Dubai: banking on the future

Healthy tourism revenues and ever rising oil prices certainly making semi-autonomous Dubai a cash rich member of the United Arab Emirates (UAE). But, as mundane as it may sound, that money has to go somewhere and behind the scenes hundreds of financial institutions are hard at work.

Competition is rife among Dubai’s bankers, investment managers and wealth planners as each makes a concerted grab at the region’s surplus cash. And there’s a lot of it about: the emirate is located at the crossroads of Asia, the Middle East and Africa, giving it access to millions of local and expatriate consumers.

As well as its strategic position, Dubai’s tax efficiency also makes it an attractive financial base from which to sell into the region. At present there is no income or capital gains tax for individuals, and there are no exchange controls.

“We have been here since 1977,” says Andrew Johnson, financial services manager at Lloyds TSB International in Dubai. “Even back then Dubai offered great potential to participate at the heart of a developing region. It’s a natural hub and provides a supportive business environment.”

Dubai’s authorities are well aware that oil revenues will not last for ever, so as a further incentive to global financial institutions to come and add kudos to the Emirate’s status as an international business hub, the Dubai International Financial Centre (DIFC) opened for business in 2004.

Banks and financial companies based in the DIFC receive a range of benefits including a 50 year zero per cent corporation tax guarantee. Since launch, it has attracted the likes of Barclays Capital, Deutsche Bank and Merrill Lynch and, just this June, Citigroup Global Markets received a licence for business.

“The DIFC provides us with a world-class platform from which to operate throughout the Middle East and allows us to contribute towards developing the region’s financial markets,” says Mohammed Al Shroogi, Citigroup’s corporate and investment banking head Middle East.

As the presence of Citigroup Global Markets suggests, the DIFC focuses mainly on corporate and investment banking, plus capital markets and global reinsurance. Most of Dubai’s retail and private banking services for expatriates and local individuals operate from outside the centre.

The range of products and services available is extensive. It needs to be: Dubai is a global melting pot with just 20 per cent of the population having been born locally. The rest of the population is made up of expats from all over the globe: immigrants from the likes of India, Pakistan and China who came looking for construction jobs; and professionals from other parts of the Middle East, as well as Europe, Australia and South Africa.

Local retail banking in Dubai

Many international banks have been promoting retail and private banking services in the region for years. Standard Chartered, for instance, already has ten onshore branches throughout the UAE. Its Dubai retail offering for locals includes multi-currency current and savings accounts, some with add-ons like free personal accident insurance with its Fusion Account. Personal loans come with up to AED 250,000 (euro 53,000) financing.

Long established domestic bank, National Bank of Dubai, also offers a wide range of deposit accounts including the Abeer Account specifically for women, and the Ajial Account tailored for the 18-25 year old market. For customers taking out loans, recent promotions have included a free 40 inch LCD TV for every home loan over AED 2.5m.

Whistles and bells are not limited to loans. At ABN AMRO, its Regular Investment Plan, which has access to over 250 investment funds, is giving away an Emirates holiday voucher for anyone signing up for ten years with a monthly investment of US$1,000.

For those who want their capital guaranteed but are keen to take on a little more risk and gain access to the stock market, there are plenty of deposit and investment accounts that come with a guarantee attached.

NBD’s Guaranteed Index Plan, for instance, in association with Old Mutual (Bermuda), links your returns to the world’s major stock indices while guaranteeing a minimum of 105 per cent of your invested amount at the end of the five year plan. Minimum investment is $25,000. The bank also offers a Universal Investment Plan with access to a range of equity, bond, hedge and money market funds, plus fixed rate accounts.

Lloyds TSB also regularly offers limited edition equity-linked guarantee offshore deposits. The latest runs until July 2006. Term deposits of either 30 months or five years are linked to a basket of global equity indices including those of the UK, eurozone, China and Japan. The guarantee only refers to your initial capital and any specified return.

On the mortgage front, just this May Barclays International Retail and Commercial Banking, launched a mortgage service for both residents and non residents looking to buy property in Dubai. Three different products are available: owner occupier, off plan and buy-to-let in a range of currencies.

