Dubai: Global banking giant HSBC sees the UAE as central to its small and medium enterprises (SME) strategy following a strategic review of its commercial banking and business banking, Stuart Nivison, Global Head of Business Banking told Gulf News in an interview.
HSBC’s commercial banking business is segmented into three areas based on customer needs such as large corporate, middle market and business banking. Business banking focuses on SMEs or companies that have annual turnover up to $50 million (Dh184 million).
In the UAE, HSBC is focused largely on internationally oriented SMEs. “We are closely involved with firms doing international trade. We help them with protection and finance. Another segment we are involved is overseas companies coming into the UAE and a third category is the UAE companies that are expanding overseas. We help them to take the banking relationship to new markets where they want to expand,” said Nivison.
The bank has identified a number of separate but linked indicators that are showing surging positive sentiment among its clients in the UAE. One of them is the overall optimism in the country indicated by the sharp increase in the purchasing manager’s index (PMI).
The UAE’s non-oil producing private sector companies posted strong growth in August as new orders and output rose and the PMI hit a new record. The upturn in the UAE’s non-oil sector gained momentum in August, with the PMI rising to a record high of 58.4, up from July’s 58.
“We see genuine optimism in the UAE compared to many markets across the world with one of the highest levels of PMI in the world,” said Nivison.
Responding to the rising business confidence in the country HSBC last month launched a further Dh1 billion fund as the second tranche of its fourth International Growth Fund (IGF) for UAE small and medium enterprises (SMEs).
The bank’s first allocation of Dh1 billion in 2013 has been fully assigned to businesses. The IGF is open to new and existing customers with cross border trading requirements or aspire to grow internationally, and have an annual turnover of Dh30 million and above.
SMEs contribute approximately 40 per cent of total UAE GDP, 70 per cent of non-oil GDP, and employ 42 per cent of its workforce. In addition, 70 per cent of the country’s SME’s are internationally oriented.
HSBC was the first bank in the UAE to launch a dedicated SME Fund back in 2010 of which 67 per cent was awarded to customers with requirements for international trade facilities. This was then followed by a second Fund in 2011 — successfully allocated and of which 87 per cent was allocated to internationally oriented SMEs. The third Fund launched in 2012 was fully allocated in February this year with 84 per cent of the Fund allocated to international SMEs.
The UAE specifically is benefiting from its safe haven status and location at the crossroads of trade between the GCC, Africa and South Asia. The business-friendly environment makes it a hot spot for foreign direct investment, the country was ranked 23rd in the ease of doing business report, up 3 places in 2014.
“The evolution of the UAE as a global trade hub, the attention the country has attracted globally following winning the bid to host Expo 2020 has helped to boost the business confidence in the country,” said Chaker Zaraiki, Country Head of Business Banking, UAE.
For HSBC, its UAE operation is the most profitable in the region. The bank reported $383 million pre-tax for the first six months of 2014, up 13.64 per cent compared to $337 million for the same period in 2013. The bank’s Middle East and North Africa (Mena) operations reported a profit before tax of $1 billion, an increase of 9 per cent compared to the first half of last year. In the Mena region, while the UAE contributed the biggest share in profits in the first half of the year, Saudi Arabia, Egypt and Qatar contributed $259 million, $149 million and $66 million, respectively.