Dubai: National Bank of Ras Al Khaimah (RAKBANK), the UAE’s largest lender to small and medium enterprises (SMEs), expects a turnaround in its business banking in 2017, even as it continues to face challenges in the second half of this year.
Triggered by a more than double provisioning due to bad loans, RAKBANK reported a 38 per cent drop in net profit in the first half to June.
But Peter England, the bank’s chief executive officer, said there have been signs of green shoots in the sector.
“It appears things have hit a bottom. There are signs of improvement in the small business [sector]. A lot of people who didn’t intend to repay have gone already, and to a large extent those left are trying to work things out,” England said at the launch of a mortgage product called “Home in One”, on Tuesday.
He expects a positive 2017 even as the bank continue to broaden its balance sheet. “For us, 2017 would be quite positive. The slowdown or reduction in business banking sector would have bottomed, and the growth from pure retail and wholesale would be strong,” England said.
Flat loan growth
For 2016, however, England said loan growth is expected to remain flat, compared to a 10 per cent growth in 2015.
“We would be in low single digit [in terms of loan growth]. One of the strategies that we talked about is broadening the balance sheet, we have gone back into wholesale banking, and [are] building on retail banking,” he said.
“It’s a challenging time. We have been very exposed to the small business market, and the small business market has been very, very challenging over the last 12 months or so. It’s challenging times in retail as there is some amount of excessive debt. This is one of the reasons why we are trying to focus on productive lending,” England said.
But despite the current challenges RAKBANK would continue to serve small businesses. “We are the largest SME bank in the country. We are very entrenched in the market and we intend to stay,” he said.
England said RAKBANK was one of two banks active in the market compared to 30 banks 18 months ago.
“On the retail side, the challenge is that the level of personal debt is very high,” he said, adding that the rejection rates on credit card is now 50 per cent compared to 20 per cent earlier due to the credit bureau.
“We have a much clear position on what people owe. The credit bureau has been very helpful,” England said.
