Dubai: Addressing head-on some of the issues related to the financial crisis such as non-performing loans (NPLs) and the surge in provision right at the early stage of the turmoil, National Bank of Fujairah (NBF) has managed to latch on to a steady trajectory of healthy balance-sheet growth and profitability ahead of the banking sector in the county.
With the economic conditions across the country improving, the bank is experiencing double-digit growth in both retail and corporate loan portfolios with significant improvement in its asset quality matrices.
“Post-financial crisis, we addressed some of our challenges quiet early, so we are a little bit further out of that difficult period compared to some of the other banks. But I think generally like everyone else in the market we have seen improving non-performing loans (NPLs), coverage positions and liquidity. I think that is a great testimony to the improving economic conditions in Dubai in particular and the UAE as a whole,” Vince Cook, chief executive officer of NBF, told Gulf News in an interview
The bank’s retail business is growing in double-numbers and corporate business is growing at 20 per cent with overall balance sheet growth in double digits.
The bank reported a full-year net profit of Dh393.1 million in 2013, up 28.6 per cent compared to Dh305.8 million reported in 2012. For the first half of this year, the bank’s profit was Dh239.5 million — up 30.5 per cent compared the corresponding period in 2013.
Cook is confident of maintaining high profitability in the face of heightened competition, high liquidity in the banking system and significant margin compression faced by the industry.
“It is true that the industry is facing margin pressures. But when we look at market opportunity we don’t see ourselves being restricted. So it is not the opportunity, it is rather our ability to address various opportunities and resist the price based competition that is going to determine margins,” he said.
Cook said the trick in addressing the margin challenge lies in finding the right balance between the quality of service and breadth of products and services.
NBF sees significant growth opportunities in both Abu Dhabi and Fujairah. In Abu Dhabi the bank has very strong contracting based business. In Fujairah the bank is strongly involved some of the key areas of the economy.
“We are closely involved with the Government of Fujairah’s initiatives — for example the e-government initiatives. We have a launch plan in the beginning of next month. It involves prepaid cards which will be used for payment of government fees and charges on government services which will extend over a whole range of both municipalities and government departments,” said Cook.
Regulatory reforms
Cook said the recent regulatory reforms point to a maturing of the banking industry in the UAE. While the mortgage reforms address the issue of potential overheating of the real estate market, regulations on lending to government relate entities (GREs) are important to check concentration risks.
“Any regulation that can help both banks and the economy are welcome. The mortgage regulations help to avoid excessive peaks and dips in the economy. From a business point of view we have a mortgage product and it is relatively low key and we are very selective. So the regulation as such does not hurt us. We have been following pretty similar parameters anyway,” he said.
Despite being a national bank, NBF strictly adheres to prudential norms on centration risks.
“Interestingly that [exposure to the Government of Fujairah and related entities] actually is not one of our concentrations. In fact it is the reverse. Recent reports from rating agencies say we have one of the lowest levels of concentration in the sector on the loans side. Our challenge on concentration is more on the liability side. Actually the government of Fujairah is net lender to the bank and in the current environment it is a great position to be in,” Cook said.
In GRE-type of exposures, he said, the bank is already ahead of the regulatory requirements.
