Dubai: After achieving exceptional retail revenue and profit growth in 2014, Mashreq expects a moderation in the retail revenue growth rates in 2015, said Farhad Irani, Group Head of Retail Banking at Mashreq in an interview with Gulf News.
“In 2014 we exceeded all projections. All segments of our retail business such as our businesses in Qatar and Egypt beat the plan. The plan in itself was very aggressive to start with. In 2014, our revenues have grown close to 36 per cent year on year and the bottom line has doubled for the third time in three years,” said Irani.
The rate of growth in retail revenues is expected to drop by about 40 per cent in 2015 largely due to the already high denominator and some rationalisation in the wealth business.
Despite the expected sobering revenues and margins next year, the full year revenues and profits growth for 2014 is seen as exceptional. The revenues from retail business is expected to exceed Dh1 billion this year while the bank has benefited hugely from the balance sheet growth.
“The growth in the balance sheet and customer base is what we really care about. In 2014 Mashreq benefited from strong growth in customer base with 6500 to 7000 new customers brought into our books in the UAE every month. The significant growth in SME [small and medium enterprises], Islamic business and wealth customers contributed to this growth,” said Irani.
The growth has been euphoric in the first half of this year with top end of the retail banking and SME benefiting from improved capital market valuations and consequent wealth effect. “It is not just fixed income or equity that helped our customers. Our entire bank assurance business, which includes protection and endowment programmes moved very well,” he said.
Wealth business
The SME business and the Islamic window contributed substantially to both assets and liability side of retail business in the first half of this year. SME business along with wealth business drives the largest part of the liquidity of the bank.
“Lot of our SME accounts, almost 9 out of 10 are actually transactional accounts and the bank enjoys significant growth in current account balances as a consequence,” said Irani.
From the beginning of the second half of the year, balance sheet growth in retail and wealth management businesses have been moderating while SME business surged without any visible signs of fatigue. “From the second half of the year our wealth business took some knocks with people waiting and watching and profit taking. We saw a lot of reclassification of assets — a lot of money moved away from investments to floating balances. From our end, sensing the market mood, we pushed our customers to diversify,” said Irani said.
Wake-up call
Change in investor perception in the last few weeks has come as a wake up call for Mashreq and the UAE banking sector says Irani. Clearly, risk apatite has taken a hit. The recent blip in the market, if it stabilises fast, it would prove to be a great buying opportunity. But on a realistic note, investors should diversify, in fixed income 6 to 9 per cent gain is decent and when it comes to equity, a ballpark of 15 per cent annualised gain is good enough and greed is not a good option in the current market conditions,” he said.
