U.S. Markets open in 7 hrs 47 mins

Saudi Banker’s Rise to Top Aramco Job Tracks Prince’s Ascent

Vivian Nereim, Matthew Martin and Dinesh Nair

(Bloomberg) -- Any doubt that Yasir Al-Rumayyan belonged to Crown Prince Mohammed bin Salman’s innermost circle was dispelled when a photo of them went viral in Saudi Arabia in December.

It showed them with five others on Mount Lawz, in the northwestern part of the country, in baseball caps, shorts and t-shirts, prompting Saudi-watchers to call them “hiking bros.”

More evidence of Al-Rumayyan’s rising clout emerged last week when the former banker, who heads the country’s about $320 billion sovereign wealth fund, was appointed chairman of oil producer Saudi Aramco. Al-Rumayyan is stepping into what’s arguably the country’s top corporate job as the world’s most profitable company prepares for what may be the biggest initial public offering ever.

The 49-year-old’s meteoric rise has paralleled that of the prince, often referred to as MBS, who went from being a relatively obscure royal to the most powerful man in the kingdom in just a few years. Their tandem ascent tells the tale of Saudi ambitions as it seeks to wean itself off reliance on oil. The sale of a stake in Aramco is at the heart of MBS’s plans to transform the economy, with the IPO proceeds likely to be poured into newer areas in preparation for dwindling oil demand in the decades to come.

“The move of Rumayyan to the Aramco role speaks to his rise and influence with MBS and the leadership,” said Karen Young, a Gulf specialist and resident scholar at the American Enterprise Institute in Washington, D.C. “However, it also shows the weakness in senior management and government ranks. Few people are able and willing to do this work, with enormous political pressure, constant evaluations and government intervention in market situations.”

So how did a relatively unknown local banker make it into the country’s top echelons and its biggest company? It’s unclear exactly how and when Al-Rumayyan met the 34-year-old prince, although people who know him say it’s a recent connection. He began being mentioned in official statements as part of MBS’s entourage in 2015, just as the prince cemented his own role.

Catapulted into the inner sanctums of the kingdom, the former Saudi Fransi Capital banker quit his job when he was appointed a royal court adviser shortly after King Salman took the throne in 2015. A few months later, MBS was named deputy crown prince and entrusted with the task of transforming the economy.

Al-Rumayyan became MBS’s man at the Public Investment Fund, or PIF, the state investment vehicle, charged with recasting it from a sleepy domestic holding company into one of the biggest investors in global technology start-ups. The fund accumulated stakes in electric carmaker Tesla Inc., ride-sharing company Uber Technologies Inc. and made a $45 billion commitment to SoftBank Group Corp.’s $100 billion technology fund.

Many bankers and Saudi-watchers were bewildered by Al-Rumayyan’s appointment at the PIF and privately questioned his credentials for such a high-profile role, which entailed sharing the global stage with the likes of Goldman Sachs Group Inc. Senior Chairman Lloyd Blankfein.

After all, Al-Rumayyan had been on a relatively unexceptional career path until he was handpicked by the prince. After studying accounting at the King Faisal University and later attending Harvard Business School’s General Management Program, Al-Rumayyan, who by most accounts comes from a relatively modest background, began his career at Saudi Hollandi Bank, eventually becoming the head of its international brokerage. In 2004, he became a part of the founding team of Saudi Arabia’s Capital Market Authority. He served as Saudi Fransi Capital’s chief executive officer between 2011 and 2015.

Then practically overnight, he went from being an adviser on local IPOs to someone courted by the world’s biggest business leaders, from JP Morgan Chase’s Jamie Dimon to Tesla’s Elon Musk.

Steffen Hertog, a Gulf specialist at the London School of Economics, called his unlikely ascent “remarkable.” “He is not only in charge of MBS’s key vehicle for diversifying the local economy and Saudi Arabia’s foreign asset base, but also plays an important role at the court,” Hertog said.

According to a person who has attended top-level Saudi meetings, the prince always pays close attention to Al-Rumayyan’s views. How someone ends up earning the prince’s ear appears to be driven as much by their personality and loyalty as their competence, analysts say. That could explain why former Aramco chairman Khalid Al-Falih -- who was viewed as a capable technocrat, but not particularly close to the prince and had reportedly pushed back on the IPO plan -- was edged out of that post.

