The media has had the effect of kicking
the credit crisis into every household, according to the head of
Lombard Odier’s Middle Eastern operations, leading to more
risk-averse strategies and increased demands on private bankers.
Titien Ahmad looks at how the bank is tackling
this and other issues.

Lombard Odier, along with other traditional Swiss private banks,
is making a lot of its conservative business model in these
tumultuous times.

During the heady days of the investment banking boom in 2006,
Lombard Odier sold off its investment banking unit to rival
Vontobel to focus on private banking and asset management. The bank
has also recently made a statement it had no exposure to the
alleged $50 billion fraud by Wall Street trader Bernard Madoff.

“Our conservative stance has been the pillar of the bank for the
last two centuries and has helped us to weather storms such as the
current crisis,” said Pasha Bakhtiar, managing director and head of
its Middle East operations, in an interview with Private Banker
International
,

“We do not branch out into other areas of banking such as
investment or corporate banking,” Bakhtiar added. “We did not
leverage our balance sheet for excessive credit or get involved in
subprime paper or Madoff.”

With €111 billion ($144 billion) under management, Lombard Odier
is family-owned and each of its nine managing partners is a
part-owner, part-manager who bears unlimited liability. This gives
them direct financial responsibility of the institution’s
well-being extending to their personal assets. This is the selling
point for Lombard Odier in a market where most of the wealth is
family-owned.

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In the Middle East, Bakhtiar said: “We have a large percentage
of businesses that are family-owned. The head of the family
translates to the head of the business. The distinction between the
wealthy individual and the business man is quite grey and usually
it is one and the same here.”

“Our managing partners are very much involved in the business.
They are in the region 5 to 10 times a year and take the time to
meet with clients and prospects. This demonstrates the level of
commitment and trust between clients and ourselves,” he added.

“We are also able to show continuity in the business, it’s the
seventh generation that runs the business. There is continuity of
management and the family in the last 200 years.”

Bakhtiar has been with the bank since 2003 and speaks seven
languages including French, Spanish, German, Italian and Farsi. He
has seen a difference in the investment tendencies of his clients
in the Middle East.

“Clients, in general, are more cautious and are more involved
with the contents of their portfolio,” he said. “The media has had
the effect of kicking the crisis into every single household –
everyone seems to know today what a hedge fund and subprime
mortgage is. People are much more aware on issues of liquidity and
risk.

“The tendency now is to take a bit more time to explain to the
client what is being invested. This also translates to a more
risk-averse client profile.”

Although Bakhtiar declined to go into specifics, he said:
“Portfolios are affected. Our focus is on capital preservation. We
are part of a system that is going through a turbulent time and we
have performed better than our competitors. We are able to weather
the storm and it is about how you position yourselves in the long
term. Our investment outlook focus is on a three to five-year
horizon for our clients; we are not subject to pressure to deliver
short-term results.”

The Middle East market, together with Asia, has been singled out
by Lombard Odier’s management as engines of growth for the private
bank. Bakhtiar is still confident of the long-term prospects of the
region even though many players are adopting a wait-and-see
approach to get better clarity on effects of the global crisis on
the Middle East economy.

“The Middle East markets are going through a rough patch right
now,” Bakhtiar acknowledged. “We have witnessed tremendous growth
in the past five to six years. Now we obviously have to readjust
but the long-term potential for the region is still intact,” he
said.

“We can see that there are already certain measures being taken
by the UAE government and also other governments in the Gulf to
reassure investors and provide liquidity where it’s needed. It is
hard to predict when the crisis will turn but the region has
extraordinary leadership and management. They are nimble enough to
adapt to what is going on,” he pointed out.

“People will still look at emerging markets like the Middle
East. At the end of the day, the economy here is not shrinking even
if growth is curtained from double-digit to single-digit unlike in
Europe where you see a contraction across the board. Opportunities
still remain.”

“The bank has reiterated its commitment in the region,” said
Bakhtiar. “We definitely have plans to scale up the team
intelligently if there are specific opportunities to bring new
people on board. As clients are more exposed to the press and what
is going on, people are more interested in the private banking and
asset managers as opposed to the larger institutions.”

The bank currently has 25 staff covering the Middle East with
seven based in a Dubai office which opened in February 2007.

“We have been covering the region for the past 50 years and
establishing a physical presence is a natural step for us,” said
Bakhtiar about the Dubai branch.

Being a Swiss-based institution, Lombard Odier will invariably
be thrown in the spotlight over banking secrecy issues. However,
there is a very low or non-existent tax structure for most Middle
Easterners, making tax evasion that has dogged the rich in the US
and Europe a non-issue in this region.

“Banking secrecy is still very much enshrined in the Swiss
constitution,” Bakhtiar emphasised. “As far as the Middle East is
concerned, there is no specific concern focused on this area. As
there are no fiscal or tax considerations here, the client is very
focused on the level of service and will find secrecy is not going
to be jeopardised