“With the recently announced changes in the property law ownership in Dubai, specifically with regards to non resident ownership, and the ongoing highly positive economic climate in Dubai, we believe that now is exactly the right time to bring our breadth of international mortgage experience to this market,” says Philip Ward, head of mortgages at Barclays in Dubai. “Dubai is maturing into a home-owning environment.”

The mortgages are available from a minimum of AED 500,000 to a maximum of AED 7.5m, in areas where all nationalities are allowed to own residential property. Loans approvals are made within 24 hours.

International links

For expats in Dubai seeking access to products based in offshore financial centres such as the Channel Islands and the Isle of Man there are plenty of options. Standard Chartered has operations in Jersey and sells into Dubai its International Access Account. This has 14 currencies available and comes with a Gold International debit card.

Lloyds TSB in Dubai is linked with Lloyds TSB Offshore which operates from the Channel Islands and Isle of Man. Expats have access to a range of savings and investment products, international mortgages, and private banking services. The multi-currency International Account offers telegraphic transfers, international drafts, direct debits and standing orders. Tax planning and will writing services are also available. The minimum deposit is £100.

“We meet many expatriates who are initially looking for the security and familiarity of a banking service that feels like home,” says Andrew Johnson at Lloyds TSB International. “As they settle into the region they may start to consider saving or borrowing. With time, they want to make better arrangements for retirement, education fee planning and other long term investments. “

HSBC Bank International, located in Jersey, also sells into Dubai. You have access to offshore investment and banking advisory services. Current, deposit and savings accounts come in up to 14 currencies, with debit and credit card services available. In addition, HSBC Bank International arranges mortgages for the purchase of UK properties.

Personal banking

ABN AMRO’s personal banking service, the intriguingly named Van Gogh Preferred Banking, offers a full range of multi-currency accounts, a wealth management account, Gold Smart credit car, fixed income and mutual fund investment opportunities. A relationship manager will help put it altogether for you.

Standard Chartered’s personal banking offerings, Excel Banking and Priority Banking, give individuals (plus their family and businesses) access to investment and wealth management services, a range of investment products such as fixed income securities, mutual funds and foreign exchange vehicles, and either a relationship manager or personal financial consultant.

HSBC Premier also assigns you a relationship manager. As well as everyday banking services, you can make the most of financial and insurance planning services, an air miles reward programme, and international services for people moving between countries including fund transfers and tailored accounts.

And at Barclays International, its Premier Banking service, which comes with a relationship manager, offers discretionary services such as portfolio management and access to investment and private equity funds. Wealth protection services include trusts and estate planning.

Private banking

For investors seeking private banking services, Barclays Private Bank offers a global wealth management service for high net worth individuals and their families. The service provide everyday banking, credit, wealth structuring, discretionary and advisory portfolio management services.

ABN AMRO’s private banking services include discretionary portfolio management, investment advice, international estate planning and access to a range of international funds covering equity, bond and money markets.

And NBD’s Aafaq Investment Funds are available to all nationalities. These include the Gulf Balanced Fund which invests in equities and bonds across the Gulf region, and the Mena Fund which invests in equities across the Middle East and Africa and has a minimum subscription of AED 100,000.

Islamic banking

A growing number of Dubai residents, mainly Muslims, are looking for an alternative to conventional banking which allows them to arrange their personal finances in ways that do not compromise their religious beliefs. Shariah-compliant Islamic banking is becoming widespread in the region.

HSBC Amanah has Islamic-compliant current and savings accounts, loans and private banking services. The bank’s Takaful service is an alternative to conventional home insurance and is based on the co-operative principles of Shariah, where participants share the risks and rewards.

Standard Chartered offers Shariah-compliant Islamic products which include current, savings and term accounts. These are interest free and funds are invested ethically. You also have access to Islamic Personal Finance (loans) which are based on Diminishing Musharaka – joint ownership between you and the bank.

For mortgages, Amlak Finance offers Shariah-compliant home financing and equity release products, with discounts for those moving over from a traditional mortgages. And Tamweel has a range of Shariah-compliant adjustable repayment mortgages with financing for up to AED 5m.

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International personal banking Lloyds TSB Offshore Limited Isle of Man Branch PO Box 12 Douglas Isle of Man IM99 1SS tel: +44 (0) 1624 638000 fax: +44 (0) 1624 615408 email: newaccs@lloydstsb-offshore.com