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Alex Thursby, CEO of NBAD |
The tightening liquidity squeeze in the Gulf has triggered questions about the ambitious international expansion plans of National Bank of Abu Dhabi. Does its leading shareholder, the Abu Dhabi state, still have the stomach for such boldness as the UAE reels from the financial impact of oil at $50 a barrel? Will CEO Alex Thursby even be allowed to see it through?
Thursby always brings an energetic gumption to his work and is as enthusiastic as usual when Euromoney calls. Insisting he will be around to see through the bank’s expansion “unless I get knocked over by a bus”, he suggests that the international growth so far has already proven itself as a useful antidote to the liquidity problems in the Gulf.
“It’s been absolutely outstanding for us,” he says. How so? Well, the third quarter results, accurate to September 30, show that in the first nine months of 2015 the bank’s international network, which accounts for about 20% of revenues, provided greater growth than the UAE did. Revenue grew 13% year-on-year in international businesses, deposits grew from Dh63 billion to Dh78 billion and now represent 33% of the group total, and NPLs in international businesses have halved to just 0.5%, compared to a group figure of 2.6%.
Trade corridor
“This is the whole reason we decided we had to create a viable strategy for the west-east corridor, and for those entities outside who trade with that corridor,” Thursby says, referring to NBAD’s key area of ambition from Africa through the Middle East into Asia.
“With the liquidity squeeze that’s happened here, we and the system have lost a lot of government deposits.” NBAD had Dh37 billion of outflows of government deposits in the first half of the year alone. “But we have been able to fill that almost dollar for dollar from the international business. In fact, if anything, our international business is throwing off more liquidity than our loan assets.
“So it has been amazing, to be perfectly frank.”
Does the board – bearing in mind Abu Dhabi Investment Council, a UAE sovereign wealth vehicle, is the dominant 70% shareholder – feel the same way? “If you look at what was said in our statement for Q3, the board sees the great virtue in what we’re doing,” says Thursby. “They feel at the board level that there is a need for diversification for the long term for this bank.”
Specifically, NBAD chairman Nasser Alsowaidi – also a member of the Abu Dhabi Executive Council and chairman of the Energy Authority – says: “We are confident that the bank has the right long-term strategy in place, and we are confident that our management team will successfully execute against this strategy.”
Speaking in November, Thursby is also able to point to clear commitment to the expansion strategy, as at the start of the month the bank opened a branch in Mumbai, which is intended to be one of its main international hubs. “We’re not looking to develop a huge bank there, but we are hoping to bank the best Indian corporations, both in India and more importantly outside India,” he says. “There is a lot of UAE business there.”
India is the UAE’s biggest trading partner and many UAE businesses are there already: Dubai World through the Indian assets of its P&O acquisition, and Emaar and Emirates too.
India represents NBAD’s 18th country of operations, and fits into the second of Thursby’s three pillars he talks about for strategic development (pillar one: improve retail and commercial in the UAE and then the Gulf. Pillar two: build wholesale and wealth network business across nine locations, Mumbai among them. Pillar three: build five new international franchises in the West-East corridor).
Thursby does admit that the third of these pillars – which had a five-year time frame when announced in 2013 – might be pushed back.
“What I will say is that, in this new world, we are slowing pillar two and three a little bit because there is so much to do around continuing our technology spend and modernising the spine of the bank, and it is fair to say our domestic market will be a bit tougher for the next few years with depressed oil prices,” he says.
“We have realised that trying to build five [new franchises] in five years, on top of pillar one and two, which are going at a pretty fast pace, is maybe… we’re going to take our time on pillar three.”
'Not dead in water'
Still, it’s not dead in the water, says Thursby. “It will take us seven or eight years to get it to the level where we want it,” he says, pointing to Egypt as an example of the strategy in action. When Euromoney first tries to reach Thursby, he is in Egypt, celebrating the bank’s 40th year of operations there and seeking to modernise the business.
He also says the precise new franchise markets were never formally named and remain under consideration, though they could include Nigeria, Kenya, Indonesia or Malaysia alongside Egypt. “We said at the outset we would select them as we went along with the process.”
Despite whispers that Thursby might leave at the end of his current contract, he insists he is staying. “I heard a rumour I was going to go and run Standard Chartered,” he says. “I could not think of a thing more distant from my thinking than to go and do that.”
He adds: “If you work for a western bank, full stop, you are at a troubled place. There’s a reason for that. They’ve got their models wrong.”
