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NEW TRADE FINANCE OFFICES

Bank of Fujairah plans big Africa expansion

Fujairah, November 2, 2013

National Bank of Fujairah (NBF) may open trade finance offices in Africa as part of an expansion of foreign business that is taking the bank far from its roots in one of the more remote, less developed parts of the UAE.

With its home base in the small emirate of Fujairah, one of the seven members of the UAE, the bank does not have the same wealthy background as competitors from Abu Dhabi or Dubai.

But it is now benefiting from an economic shift within the UAE: as the wealthy southern emirates grow, money is spilling across their borders into the north.

Meanwhile Fujairah, with a population of only about 190,000 people but a port on the Gulf of Oman, is prospering as a trading channel between the other emirates and the rest of the world - a channel which NBF is keen to exploit.

"We've consistently seen over this year a 30 per cent range of year-on-year growth in net profit and we see that continuing because it's not coming from a one-off," NBF's chief executive Vince Cook said.

Earnings growth at the bank, which is owned 40 per cent by Fujairah's royal family and 10 per cent by Investment Corp of Dubai, is being driven by trade financing revenues, credit facilities and debt advisory services, he told the Reuters Middle East Investment Summit.

NBF's net profit for the first nine months of this year jumped 31 per cent from a year earlier to 286.4 million dirhams ($78.0 million). Loans and advances rose to 13.9 billion dirhams at end-September from 12.2 billion dirhams at the end of 2012.

Fujairah became strategically more important to the UAE last year when the emirate opened an oil pipeline with a capacity of up to 1.8 million barrels a day, bypassing the Strait of Hormuz and Iranian threats to block that shipping route if geopolitical tensions worsen.

Officials have said the pipeline will carry most of Abu Dhabi's oil exports. A string of projects has begun to expand oil storage facilities and possibly build a second refinery in Fujairah.

Also, the UAE's non-oil foreign trade is growing rapidly, particularly with Asia and Africa; Dubai's non-oil trade rose 16 per cent from a year earlier in the first half of 2013. Fujairah can profit by serving some of that business.

"Trade is a relatively high per centage of the bank's overall business and we believe more growth will come from trade," said Cook.

"Supporting Fujairah's interests, particularly in the marine, oil and gas activities plus precious metals, in particular the gold business, will feed into some elements of the bank's trade finance business."

Cook said NBF had recently opened a company in Hong Kong to process trade deals and facilitate letters of credit into the Far East, and would look at opening similar offices in Africa.

"We would like to increase our coverage in Africa - sort of what they call the south-south channel of trade."

NBF also plans to expand its current network of 14 branches in the UAE with "a couple" new ones next year.

The bank expects to step up its financing advisory services and debt capital market activities given high funding needs for projects in Fujairah, particularly expansion of the port, bunkering facilities and an airport, and development of the arid coastline.

It is looking at starting a capital markets programme next year to diversify its sources of funding.

"We have traditionally had one main bank syndication that we have relied upon for our medium-term funding needs and that matures next year," Cook said.

"Going forward, we'll probably break that into smaller transactions and maybe more bilateral transactions with partner banks, and then maybe do a capital market programme starting sometime next year that will enable us to issue paper on an orderly basis."

Cook predicted non-performing loans would shrink to about 5 per cent by year-end from the current 5.7 per cent, and then gradually fall to "normal" levels of 2-3 per cent.-Reuters




Tags: National Bank of Fujairah | trade finance |

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