply a question of tapping that inner strength to move forward.
I think one of the most important attributes is education. With education comes tolerance, tolerance of other opinions. We live in a world, which is contradictory. You have to allow people to break the boundaries of what’s acceptable. I don’t think we can ever say that should be a world or a society without any boundaries because of course there are boundaries, because you need to protect the weak or disadvantaged in a society. Here we are talking about boundaries that limit thought and progress. Education gives you that tool, that ability to say, “I can solve the problem, whatever that problem is.”
You talk about a more open society, but do you think as far as banking is concerned, more regulatory changes would be an answer?
A simple answer is no, because there is the regulation and there is the adoption. When you go with your car in the street, you know there are rules, because the road is for everyone, but does everyone adopt these rules. I think not. We believe that once we put out an issue as a law, we solve the problem. The law is a policy and has a long term effect. You need to keep it simple and you have to educate people about why they should adopt it, that it is for their good.
So now we are talking about understanding the spirit of the law rather than the world of the law itself?
I will give a very good example. It starts at school. We used to make a joke that when you go to the West you have to line up all the time, and you see it actually everywhere, right from the airports. There are however, people who would love to jump the queue. You see this on the highway, somebody steps in front of you because he is very busy and his time is more precious than yours – that is his mentality. The rules are for you, not for him. So you start teaching children from the beginning, at school itself, what discipline means. You tell them that what you see in the world is often wrong; and this is not the example to follow.
As a CEO what is your vision and strategy?
Vision is a long-term view so for us, we want to build up this enterprise and make it from a boutique to a larger institution. We want to create quality investments that people feel they are comfortable to work with and which will be remunerative. Our focus at the moment is on investing in Europe and North America. I would love to invest in this part of the world. As our Business matures, we would like to focus on the region.
The focus is to establish Oasis Capital as a top tier regional private equity platform. To become a reference point for the best-in-class private equity solutions for GCC based family offices, high net worth(HNW)individuals and institutions. Behind this vision lies a strong conviction that in spite of the many challenges facing Bahrain and the region, that we will come back, reinforced and prevail.
Do you feel a place like the Capital Club is a place where one can exchange opinions and confer with like-minded people?
It plays a role definitely, and I think that role can be enlarged even further. I am an unusual member in a number of senses. I am next door to the Club, I simply walk across the road and I am here. The convenience outweighs everything else, the service is good, the staff are very attentive even when I give them a hard time at times. But I appreciate their work as well.
I see the Capital Club evolving, I see it a place for meeting people and meeting personalities. Lots of times when I have a guest from outside, they prefer coming here rather than to the office. I too prefer to have my business meeting here, rather than in a prominent hotel. I feel I can have a private meeting here, although it’s an open space, somehow it feels very private. I think the Capital Club has done a great job. I think it has done very well.