Dubai: At a time when the banking sector in the UAE is facing margin pressure in the retail business segment and sluggish loan growth in the corporate business segment, the National Bank of Fujairah (NBF) has been reporting double-digit growth in both segments with profitability above industry average.

The bank sees such growth as sustainable given that its target market segment has huge potential for growth.

“We are not one of the larger banks. So we have a clear focus on the business that makes most sense for us. We have a very strong trade finance business and that translates well into small and medium enterprises (SME) and mid-level corporate business. On the back of these to business lines we have a very lively treasury business which far exceeds that of most of our size banks would have because of the trade finance and the SME sector,” said Vince Cook, chief executive officer of NBF.

The bank has been focused on the mid-segment of the SME business for the last 15 years.

“We have been in that segment of business even before people were talking about it and it is our core and we have a long-term commitment to it. NBF Capital is also very focused on extending our service to that sector. We have a number of other initiatives under way to meet the requirements of the mid-market segment,” said Cook.

The bank recently built an equipment finance team to address the equipment financing challenges of SMEs in way that it doesn’t eat into their working capital lines.

Banking sector in the UAE has been witnessing strong liquidity and with cheap and abundant liquidity comes the challenge of acquiring assets with reasonable returns without exposing the bank to excessive risks. NBF sees this as serious challenge to all banks.

“I think we have to be careful that we don’t do things that in the long-run will hurt us by seeking excessive yield right at this point in time. We maintain extremely high balances with the central bank for a return of nearly nothing. But we prefer to do that to maintain a high quality liquid base,” Cook said.

While the bank has been deliberately keeping a relatively small investment portfolio, it is cautious on excessively expanding the balance sheet based on the current round of liquidity surge.

“We have to very careful that a lot of liquidity that flows in can leave fairly quickly. So building a long-term balance sheet on a relatively short-term flow could mean potential problems in the future,” Cook said.

While the bank has strong liquidity buffers in place, Cook said the bank is proactive in its efforts to meet to meet the Basel III capital adequacy requirements.

“We did a private placement last year that was structured as a Tier I perpetual note. We needed to test the water, understand the structure and some of the Basel III requirements before doing further issues. I suspect before the end of the year we will do another issue,” he said.

NBF intends to keep these issues small and wants to access that source of funding as and when it requires funding and or meet the Basel III capital adequacy requirements.