Suvo Sarkar currently heads the retail banking division of Emirates NBD for the second time. He returned to the bank last year after running the retail division of National Bank of Abu Dhabi for two years. In his last stint with the bank, Sarkar was instrumental in the smooth transition of the retail banking business during the merger of Emirates Bank and National Bank of Dubai in 2007. In an interview with Gulf News, Sarkar speaks about the latest trends in the industry and the direction of Emirates NBD’s retail business.
Gulf News: Emirates NBD has been making an aggressive push in retail banking business over the past one year. What is the rate at which your retail business has grown this year?
Suvo Sarkar: Growth has been very good in both topline and bottomline. As for topline retail revenues, we have grown around 13 per cent year on year. Year to date profits have also grown, for the entire consumer banking and wealth management business, at over 15 per cent. We expect this trend of double digit growth to continue in 2014 and beyond. The growth has been impressive across all customer segments — personal banking, affluent banking and business banking, as well across all products — savings, loans, cards and wealth management. The same is true for all the geographies we operate in, not just in Dubai. Retail Banking is today one of the biggest contributors to the Bank’s overall performance.
Q: Hasn’t that been the overall trend in the retail banking segment in the UAE?
A: We estimate that the retail banking revenues in the UAE are growing at about 8 to 10 per cent this year. We are growing faster than the industry, and in the past 12 months, have seen a growth in market share across almost all our products. I will attribute this to our brand equity, our product range, our distribution network and our customer loyalty.
Q: After the financial crisis most of the banks went into a period of balance sheet repair and rationalization of assets giving priority to quality. Now it looks like banks are once again back to aggressive expansion. How does the asset quality look now?
A: The Retail asset quality for the industry in the last 18-24 months has obviously been far better than the preceding three years. In fact, the asset quality today is possibly better than the pre-crisis years. This gives the banks confidence to lend more to the consumer sector, thereby driving GDP. The dark clouds that the industry faced between 2008 and 2011 are largely gone, so most banks, including Emirates NBD, have reviewed the tight credit underwriting criteria imposed as a necessity in those years. As a result of this and on the back of positive market sentiment, all retail asset products are back on a growth mode.
Q Is that because of an improvement in the quality of the market or because of conservative lending policies?
A: It is because of both. The market has improved across most sectors, whether energy, manufacturing, retail, hospitality and logistics. In parallel, banks have opened up their credit policies conservatively, not recklessly. Consumers today are more careful in how much they borrow. Additionally, the regulator has imposed much required controls on lending criteria. Overall, we will see growth that is healthy and sustainable.
Q. What is the current size of Emirates NBD’s retail assets and what is its share in your total assets?
Retail bank assets for the conventional bank are currently 11% of the bank’s overall assets. This has grown by over a percentage point since last year, and our aspiration is to continue to grow this ratio in the next 3 years on the back of both secured and unsecured lending to consumers and SMEs. We are seeing a healthy growth in all asset volumes, be it credit cards, personal loans, auto loans, SME loans and mortgages.
Q. Despite all the positive stories on the revival of the property sector, we do not see any big promotion of mortgage products. Is the bank risk averse in this segment, at least for now?
We are indeed very active in the mortgage market, and have always been one of the key players in the industry. Our new mortgage volumes are more than double of last year’s. However, we are conservative in our lending criteria and are supportive of the new mortgage regulations from the Central Bank. They will help to reduce speculation and lead to a healthy long-term growth of the industry, while protecting customers. In a booming market, greed can lead to irrational behavior and spoil the party for all.
Q. Etihad credit bureau is expected to be launched early next year. Are you fully geared for the launch?
Absolutely. As part of the initial working group of banks, we have been providing inputs and doing data checks with the Central Bank for a few months now. Training of frontline and back office staff for the launch is on schedule. We are fully geared for the launch sometime early next year.
Q. What will be the impact of credit bureau on UAE’s banking sector?
We might see a short-term blip on Retail asset growth. But the good news is that both consumers and the banks will benefit in the medium to long term. For the banks, the bureau will provide more clarity on customer exposures and history, and allow more informed decision making and risk-based pricing. For the consumers, it means better pricing on loans based on credit scores. Overall, the market dynamics will become more mature, and industry level asset growth will be more sustainable.
Q. Expo 2020 is widely seen as the next big catalyst for UAE’s economy, what are your expectations for your business if the UAE wins the bid?
Emirates NBD is a premier partner supporting Dubai’s bid for Expo 2020. We believe that if the event were to be awarded to Dubai, we will see a further improvement in the emirate’s medium-term economic growth prospects as infrastructure investment will likely be brought forward and anchored by the event. Transport infrastructure and the tourism sector (construction of new hotels and leisure facilities including retail space) are likely to be key beneficiaries of this investment. The official public budget for the event is currently estimated at Dh30 billion, but private investment could add to this figure significantly. The SME sector will benefit significantly from these trends, and given that we are the market leader in SME banking with one out of five SMEs banking with us, we are bullish about the additional business that the Expo can potentially bring. We would like to wish Dubai the best of luck for the bid.
