Emirates NBD branch on Shaikh Zayed Road. The bank’s retail lending book grew about 2 per cent during the first quarter, supported by growth in mortgages. Image Credit: Pankaj Sharma/Gulf News archives

Dubai: Facing macroeconomic headwinds, retail banking business in the UAE has been facing anaemic asset growth, margin pressures and lingering loan impairments in the past several quarters.

Despite the challenging regional economic environment, the first quarter results of Emirates NBD points to a strong start in the retail and wealth management (RBWM) business with a double digit year on year growth in total income, supported by a revival in asset growth and improved margins.

Suvo Sarkar

“Our consumer business, in both retail banking and wealth management, grew by 10 per cent in the first quarter of 2017, beating our expectations. This growth is on the back of our growing market share in all customer segments, whether high net worth, mass affluent or small and medium enterprises (SMEs), and strong volume growth in all products, both liabilities and assets,” said Suvo Sarkar, Senior Executive Vice President & Group Head — Retail Banking & Wealth Management at Emirates NBD.

The bank’s retail lending book grew about 2 per cent during the first quarter supported by growth in mortgages. While there has been a slowdown in auto loans as new car sales dropped, personal loans faced lower growth on account of low loan demand and cautious approach by banks.

“Customers are now more prudent in borrowing, given the uncertainty in the economic outlook. Banks are also being more cautious in lending, armed with the additional insights they have now, thanks to the credit data from Al Etihad Credit Bureau,” said Sarkar.

Cards business is an area where the bank is witnessing a healthy double digit growth, and 1 out of 5 dirhams in UAE is spent today on an Emirates NBD debit or credit card. Fee income revenues, whether in foreign exchange, insurance or investments, are also witnessing an above-average growth rate. In the private banking business, flows of net new money continue to be very strong.

In the retail loans business, the bank’s efforts have been to improve service levels through digitisation. “We have now launched paperless personal loans across most of our branches where customers can walk in and get a loan without filling up a single form physically. Very soon, most of our loan decisioning will be fully automated,” said Sarkar.

On the liability side of business, in the first quarter RBWM’s book continued to grow faster than the market, increasing by 5 per cent over the quarter, led by growth in low cost Current Account and Savings Account (CASA) balances.

Beyond and more

ENBD’s Personal Banking Beyond proposition for emerging affluent customers is helping the bank grow both retail assets and liabilities. The bank reported acquisitions under this segment up 10 per cent in the first quarter year on year. More than 60 per cent of new credit cards sourced belonged to the premium segment.

The bank is in the process of transforming its customer service paradigm from being reactive to proactive. Going forward, the bank intends increased application of artificial intelligence and data analytics to help enhance customer experience by being predictive in customer needs and addressing these even before customer seeks help.


Factbox: No dearth of opportunities

Regional economic challenges are likely to slow growth in some segments of retail banking business, but it is not all that gloomy as it has been made out to be, according to Suvo Sarkar, Senior Executive Vice President & Group Head — Retail Banking & Wealth Management at Emirates NBD.

There are a number of triggers for growth even under the current market conditions. The rising interest rate regime is clearly an opportunity that will benefit all retail banks with large deposit bases in improving net interest margins.

In lending, Sarkar sees new opportunities for growth as business conditions improve. The total retail loans to GDP ratio in UAE is still well below the level in more developed markets. Additionally, the penetration of debit and credit cards are relatively low with more than 80 per cent of personal consumption expenditure in UAE is still on cash.

In the wealth management space he sees huge opportunities in investment and insurance products for mass affluent customers. The market penetration of these is still in single digits.

“The build-up to the Expo 2020, in which we are the official banking partner, is starting and this should boost infrastructure, construction, hospitality and tourism, providing increased opportunities to SMEs and thereby retail banks. E-commerce is an area that is evolving strongly in the region, driven by rapid digital adoption and changing customer preferences, and I expect to see big retail banks benefit from this,” said Sarkar.

In the new market environment, Sarkar believes banks need to be more creative and proactive in service delivery. “The bank that puts customers first — through innovative products, superior service and simpler banking — will also be the one to create a sustainable competitive advantage,” he said.