Dubai: The UAE’s banking sector is expected to face increased challenges from economic headwinds resulting from low oil prices, but the Abu Dhabi Islamic Bank (ADIB) expects it to be a temporary blip.

“We are confident about the economy. The fundamentals are right. Yes, the headwinds have been stronger in some areas of the economy, but we think that the UAE’s fundamentals are strong enough to cut through these and there has been no change in our long-term strategy,” said Philip King, Head of Retail Banking, UAE, ADIB.

ADIB is one of the most liquid banks in the UAE. The bank ended 2015 with a steady customer financing-to-deposits ratio of 82.6 per cent and an advances-to-stable funds ratio of 84.6 per cent, which remains significantly better than the regulatory threshold of 100 per cent.

Last year the bank’s total assets increased by 5.8 per cent to Dh118.4 billion. Customer deposits increased 12 per cent to Dh94.9 billion, while net customer financing grew by 7.4 per cent to Dh78.4 billion.

“As far as liquidity is concerned, we are in a fantastic position. Competition may heat up around liquidity later in the year. But as it stands we are doing very well on that front. Deposit growth has been phenomenal. We have a number of products and promotions that attract core stable deposits. The bank has a very strong wealth management and private banking proposition supporting the funding base,” said King.

Despite a dampened credit environment, last year the bank’s total non-performing loans (NPLs) as a percentage of gross customer financing were at 3.9 per cent, down from 4.4 per cent in 2014.

Limited risks

Although a number of UAE banks reported an increase in NPLs in their small- to medium-sized enterprise (SME) portfolios, ADIB sees limited risks impacting the bank from this segment and continues to be engaged with SMEs. The bank recently launched point of sales [POS] financing targeted at small businesses to fund receivables of merchants.

“We are still very much involved in fleet financing. The higher end of the SME business, especially the partially secured segment of the business, is growing very strongly. I think our core approach to SMEs is very positive. Clearly there have been some knock-on effects from some the issues affecting the SME market, but overall our position with [the] performance of SME business is completely within our loss norms and we continue to support our clients,” he said

ADIB has placed a lot of attention on its digital strategy during the last 18 to 24 months, and has witnessed a rapid uptake in mobile banking.

King said ADIB’s “internet banking grew at 33 per cent last year while our mobile banking grew by 66 per cent and transactions through mobile [were] more than 90 per cent. Mobile is becoming the preferred channel of transactional banking. Internet is increasingly becoming a channel of research and analysis and service request, but branch visits are still very important.”

“It is but natural to expect higher branch visits as the bank is witnessing a steady growth in the number of customers. The relationship and the personal side of banking is still a top priority to us and our customers. We don’t see digital as a substitute for human interface,” King added.

Key numbers

2,504 employees

1,177 UAE national employees,

Emiratisation ratio of 47 per cent.

877,975 customers

88 branches

769 ATMs

Advances to stable funds ratio of 84.6 per cent as of December 31, 2015

Customer financing to deposits ratio of 82.6 per cent as of December 31, 2015