Mashreq sees robust opportunities in retail, SME and wealth management

Dubai: The difficult global and regional economic conditions and changes in the local business environment has thrown up some challenges for the retail banking business in the UAE, yet there are robust opportunities in small and medium enterprises (SME) and wealth management business, Subroto Som, Head of Retail Banking Group at Mashreq told Gulf News in an interview.

The veteran banker with more than three decades of experience in all aspects of consumer banking across Asia and Middle East believes that the current turbulence the SME business in the UAE is largely cyclical and to some extent is the result of the distinct nature of the business in the country.

“I still see a lot of opportunities in SME business and wealth management in the UAE. Payments and personal banking are two very big engines of Mashreq in the retail space,” said Som.

According to estimates by the UAE Banks Federation, the banking sector in the country is facing non-performing loans (NPLs) in the range Dh5 billion to Dh7 billion from the SME exposures on a total book size of Dh1.5 trillion.

Som believes SMEs are important and banks can’t afford to neglect this segment. While some of the challenges faced by UAE banks have to do with the unique nature of SME Sector in the country, he said some of the issues relate to the way banks have been approaching the SME business.

A significant portion of the SMEs in the UAE are made up of expat businesses that are linked to trading and banks’ exposures to SMEs largely constitute direct lending, making these vulnerable to global economic cycles.

“I don’t see SME business as a lending only or a heavy — lending business. I think one of the biggest challenges is if banks did just lending, they are exposing themselves to the ‘high risk, high reward’ part of the SME segment. There are bigger areas with better potential in SME banking such as transaction banking, investments, trade finance and forex,” said Som.

“Customer Experience is a key differentiating factor in banking & with the advent of online and mobile capability, the opportunity for integrated omni channel experience is immense. This also allows for personalisation and the key will be to make our customers adopt the new technology and manage risks and scepticism. Time has come to make banking simple and fun” Som added.

While lending is an important part of the SME business and has been facing some stress in the recent months, he said that it is natural for bank balance sheets to reflect the impairments for some time. But he believes the key to managing the stress lies in a balanced approach to the SME portfolio.