The UAE’s banking sector is set to return to strong profit growth in 2012 as most banks have made provisions for the non-performing assets they accumulated during the financial crisis, Abdul Aziz Al Ghurair, Chief Executive Officer of Mashreq, said yesterday.
Al Ghurair said profit growth would be lower for Mashreq and the entire banking sector in 2011, but said he expects strong profit growth in 2012. “There is a strong recovery process under way. We were expecting it to be faster. What’s happened around the world has pulled down the economy,” he told reporters on the sidelines of MEED’s Middle East Retail Banking 2011 event yesterday. “The last two years have been bad in terms of profit growth. This year is about stabilising the profitability of banks and I think 2012 is a year for takeoff,” he said. Al Ghurair expects to see 10 to 15 percent profit growth next year.
The sovereign debt crisis in Europe and a potential banking crisis in Europe and the US are unlikely to impact the financial system in the UAE and the Gulf region, Al Ghurair said. The regional banks, especially UAE banks, are better prepared for the fallout from Europe, he said. “This time we have enough liquidity, balance sheets are cleaner and exposure to the potential problematic assets is negligible,” said Al Ghurair. However, he said the bad news from across the world is likely to impact asset prices in the region.
“Stock valuations are very cheap in the region. Many shares are trading below their book value. It may be a good time for acquisitions,” he said. The global financial crisis has made the bankers in the region wiser and more prudent in terms of doing business, he said. “Besides making lending very prudent, banks have become very customer oriented. This is a good change that has happened to the banking sector,” Al Ghurair said.
As for the changes in Mashreq he said the bank has changed its whole approach towards customer service, introducing an integrated approach and providing end to end service. Al Ghurair said the company has no immediate plans to go for a bond issue this year. “We have enough liquidity and our capital adequacy is at 22 percent. There is no reason (to issue a bond). If we do it, it’s just to stay in the market,” he said. However, he added that the bank may consider a bond issue in the second half of 2012. “We are always evaluating the market conditions. If the conditions are attractive we might go for fund raising in the second half of next year.”
Good growth seen
Abdul Aziz Al Ghurair, CEO of Mashreq Bank, expects to see 10 to 15 percent profit growth next year.
The retail banking market has stabilised in the UAE, thanks to the prudent Central Bank regulations and quick adaptation of banks to the new business environment, said Abdul Aziz Al Ghurair, CEO of Mashreq said yesterday at the Middle East Retail Banking 2011 conference. He was awarded The MEED Leadership Award in Banking. In his remarks to the Retail Banking Conference on the health of the regional banking industry he said the root cause of the banking sector’s problems prior to the global financial crisis was greed.
“Bankers everywhere are a greedy lot. We didn’t see a problem with people acquiring large numbers of credit cards and loans beyond their means. The weak link in our banking system is that we don’t have a credit bureau. It (credit bureau) is a protection system for the banking system and the economy,” he said.
Revenue fall likely
While the Central Bank of the UAE capped the personal loan limits earlier this year, banks themselves have significantly tightened their lending norms during the last two years. As a result the banks are expected to see a decline in retail banking revenues this year. UAE banks’ revenues from their retail business are likely to decline as much as 20 percent as a result of Central Bank rules that took effect in May, a National Bank of Abu Dhabi official said at the event.
“The impact will be significant. Definitely double-digit. I’d say 15 percent to 20 percent on the entire revenue pool of banks in this market,” said Suvo Sarkar, general manager for consumer banking at NBAD.