“The personnel change is reflective of the Crown Prince’s desire to restart the IPO,” said Gregory Gause, professor of International Affairs at Texas A&M University. “It seemed as if the IPO had been put off indefinitely, which one can assume was what the technocratic leadership of Aramco wanted all along. With the IPO seemingly back on track, it is understandable that the Crown Prince wanted someone not affiliated with shelving the idea previously.”

Late Saturday, Al-Falih was dismissed by King Salman from his post as energy minister and replaced him with Prince Abdulaziz bin Salman, an older half-brother of MBS.

What Al-Rumayyan has is the prince’s absolute trust, said a person who has worked with him and known him for more than 15 years.

“Yasir is excellent in managing upwards,” he said, declining to be identified, citing local sensitivities. “The key thing Yasir offers MBS is trust. In countries like Saudi Arabia and for the ruling family, trust is the key, capability, not always. The Crown Prince sees him as someone who’s not looking for fame, money or designation and he ends up getting all that from him because he doesn’t try hard for it.”

Al-Rumayyan may also have gained from his reputation as something of a risk-taker, a trait he shares with his mentor, who has sought to shake up traditional Saudi society by introducing reforms including legalizing cinemas, allowing women to drive and letting them apply for passports without permission from the men in their families.

Described as mellow and understated, even underwhelming, by some people who’ve worked with him, Al-Rumayyan is seen by others as smart, serious, bold and something of a task-master. During his four-year stint as CEO of Fransi Capital, the investment bank topped league tables for a while, raising his profile. Some put that down to his being in the right place at the right time, noting that the Fransi team had built a big pipeline of deals that were completed after he joined, allowing him to take credit for them.

Still, his ambitions for the small, local bank were evident in his decision to open an office in Dubai in 2015 in the expectation that Saudi Arabia would open up to foreign investment, and betting that having a toehold there would ensure investors wouldn’t automatically go to international banks. No other Saudi bank was prepared to do that at that point. After Al-Rumayyan left the bank, the new management thought the office was too expensive and shut it down. People at the bank, however, remember it as one of Al-Rumayyan’s boldest moves.

“Yasir definitely had a visionary side where things he said that may have seemed a bit futuristic at the time look incredibly prescient in hindsight,” said Muskan Thacker, who was the CEO of Saudi Fransi International and opened the bank’s Dubai office.

That audacity continued at PIF -- with the prince’s blessing. At the luxurious St. Regis Saadiyat Island Resort in Abu Dhabi in February, where the Milken Institute held its Middle East and North Africa summit, Al-Rumayyan was asked about the PIF’s $45 billion commitment to Softbank’s technology fund. His response reflected how closely his views track those of the prince.

“Some people say this is too aggressive -- it could be,” he said. “But to us it’s still a fraction of our assets under management and we need to be in futuristic investments rather than be in more traditional or conventional investments.”

By putting a finance executive at the top of the oil company rather than someone from the energy sector, MBS may be attempting to re-calibrate the outsize role the commodity plays in the Saudi economy. In 2016, he said Aramco “is a company that has a value – an investment. You must own it as an investment. It should not be owned as a primary commodity or a major source of income.” Aramco accounts for about 67% of the government’s revenue.

The kingdom’s de facto ruler has said he expects Aramco to be valued at over $2 trillion, but analysts see $1.5 trillion as more realistic. The original plan, announced by MBS in 2016, was to sell up to 5% of Aramco on the Riyadh exchange and at least one international bourse.

Potential investors in Aramco may have reason to worry about Al-Rumayyan’s conflicting interests, given the multiple hats he wears and his closeness to the prince. In addition to his role at the company, he’s a top government official, the governor of the PIF -- which MBS wants to expand into the world’s largest sovereign wealth fund from 10th spot currently -- and chairman of a small but important think tank in the royal court.

Still, they could take some comfort from Al-Rumayyan’s own investment philosophy, and hope he practices what he preaches. Asked at the MENA summit about what he looks for in his investments, the executive said: “my answer is short and sweet -- double digit internal rate of returns.”

(Adds change at Energy Ministry in 14th paragraph.)

To contact the reporters on this story: Vivian Nereim in Riyadh at vnereim@bloomberg.net;Matthew Martin in Dubai at mmartin128@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Vidya Root

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.