Dubai: National Bank of Fujairah (NBF) reported Dh280.9 million net profits for 2011, up 64.4 per cent compared to Dh170.9 million in 2010.
During the past three years the bank made consistent recovery, putting behind the losses of 2008.
Vince Cook, chief exec-utive officer, attributes the turnaround to strong core business performance, effective asset and liability management and a reduction in loan loss provisions.
Cook joined NBF in December 2009. He spent much of his 31-year banking career in the Middle East. This included senior positions in Barclays Bank's Corporate Banking and Middle East Group divisions and a stint as Managing Director, Gulf, of Barclays Capital. Prior to joining NBF he was CEO of the Islamic Bank of Asia, a joint venture between GCC investors and Singapore's DBS Bank, from 2007 to 2009.
In an interview with Gulf News he spoke about the direction of NBF's businesses in the UAE including the possibility of an entry into Islamic banking.
Gulf News: After facing losses in 2008, the bank has made a strong comeback with significant growth in profits and operating margins. What do you attribute this turn around to?
Vince Cook: The way our board responded to the situation was what helped us in the end. The challenges at that time were coming from our investment portfolio. We had some losses which we could not simply escape from. These losses came from investments and not particularly credit. We had to recognise these on a market to market basis and our board took the view that we need to overcome this and make a new start. Taking a few difficult decisions in 2008-09 helped the bank to get ahead of the provisions curve. So from the time I have been here we have been able to focus on those areas of business that continue to do well. We indeed have done some good business that suits our business model. I think with a little bit of luck and little bit of judgment, we have been very fortunate.
Has the bank fully recognised all the losses on the legacy investment portfolio?
All have been fully provided for. In fact we had an ongoing programme to reduce the size of the investment portfolio. Today the size of this portfolio is significantly smaller and the bank has really gone back to its core business such as trade finance and corporate commercial business.
NBF has always been corporate focused, is there going to be any major change in this in the future?
That's where we have our expertise. That does not mean that we do not have a meaningful retail personal banking business. But traditionally it is focused in Fujairah. What we want to do is to make it more widely available across the UAE. We look at our retail business as an extension of our core business. We are not looking at getting into a mass consumer banking business, but our personal banking business will be largely relationship driven.
The bank reported more than 64 per cent growth in net profits last year. What were the key drivers of such a jump?
It is tough to repeat that every year. The 2011 results were driven by a combination of factors such as the increase in core net interest income, forex related income, fees and commissions. We have seen healthy growth in the book with our balance sheet growing between 15 and 20 per cent in different areas.
This gives us a good feeling that there is still business to be done. It is also fair to say that a big chunk of the improvement is down to an improving provisioning experience. We have seen the level of provisioning rise through 2009-10 and how it started declining towards the end of 2010. In 2011 we have returned to much more normal levels of provisioning.
You reported more than 20 per cent credit growth which is far ahead of the national average. Where is this growth coming from?
Our core business is closely linked to the traditional business of the UAE, the trading business in Dubai in particular. We are also closely linked to the traditional gold and jewellery business in Dubai. We have also been very lucky that we always had a very strong share of the contracting business in Abu Dhabi. There we are working with our longstanding customers. Fujairah is benefiting from a lot of investments especially relating to infrastructure such as the expansion of the ports, the bunkering, the new refinery and the power plant, all these together creating new businesses there and we are benefiting a lot from that.
What are your main sources of funding? Do you have plans to raise funds from the market through syndications or bonds?
We have been able to grow our deposit base fairly in line with our loan book. Always the loan book tends to lead deposit growth and that is true with us. Because of our size we are not faced with liquidity pressures. We are not under any pressure to raise more funds in 2012. However we do see continuing growth. It is a question of pacing that growth with the market. If we are able to do that the way we did last year, then towards the end of the year or towards the beginning of 2013, if market conditions improve then we would take a look at the option. This is not something I will rule out completely at this point.
Most banks operating in the country, irrespective of size, have some kind of Islamic banking proposition. Are you looking at this segment of business?
It is certainly on our radar. We certainly have customer demand. So it will be wrong for us to ignore that. At the moment it is more a question of when and how. We are aware that we need to have some form of that proposition. We are still at an early stage of that discussion, so I don't have a definite answer on when and how.
More deals ahead
Dubai: National Bank of Fujairah (NBF) is fast emerging as a significant player in syndicated financing deals in the UAE. The bank recently secured mandates as lead arranger for two loans totalling over Dh500 million.
NBF, mainly active in wholesale banking and trade finance, was recently mandated as lead arranger and underwriter of a 10-year, Dh225 million credit facility for the development of the Fujairah City Centre.
The project is a joint venture between property developer Majid Al Futtaim Group LLC and government entity, Fujairah Investment Establishment.
The bank is also the lead arranger and underwriter for a Dh280 million syndication to Gulf Resources Development and Investment LLC to finance its construction of the Standard Chartered office building in Emaar Square in Dubai.
In November last year the bank closed a Dh261 million long-term syndicated loan for Lifeline Hospital Group. In addition to lead arranging some of these deals the bank has also been taking exposure to some of these syndicated facilities.
"These are transactions that we ourselves are very comfortable with. It is just a question of either the client wants to do other client relationships. These are typically club type transactions, to that extent they are very organised," said Vince Cook, chief executive officer of NBF.
Cook sees a promising outlook for corporate loans and club deals.
"A number of our customers are showing good signs of growth in their business and they need support. There are more such deals in the pipeline. This is a clear indication that there are still opportunities in the market."
