Awards for Excellence 2018
Reform in the Middle East, clearly, is not just about recent dynastic change. Across the Gulf, increasing budgetary constraints – thanks to the continued viability of shale oil and gas production, and the spread of renewable energy –underline the importance of economic diversification.
These shifts have profound implications for the region’s banking industry. Meanwhile, the sector is going through its own transformation, not just technologically but also in terms of rationalization through mergers. The creation of First Abu Dhabi Bank (FAB) looks like a harbinger of more to come. Mergers of local importance are already under discussion, or rumoured, in Saudi Arabia, Qatar and Kuwait.
Mohammad bin Salman has dominated the headlines in Saudi Arabia. His elevation to crown prince last June has led to social reforms that include allowing women to drive and cinemas to open, as well as a roller-coaster anti-corruption purge and a region-shaking embargo against Qatar. But change is also underway elsewhere in the region, for example, in the United Arab Emirates. The opening up of Abu Dhabi National Oil company (Adnoc) seems more advanced than its Saudi equivalent, even if Saudi Aramco’s planned IPO is the end game for many investment banks.
These reforms may position the region better for the challenges ahead, although they are also exacerbating shorter-term economic sluggishness. The introduction of value added tax in Saudi Arabia and the UAE is a case in point.
International bond issuance and public financial support have eased banks’ liquidity problems, yet lending remains slow, especially in Saudi Arabia. The UAE and even Qatar have enjoyed better growth recently, particularly in the lead up to Expo 2020 in Dubai and the 2022 World Cup in Qatar.
The bank that has best weathered these changes and looks most likely to benefit from the opportunities they provide is Emirates NBD, this year’s winner for best bank in the Middle East.
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Shayne Nelson |
Under chief executive Shayne Nelson, and despite the political problems in the region, the bank’s net profit reached a record Dh8.35 billion ($2.3 billion) in 2017, up 15% year on year. Net interest income, meanwhile, improved by 7%, as the bank continued to grow its loan book to support the local economy.
This success owes much to the bank’s forward thinking in recent years, not least in the complete revamp of its digital offering. The bank has now completed its five-year digital transformation. The changes introduced in 2017 include paperless personal-loan applications and account openings, a new online banking platform, face-to-face conversations online with a financial adviser, voice recognition for phone banking, access to Apple Pay and Samsung Pay, and the integration of blockchain technology into cheques.
Such innovative features are now central to a bank’s success, as financial technology startups continue to chip away at markets previously dominated by incumbent financial institutions. The banks that are too slow to adapt to the new technology will fall behind.
Emirates NBD is not resting on its laurels. It has decided to invest a further Dh1 billion over the next three years to further improve its digital offering.
The bank will have to be mindful that its dominant position in the UAE, and in the Middle East more broadly, is being challenged by First Abu Dhabi Bank, a new institution with real promise.
But Emirates NBD is being smart about targeting the next generation of clients. To that effect, the bank launched liv., a digital bank targeted at millennials, as a mobile-only service providing a banking-meets-lifestyle experience, with no paperwork, no sales calls and no inbound call centre. The account opening is instant, with know-your-customer controls using biometrics.
Emirate’s expanding presence in Saudi Arabia, with a fully fledged commercial branch and an investment banking licence, places it well to benefit from the economic reforms taking place in the Kingdom.