Vince Cook
Vince Cook, CEO of National Bank of Fujairah, prefers to frame his perspectives from all angles, where possible. At a time of interest rate and geopolitical uncertainty, that sentiment carries weight. Image Credit: Supplied

Dubai: By now, businesses in the UAE (and everywhere else) have come to terms with interest rates being higher for a bit longer.

They don’t have too many options, with the US Federal Reserve still wrestling with when they should start dropping rates. And how many there should be in 2024. One things looks certain though – there won’t be that many rate cuts that market watchers and business owners had been hoping for when 2024 started.

Whatever be the case, Vince Cook, CEO of National Bank of Fujairah, has one piece of advice to businesses – don’t be in a rush to refinance existing loans as and when the first rate cuts happen.

“Ideally, I think businesses would benefit from seeing how floating rates reduce once the interest rate cuts happen and then look at how fixed rates have moved,” said Cook. “At the moment, I think it's very early to be fixing levels.

“It depends how businesses structure the borrowing. If you are in a 5-year fixed term - or even longer than that – businesses are already feeling the benefit. I guess it's people’s expectations of the upcoming rate cuts that make them say businesses should be now. That too for a longer fixed-rate period.

“The question is, are these expectations likely to be correct? If you fix the rate now, and rates collapse over the next 12 months, then the price that seems attractive today will look quite unattractive in a year. And then, you're stuck with it for the next couple of years.”

"Or is it actually better to price your borrowing on a floating rate basis, and then just benefit from future (US Fed) reduction in rates? Which could happen on an ongoing basis for the next 12-18 months?

“I think most customers should be thinking to see where we end up over the coming months - and then, maybe, consider fixing future interest rates. So, wait…”

A branch of National Bank of Fujairah in Dubai
National Bank of Fujairah churned up some good numbers on its 2023 financials, not least on the operating profit side of things. Image Credit: Gulf News Archive

Vince Cook has always been the consummate banker, one more likely to look to all the angles to issues the banking sector and clients keep confronting time and again. So, when he says, businesses should not rush into refinancing, that sentiment sure has merits attached.

2023 boosts NBF profit numbers

His ways are delivering results for the bank too. In 2023, NBF recorded a net profit of Dh725.1 million, from a 113 per cent increase. In a UAE banking sector awash in record setting numbers for 2023, NBF’s held their own.

The results came about from the ‘high level of resilience in the bank’s core business, selective business growth, the high interest rate environment, effective investment portfolio and margin management’ said the bank at the time of reporting the results.

The NBF operating profit lined up at Dh1.6 billion, by some distance its best ever.

A core focus area for the bank has been trade finance, and this delivered its sizeable contribution to the 2023 financials.

“We've seen growth over the last few years up the double-digit from trade finance, around 8-9 per cent in the loan book growth, and we believe that that sort of growth in the SME sector is still achievable,” said Cook. “Particularly given now that there's heightened UAE government attention to the SME sector.”

As a bank, we don't have an advantage because of size or because of rates. But if a business coming here is willing to pay to understand how to get things done, then we can help

- Vince Cook of National Bank of Fujairah

Geopolitics can help on growth chances too

But won’t the prevailing geopolitics get in the way of local SMEs with substantial export exposures? And by extension, won’t that hurt NBF on the trade finance too?

Cook has a ready response to that.

“What we've seen is that the UAE - Dubai in particular - has such a strong presence in peoples’ minds as a relative safe haven that when the rest of the world is going through turmoil, even more business comes through Dubai,” he added. “People find it easier to come here and conduct business meetings here, with even neighboring countries or other parts of the world, because of the infrastructure and environment that has been built up.

“Actually, the trade-related business is growing much quicker in the UAE despite all the slightly worrying signs in other parts of the world. I think we will continue to benefit from that phenomenon that Dubai has been able to create. It's a lot is to do with the connectivity and the sort of ease of getting businesses up and running, and the quality of the infrastructure that you get to work with.

“I don't see the current level of global turmoil changing - in fact, it probably will just give another lift to the local economy.”