With a wealth of international banking experience, London based Jamil Zubairi shares his views on the future of banking and the impact of the prevailing recessionary climate with Blue Chip. His stellar record in banking includes significant time spent in South Africa where he witnessed the abolition of the apartheid regime and Nelson Mandela’s momentous rise to power. He speaks of this historic time, his meetings with the iconic Mandela and Africa’s promising economic future. Hailing from one of Pakistan’s most renowned literary families, Jamil Zubairi’s father, the late Hamid Zubairi, was an important editor of the Dawn newspaper in pre-partition India. After partition, he moved to Pakistan where he worked for Dawn in Karachi. He retired from Dawn after working there for 31 years and then worked with the Business Recorder newspaper for 30 years.
You have extensive international experience in banking, particularly in Africa, what are your views on economic growth in South and Sub Saharan Africa?
Jamil Zubairi: “My banking career started in London in 1985. In the last 28 years apart from London I have lived and worked in Zurich and Johannesburg as well. It has been a very varied career – I played a major role in starting two new banks, one in the UK and one in South Africa, started a new branch of a UK bank in Zurich and played an important role in developing a new subsidiary of a Swiss Bank in London. I have worked in both small and large global banks.
I first visited South Africa in 1987 and subsequently lived there for six years during the nineties. As part of my work I have travelled extensively in Southern and East Africa.
In my view, the challenge Africa faces is that the developed world knows the continent offers many exciting investment opportunities, however structuring an investment just seems to drag on. As there are no developed stock markets (The Johannesburg Stock Exchange is the only developed stock exchange in sub Saharan Africa) investors face many hurdles. Governance, lack of transparency, political and reputational risk and law and order issues all have an impact.
However, the world is learning to deal with Africa. We see more direct investment transactions and foreign investments are expected to increase to over USD 50bn by 2015. Countries like Angola, Zambia, Ghana, Nigeria, Mozambique, Rwanda and Tanzania etc. are seeing strong growth in a range of sectors. South Africa, the largest economy in Africa which joined the BRICS club in 2010, has failed to attract investors and the country’s GDP growth has fallen below 2%. Nigeria is expected to overtake South Africa as the largest economy in Africa by 2015 and is also seeing a rapid growth in its population. In about three decades Nigeria is expected to become the fourth most populous country in the world. Ethiopia the second largest country by population in Africa is also seeing growth increasing. Zimbabwe which had to scrap its currency and replace it with US Dollar after years of fiscal and monetary mismanagement is now seeing double digit growth as well.
In my opinion the continent offers huge opportunities in many sectors. Investors should make an effort to understand the values and culture of the continent, build relationships and learn to work with the governments as they still influence activities in the private sector. One must not forget that the physical and financial infrastructure of Africa requires a lot of investment and attention which should be recognised.”
You witnessed the transition from the apartheid regime to Mandela’s historic ascent to power in South Africa; can you share your impressions of that momentous time?
JZ: “I landed in Johannesburg on the day Nelson Mandela came out of prison in February 1990. I was subsequently transferred to South Africa and I lived there till September 1996. I consider myself very lucky and fortunate to have witnessed this historic event – the end of apartheid in South Africa. I had the honour of meeting Mr. Mandela on two occasions. I first met him on his 75th birthday and then just before the elections at a private dinner where I ended up sitting next to him and was fortunate enough to have had the opportunity to talk to him in depth.
What I clearly remember of my meetings with Mandela was how easy it was to talk to him; he was very well informed and even discussed in some detail the bank I was working for – size of capital, total assets and our investment and lending policies. He came up with many innovative solutions – the truth and reconciliation commission, merging the ANC armed wing with the army, encouraging sport to reconcile and heal the nation, handing over power after the end of his first term and not standing for a second term. All this whilst never complaining about the horrible treatment he received while in prison for 27 years. He even requested his prison guards attend when he took his oath of office after winning the election. Mandela inherited a wounded nation with a lot of problems and in a short period helped it to move forward.
When I moved to South Africa apartheid was still very much in evidence and various communities were forced to live separately. What I noticed was that as an outsider, I was accepted by all communities with open arms. They were all very friendly and helpful and I enjoyed their culture and food. It is really nice to see that these communities are now pulling together as one nation.”
You have a wealth of international experience in banking and finance, what are your views on the impact of the global financial crisis on banking in general and private banking in particular?
