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banking and finance


Rick Pudner, CEO, Emirates NBD


Arab spring, the tsunami in Japan, the US debt ceiling issues and, of course, the ongoing sovereign debt crisis in Europe. The local and regional economies have not been immune to these developments and this was reflected in weaker private sector activity and consumer confidence, while access to international capital markets was affected by heightened global uncertainty and risk aversion. Nevertheless, the region has been relatively resilient in the face of these challenges as growth has benefited from increased oil production as Saudi Arabia, the UAE and Kuwait stepped in to offset the decline in production from Libya, as well as higher oil revenues. In the context of this macroeconomic


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backdrop, the UAE banking system has similarly been resilient with capitalisation and liquidity levels remaining extremely healthy and mid single-digit average operating profitability year-to-date. This was achieved despite relatively subdued private sector loan growth and continued balance sheet de-risking in the aftermath of the 2008 global credit crisis. During 2011 the UAE banking sector also faced additional regulatory tightening from the Central Bank. Looking ahead to 2012, the


macroeconomic environment remains challenging and the global outlook is


he past year was dominated by a number of significant macro events both regionally and globally, including the


still uncertain. Regional private sector activity will depend to a large extent on continued stimulus from government spending, as well as global growth in 2012. In addition, Libyan oil production is expected to revert to more normal levels over the next few months, which suggests that GCC oil production is likely to decline, or at best remain flat, providing a headwind to growth in the region next year. The uncertain outlook for next year


will have implications for the UAE banking system and the evolution of business strategies. Firstly, volatility and uncertainty will likely remain for some time which means that speed of decision making and execution becomes a critical success factor. Secondly, private sector activity and loan growth is expected to remain relatively subdued, which implies greater competition for underwriting opportunities and pressure on banks’ net interest margins. As a result, strategies are likely to focus on building and developing fee-generating businesses, improving customer service and delivery, enhancing credit appetite in selected sectors and refocus to under-penetrated segments. At the same time, optimising operating costs and efficiency as well as balance sheet management will remain high on the priority list. Finally, we may see a pickup in local and regional mergers and acquisitions activity as banks seek diversification and growth or, alternatively, to strengthen vulnerabilities in parts of the banking system.


fast facts


– the bank was formed by a merger between emirates Bank international and the national Bank of dubai in 2007, and boasts the largest asset base in the Gcc – dhs286.2 billion as of the end of 2010.


– the uae’s largest bank, emirates nBd saw its shares rise 20 per cent this year.


– the bank has 132 branches and around 700 atms across the uae.


GULF BUSINESS / 55


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