NBAD chief says UAE bank mergers on hold
Abu Dhabi, February 12, 2009
Mergers among leading UAE banks are on hold due to the economic turmoil despite the need to consolidate to face mounting foreign competition, the head of National Bank of Abu Dhabi said.
Chief executive Michael Tomalin told Reuters in an interview on Thursday that Abu Dhabi needed to have a bigger domestic bank to compete more effectively with global behemoths.
Tomalin said NBAD, the second largest bank in the United Arab Emirates (UAE), has made several proposals to its government owners to grow through mergers, especially after the 2007 merger of two Dubai banks to create Emirates NBD.
"It has not gone that way. In these markets, the case for consolidation is less pressing. It should be done when the economic climate is good," Tomalin said.
"My sense is, it is not on the agenda now. But it is for the owners to consider."
NBAD plans to grow by increasing the number of branches it has locally and abroad. The bank, which has 80 branches in the UAE, plans to open at least 15 new branches in the country this year.
"Our expansion is part of our medium- to long-term strategy and we won't be affected by short-term pressures because there is vibrant growth in the UAE," Tomalin said.
Also, the bank will continue to press ahead with its overseas expansion plans.
"We plan to open half a dozen new branches in Egypt, add two branches in Sudan and two in Oman," he said. "We expect to open business in Hong Kong and Jordan in 2009."
He said the bank was also eyeing opportunities in several other foreign markets.
NBAD, which saw almost zero loan growth in the fourth quarter of 2008, will see its loan book grow by 10 percent in 2009, Tomalin said.
The UAE central bank governor last month said credit growth in the country will be capped at 10 percent. Key areas that will get credit from NBAD are infrastructure, small and medium size enterprises (SMEs) and retail.
NBAD's loans grew 40 percent to 112 billion dirhams during full year 2008, up from 80 billion dirhams in 2007.
Tomalin said the deposits market in the UAE was "tight" and the shortage of deposits was exacerbated by competiton from foreign banks that are funded locally.
"It is also due to the withdrawal of hot money, estimated to be about 200 billion dirhams that is not fully replaced. But the authorities are taking measures to pump liquidity and close that gap," he said.
However, the loans-to-deposit ratio of NBAD, as well as of most other banks in the UAE, is "good" compared to banks globally that are borrowing heavily in the interbank and repo markets to finance activities, he said.
Nor are the growing non-performing loans (NPLs) a major concern for NBAD, he said. NBAD's NPLs increased to 1.072 billion dirhams in 2008 from 859 million dirhams in 2007.
"If the market stays poor, NPLs for all banks and not just us will go up, and if the economy continues to soften, NPLs will rise," he said, adding that it was a normal result of the economic cycle. -Reuters