Following the 2008 financial crisis, UAE banks targeted individuals to compensate for the slowdown in corporate financing.

But the competition for retail customers among the country’s 51 banks has become so intense that lenders are speeding up getting new products on the market, and expanding at home and abroad to avoid falling behind and possibly being swallowed by bigger fish.

Islamic lenders such as Abu Dhabi Islamic Bank and Noor Islamic Bank are expanding beyond catering for Muslim customers in the Arabian Gulf and have been trying to appeal more to non-Muslims, while Mashreq and others have spent millions on creating iPad-laden high-tech branches in a bid to make transactions easier for customers.

Neglected parts of the business like wealth management are also undergoing a renaissance.

Emirates NBD recently partnered with the London-based fund manager Jupiter to give clients more investment options and National Bank of Abu Dhabi has stated its intention to expand its retail business both in the UAE and internationally so as not to be left out of the boom. Some banks, like London-based Barclays, have decided that it is not worth their while to compete and might sell its UAE retail operation.

“The competition is very intense and unless we see massive population growth, it will be tough,” said Sachin Mohindra, a Middle East and North Africa portfolio manager at the Abu Dhabi-based asset manager Invest AD. “There should be consolidation but it’s difficult to forecast.”

Mr Mohindra said banks, as Emirates NBD had done, would need to increase the flow of products in areas such as wealth management for its richer clients.

That is because there is a large affluent part of the UAE’s eight million residents that might not be rich enough to require private Swiss banking but who nonetheless want a more diverse range of investment opportunities.

Emirates NBD, Dubai’s biggest bank, said this month that Jupiter Asset Management, well known for its Merlin range of mutual funds that invest in other funds rather than individual securities, would help it to manage more than US$100 million of its overseas assets it manages for clients.

The bank’s move to bolster its international asset management business comes amid growing demand by UAE customers following the more than 80 per cent gain in Dubai’s stock index this year, according to David Marshall, a senior executive at Emirates NBD Asset Management.

“Investors may want to take some money off the table [from the UAE stock markets] and diversify in global markets,” he said.

Market share has grown for Islamic banks in recent years but they will have to go beyond the Muslim world in the long run. Philip King, the newly installed head of retail banking at ADIB, and his counterpart John Chang at Noor Islamic Bank are betting that the declining fortunes of western banks since the global financial crisis will make the principles of Islamic banking more appealing to non-Muslims.

ADIB is also focusing on attracting the richest retail clients. To that end, it is adding four more “priority gold” banking centres that offer the complimentary use of iPads to customers in ornate waiting rooms. Two of the new centres will be in Dubai and two in Al Ain.

Its expansion drive in Dubai – offering perks such as air miles on covered cards (the Islamic equivalent of credit cards), and competitive fees – has attracted Arab expatriates and non-Muslim westerners, said Mr King, a Citibank veteran. Not to be outdone, Noor Islamic has made its home financing available to non-UAE residents in more than 20 different countries.

The flourishing of retail banking has promoted the country’s banking federation to propose a self-regulating code of conduct to protect consumers against any kind of predatory behaviour by bankers.

Eliminating deceptive bank advertising on loan interest rates and credit cards as well as cracking down on overzealous bankers seeking to fulfil targets unethically will be high on the agenda of the federation’s code, Abdulaziz Al Ghurair, who is also the head of the banking federation, said last month.

“It’s the right time because we are in a boom time and many customers don’t get into the details. And they are prepared to sign the documents quickly [in a rush] to buy the car or mortgage or whatever. We want to make sure the customer takes some time to read these documents, have the bank answer all his questions before he signs.”

Still, product innovation and giving consumers a greater sense of confidence on the retail banking front may not be enough for many of these banks and almost all them here are eyeing expansion opportunities in emerging markets including Egypt, India and Indonesia.

“Banking in the UAE has become very competitive of late and so now banks are now looking at opportunities outside of the country like Egypt, where a significant part of the population don’t have bank accounts,” said Harshjit Oza, a Cairo-based bank analyst at the Egyptian investment bank Naeem Holding.

“It’s a young, growing population with lots of cash and many people who are not familiar with the banking sector,” he said. “GCC banks like Emirates NBD and NBAD are already in Egypt and a lot of the banks are looking to get into the country but are waiting for things to stabilise.”

As part of five-year plan announced by NBAD’s new chief executive Alex Thursby this year, the bank plans to build up five retail franchises in international markets such as Egypt. The bank is trying to identify countries with a burgeoning middle class in which to establish itself as a niche player.

The bank would not necessarily aim to open branches in all the cities of the countries it was targeting, but it would focus on the capitals or the major cities with the most business opportunities, Mr Thursby said.

“This is not about carpet-bombing all segments of the marketplace,” he said. “It’s about being very surgical and dominating those places that we want to be.”

mkassem@thenational.ae