Resilient outlook for the UAE’s banking sector

The retail banking sector has remained resilient in the UAE. Credit goes to the stable economic and regulatory policies which have helped to ensure a stable financial sector. The introduction of the Al Etihad Credit Bureau, laws on defaults and bounced cheques to name a few, have all helped to ensure confidence and stability in the retail banking sector.

The UAE has a very stable political and economic environment. The market is open and has maintained very competitive business policies notwithstanding the regional geopolitical environment. Many see the UAE as a regional safe haven. Consumer confidence in the UAE’s banking sector has strengthened year-on-year and currently ranks ahead of its peers in developed nations according to multiple surveys. Unfettered capital convertibility with no exchange controls and an attractive tax regime have helped the UAE enhance its lustre for investors looking for safe, secure wealth management centres where they can maximise their total return from investments. Increasing competitiveness and sophistication in wealth advisory and solutions combined with enhanced access to global, cutting-edge wealth products has helped the UAE further improve its attractiveness as an onshore wealth management centre.

All clients are important to Standard Chartered. We, of course, have different client segments that are catered by different client-value propositions. The affluent customers are extremely important to us. Most of these customers are decision- and change-makers in their respective industries. We believe that our support to the affluent customers goes a long way in helping to drive prosperity and wealth creation in the economy. Most of the affluent customers create jobs, invest in development projects and help provide liquidity, which is eventually used to create financing for consumers and other businesses.

Affluent clients have varying preferences for how they manage their wealth and there is no one-size-fits-all approach. Most clients like to hold a significant proportion of their assets in onshore accounts so that they can conveniently access their portfolio income and returns to meet their liquidity needs and ongoing financial expenses while also benefiting from the applicable tax rebates. Convenient and affordable access to credit has also allowed clients to enhance ROIs via leveraging the investments in their onshore accounts. While a good number of clients do like to keep a certain portion of their investments offshore, this behaviour is reflective of a tendency to diversify geographical/jurisdictional risks on investments and not really influenced by current market conditions.

The advent and global implementation of automatic exchange of information under the CRS regime has also reduced offshore flows motivated by privacy and secrecy considerations.

With lower interest rates, we expect to see more access to financing in the market in all sectors and that helps to drive economic growth when invested in the productive sectors. We of course have to keep an eye on inflation. Following the drop in rates coupled with the drop in property prices, we expect to see more clients accessing mortgage loans. Unsurprisingly, October recorded the highest property sales in Dubai since 2008 with close to 5,000 real estate transactions, according to Dubai Land Department statistics compiled by real estate portal Property Finder. This trend is likely to continue.

The Expo 2020 Dubai and its legacy are expected to contribute approximately 1.5 per cent of the UAE’s annual forecast GDP, stimulating economic activity and capital inflows that will spur personal wealth creation and investment. As a consequence of hosting the Expo, the UAE will need to serve a much wider community than what it is currently catering to. As Dubai and the UAE attracts even more foreign investments to the region, the need for differentiated wealth offerings will become even more pronounced.

Expo 2020 is also the first World Expo to be held in a country which depends totally on expatriate labour — at all levels of seniority. Expatriates make up 85 per cent of the UAE’s resident population and with the UAE expat community ranking among the lowest in the world in terms of retirement savings, retirement solutions is a glaring gap and a potential growth opportunity in the wealth management space in UAE.

The UAE continues to lag behind other competing markets when it comes to digital penetration in wealth management solutions.

However, with digital technology identified as one of the top seven primary national sectors by the National Innovation Strategy of UAE Vision 2021, there is expected to be significant growth and proliferation in digital solutions within wealth management in the UAE in particular.