190519 Peter England
Peter England Image Credit: Supplied

Dubai: Conscious efforts to diversify RAKBank’s business mix has resulted in steady improvement in stability of its income streams, said Peter England, CEO of RAKBank in an interview with Gulf News.

In 2018, treasury business was 20 per cent of the bank’s total business, personal banking 41 per cent, business banking 18 per cent, wholesale banking excluding financial institutions (FIs) 14 per cent and FIs 11 per cent.

By 2021, the bank is targeting treasury’s share to go up to 21 per cent. The bank expects business banking to remain similar range, wholesale banking would grow from about 14 to 18 per cent and FI would grow to 13 per cent and the personal banking dropping to 36 per cent from 41 per cent.

“Most of the work in the rebalancing of portfolio has been done and what we are expecting is a gradual change rather than something dramatic,” said England.

The bank is actively addressing measures to address costs. Last year it witnessed a jump in costs largely driven by a change in value added tax (VAT) calculations. “We had to set aside an additional Dh17 million to account for the change in VAT calculations,” he said.

The bank is also experiencing a rise in operating costs because of the new investments in treasury, compliance, corporate banking and FI business where it has been committing additional resources and investments in technology.

England expects to recoup the costs from significant productivity gains and cost savings from technology adoption. The banks is working with Wipro on offshoring and automation of back office operations that will come with significant cost savings.

“On the front end, I don’t think we need to spend huge amounts of money. We have set aside Dh250 million for our current three-year strategic plan [2018, 19 & 20]. We are progressively spending some of that largely on replacing the look and feel of our internet and mobile offerings,” he said

England expects some of the cost savings the bank is making from the offshoring to pay for the automation in the front end.

High NIMs

RAKBank’s interest margins have been the highest among the UAE banks. Despite the fact that our NIMs have come down, the bank’s NIMs are are pretty much higher than the UAE market average.

“Our share of interest incomes and NIMs are high because of relatively large retail portfolios such as personal lending, credit cards and the more risky SME portfolio. We have seen that the trend continuing downwards, gradually, mainly because the mix of business continues to change with the share of wholesale book growing faster, resulting in NIMs graduating down closer to 5 per cent. But it still means will be higher than many others,” said England.

For RAKBank a rising interest rates environment is not overly positive for net interest income, simply because of the nature of its book. “We are happy about rates taking a pause. Banks with very large wholesale books reprice loans based on Libor/Eibor in a rising interest rate environment. In our case, the rates remaining neutral or edging down would work positive for us,” he said.


The bank is comfortable with its current funding mix of current and savings account (CASA) corporate deposits and small ticket private placements depending on the maturity profiles. The bank has recently issued $500 million bonds under its existing medium term notes (MTN) programme. The purpose of the latest bond issue is to refinance the $800 million bond that is due in June this year.