Abu Dhabi: The National Bank of Abu Dhabi (NBAD), Abu Dhabi's largest bank was incorporated in 1968. NBAD has a network of more than 90 branches in the UAE. The branch network is widened further with over 300 ATMs through which customers perform a variety of transactions.
NBAD's overseas network stretches from Oman, Kuwait, and Bahrain in the GCC, Egypt, Libya, and Sudan in Africa, London, Paris, and Geneva in Europe, to Washington DC in the United States.
The bank provides its customer with a wide variety of financial services targeting all segments of the retail and corporate market in addition to fund management, brokerage, leasing, property management businesses and private banking.
NBAD's Group Chief Executive Michael Hardwick Tomalin is a senior international wholesale and private banker who has been at the bank's helm since 1999 and has steered its growth over the past 10 years.
Gulf News caught up with Tomalin recently to discuss NBAD's business expansion plans in an exclusive interview.
GULF NEWS: What are the lessons NBAD has learnt from the global financial crisis and what is its business strategy now?
Michael Hardwick Tomalin: The business strategy now is the same as the business strategy that we had before. I think what the global economic crisis has done for us is reinforced our strategy to lend money, to use our balance sheet to support our friends and our clients. We did not get involved in toxic waste. We have no CDOs (Collateralised Debt Obligations), no dangerous structured products on our balance sheet. So, we avoided the first wave of problems that some other banks in the world encountered. Obviously, the second wave... with the effect on the real economy,... our customers, you can't avoid. But by being close to your customer, understanding your customer's business and supporting your customer in good times and not such good times, you can work through many of these problems with your client.
Our strategy of using the lending as a means to an end is a way of building a relationship with a client so that we can do other things — manage their pension fund, do the next bond issue, provide investment banking advice.
We haven't made any changes or adjustments in our strategy. The broad strategy that the bank set itself in 1999 hasn't changed in the last 10 years. We continue to build NBAD as a global financial services company step-by-step, organically. We are adequately capitalised.
What's NBAD's presence outside the UAE and do you have any plans to acquire banking assets overseas?
We have more presence outside the UAE than any other UAE bank. We have been in the UK for many years... we have a big business in London. We are in Paris, in the US. We are one of the biggest foreign banks in Egypt, where we have 27 branches, eight branches in Oman, three in Sudan, a branch in Kuwait, a branch in Bahrain and a representative office in Libya. We have a wholly owned private banking business in Geneva. We are opening offices in Hong Kong and Jordan this year. We have the largest international presence of all the UAE banks.
As regards your second question, our strategy has been to grow the business organically rather than to buy. When you buy, you have legacies to consider and you have to make sure it's at the right price. I am not saying we wouldn't buy a bank under any circumstances, but it has to be the right fit at the right price.
Our experience in Geneva has shown it's better to build rather than to buy. It's cheaper to build a bank, though it takes longer. It's all cost, no revenue in the earlier years. We are looking out for opportunities. We are not closing our eyes. But our natural disposition is to build rather than to buy.
What's NBAD's net worth as of today?
The net worth of the company is Dh15 billion as of June 30. Its Tier I capital is Dh19 billion. Its total capital resources that includes Tier II capital is Dh21.9 billion. Our total balance sheet size as of June 30 is Dh181 billion. Total loans were at Dh124 billion and deposits were at Dh112 billion.
What are NBAD's plans for domestic and overseas expansion?
In the UAE, we have 93 branches as of today and we plan to have 100 by the end of the year. We have a customer base of more than 300,000 customers in the UAE. Overseas, we have 47 branches. Altogether, around the world, we will have around 150 branches by the end of the year.
What's NBAD's credit growth target this year?
In terms of credit growth, we expect to grow 10 per cent to 15 per cent in our loan book year-on-year. Since the global financial crisis, the [credit] growth has slowed down, but it hasn't stopped. Our total loan portfolio at the end of June was at Dh124 billion, compared with Dh112 billion at the beginning of the year.
What are the provisions NBAD has taken in the third quarter this year to cover bad loans?
I cannot comment on that. We are due to announce our third quarter financial results on October 27.
Do you think the UAE banking system needs to be better regulated?
The banking system here is already well regulated. However, the development of the discount window will be very useful.
What are the key areas of banking that the NBAD wants to focus?
At home, we are putting more emphasis on the SME (Small and Medium Enterprises) market, where we have a relatively small market share. We want to take our share in the UAE's SME market to 12 per cent from 3 per cent over the next five years. Other segments of business that we want to focus on include Islamic Banking,
Private Equity and Custody since these are very new businesses at different stages of evolution and development. On the international side, we will open our branches in Hong Kong and Jordan later this year. The Hong Kong branch will be our first branch there and we plan to open it on December 3. The UAE is looking more towards Asia for trade and investment.
There are vast pools of liquidity in Asia that we can tap. We will be intermediating trade and investment flow between our world and the Far East through our Hong Kong 0ffice. In Jordan, we have got the full banking licence and the branch there will be a very important addition to our MENA (Middle East and North Africa) network.
What's your outlook on the repo rate and the reverse repo rate in the UAE?
In my view, we need to bring the repo rate down so that the dirham rates are closer to the dollar rates. The same applies to the reverse repo rate. The dollar rates are substantially lower than dirham rates at present. This is partly because there is a general shortage of liquidity among the UAE banks.
What's your view on the global recession? When do you think, it's going to end?
We have probably seen the worst of the recession. There are lots of encouraging signs in places like China and in house sales in the US. It's not going to be a straight line, going out of it, but I suspect we are coming to the end of it.
What's NBAD's average rate of return on investment?
Our objective rate of return on investment is 25 per cent. This year, however, we have targeted 20 per cent, compared with the actual 24.8 per cent achieved in 2008. In the fiscal first half of 2009, we achieved a 22.8 per cent rate of return on our investments; it's the highest among all the major banks in the UAE.