JZ: “Banking is going through a very difficult period at present. Without a massive bailout by various governments running into many billions of dollars, the global banking system would have collapsed. There is pressure on governments to tighten regulations, sharpen supervision on banks and to control remuneration of bankers. The crisis showed that the banks did not have adequate risk controls in place and took unnecessary risk and suffered heavy losses. At the same time regulators failed to see the problem and did not take steps to force the banks to reduce risks. The sector is shrinking and in the UK alone the banking sector has shed almost 200,000 jobs in the last 2 years.
What is noticeable is that many banks have changed their chief executives and members of their board of directors. The new leaders have been given the mandate to restructure the banks, manage losses and focus on core businesses. Many banks are exiting from territories and businesses that they do not consider core to their operations. Even the main activities are being reviewed and elements that are considered high risk are being shelved and curtailed. The industry is shrinking, balance sheet exposures are being reduced and efforts are being made to substantially improve capital adequacy.
The Financial crisis had a major impact on Private Banking as well. Some banks have sold off their private banking operations and the others have stopped dealing with clients from territories they consider high risk. The main challenges private banks face today are transparency and suitability and here regulators globally have tightened rules as well. Banks have to ensure that they document in detail that the client funds that they hold are from legitimate and acceptable source – gone are the days when accounts could be opened without fully understanding and documenting the source of funds. Risks relating to investments that banks recommend now need to be fully explained to the client and documented. Fees should be transparent and whatever the bank sells to the client should be suitable i.e. it is in line with their risk profile and personal circumstances. The private banks have also seen a sharp increase in their back office costs as compliance and regulatory checks have increased. Managing these costs will be an on-going challenge as regulatory pressure is likely to increase.”
How do you see wealth management evolving in the future?
JZ: “In my view wealth management business will grow and has a promising future. The Financial industry is complex with a range of savings, investments and borrowing products. In the same way that we go to a GP for our day to day health needs, clients also need a Private Banker to manage their day to day relationship. Similarly, where a GP refers a patient to a specialist, a Private Banker refers a client requiring special advice, for example to pensions, tax planning and inheritance planning experts.
In the coming years, jurisdictions and banks will be measured by their performance and service – jurisdictions with robust legal system and banks with sound balance sheets and global reach will be the winners.”
You come from a highly acclaimed literary family, what drew you to a career in banking?
JZ: “My late father Hamid Zubairi was a journalist. He joined the famous newspaper Dawn in Delhi in 1941-the year it became a daily. After retiring from Dawn he joined the newspaper Business Recorder. He worked as a journalist for almost 61 years. My late mother was a teacher of English Language and retired as Principal of a girl’s high school in Karachi. Both my parents were graduates of the Aligarh Muslim University. They both loved poetry and were good writers.
From a young age my elder sister, my elder brother and I on occasions wrote articles in the weekly children’s magazine of the newspapers in Karachi. However, sadly our father advised us not to consider journalism as a career. In the sixties and the seventies when we were growing up Pakistan was ruled by the military and there was strict press censorship. The civilian government that came to power in the seventies did not take the bold step of freeing the press. Time and again our father told us that at his age he could not start a new career and he was stuck in an industry the government would not allow to blossom and grow. The recent developments are encouraging – we now have a free press in Pakistan and I would like to add that my younger brother who is also a banker writes short articles regularly which are published in various magazines and newspapers.
I was a good student and I passed my B.Com in first class and was in the merit list of top 10 graduates. My parents were very happy with my results and they accepted my request to go to London to do chartered accountancy. After I qualified as an accountant my firm offered me a job and helped me with my work permit and London became home.
In 1984 a purely chance meeting led to an offer to join a small team as manager of operations of a newly licenced bank in London and I have never looked back.”
As a leading banker, what factors do you feel have contributed to your success?
JZ: “I started my career in banking in 1985. My first boss Mr H D Habib (Owner and CEO of a new bank in the UK) on the day I joined told me that there were more than 600 registered banks in the UK. Customers had a choice as many banks offer the same products and services. The brand of the bank you joined gives comfort to the customer but it is how you deal with the client that is most important. How you service the client will determine whether he starts and then maintains a relationship with the bank. I took this advice on board and over the years have always given my clients the attention they deserve.
I am also a great believer in building teams as I feel strongly that teams working together give better attention and service to their customers. In the various institutions where I have worked, I have ensured my team colleagues get to know the entire client base well. In today’s market, the Banking industry has to follow many rules and regulations and clients should be educated that these rules are for their benefit – cutting corners will never help.”