Abu Dhabi Islamic Bank says it expects almost all of the customers that it inherited from its purchase of the UAE retail banking arm of Barclays to stay on, boosting its efforts to expand beyond its traditional base.
Barclays said in April that it would sell its UAE retail unit to ADIB for about Dh650 million. As well as absorbing 110,000 customers, ADIB also hired nearly all of the unit's employees, according to Phil King, the head of ADIB's retail banking division.
The retail clients were notified of the changes and were given 90 days to opt out of the integration, which should be completed by the end of the year, he said.
The sale to ADIB comes amid greater consolidation in the banking market, especially in the consumer divisions. Abu Dhabi Commercial Bank, which was reported to have expressed interest in Barclays, bought the retail arm of Royal Bank of Scotland in 2010 for about US$100m, adding more than 250,000 customers to its business. HSBC bought Lloyds' retail arm in 2012 for $769m and Emirates Islamic merged with Dubai Bank to create Emirates Islamic Bank in 2012.
ADIB is not only trying to win a greater share of the thriving consumer banking market but is also striving to make Sharia-compliant banking, which prohibits interest and charges a profit rate instead, more attractive to non-Muslims.
The bank last year hired Mr King, a veteran Citibank executive, to head the lender’s retail business, and he is keen to make Islamic banking more accessible to western expatriates while keeping the bank’s existing local customers happy.
“We’re attracting more and more expats and our penetration of Dubai has increased,” he said. “We’re still very strong in Abu Dhabi, appealing to UAE nationals and Arab expats. That hasn’t changed. The strategy of expanding into the non-Muslim expat segment is also working. It’s irrelevant whether you are Muslim or not – it’s about providing services that are ethical.”
Mr King added that the successful retention of Barclays customers was mostly because of the better financing rates offered to them.
“We’ve had very few people say they don’t want to stay on,” he said. “People like that, they are getting a better deal than before. We’re giving better offers on their home finance, on their card proposition. We wanted them to know they were coming over to a fair and beneficial proposition.
“It’s at least matching the benefits they have with Barclays, and we are offering them something on top. There’s no downside on the product offering.”
ADIB, which had an existing customer base of about 600,000 before the Barclays acquisition, had been building up its consumer banking business aggressively over the past couple of years, expanding its operations into other emirates, such as Dubai. The lender has the third largest retail banking network in the UAE, with 80 branches and more than 600 ATMs.
Banks in the UAE, of which there are more than 50, have been vying heatedly for retail customers since the financial crash of 2008 because the margins on that business are higher than loans to companies. Many corporate borrowers struggled to recover from the crisis, making banks focus on individuals.
The subsequent economic boom in the UAE that began in earnest last year has increased demand for mortgages, car loans and personal financing. That has made it difficult for banks with smaller retail networks to compete with market leaders such as Emirates NBD and ADIB.
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