RAKBank buoyant on SME and mortgage business growth despite tougher market

Lender is earmarking Dh100 million for digital initiatives next year, CEO says

Peter England, RAKBank chief executive. Courtesy Rakbank

The National Bank of Ras Al Khaimah, or RAKBank, sees growth in lending to small and medium-sized enterprises and mortgages next year, despite tough market conditions and plans to spend Dh100 million in 2020 on digitalisation, its chief executive said.

The lender, which is majority-owned by the government of RAK, grew its mortgage loan book nearly 13 per cent in the first nine months of the year to Dh5.2 billion and expects that to pick up another Dh300m by the end of 2019, Peter England said.

"We have put a huge amount of effort in to build and develop this book so I think another Dh500m [addition to the bank's mortgage portfolio] is doable next year," Mr England told The National. The upbeat outlook defies the challenging environment in the property market and a slowdown in the global economy affected by trade tensions between the US and China.

The government is implementing reforms to encourage investment and rolling out a stimulus package to boost growth. The Central Bank of the UAE is also considering amending the rules governing the financing of real estate and flexing the cap on funding to the sector. The regulator currently allows banks to lend as much as 20 per cent of their total deposits to the property sector. That cap is being raised to a still undecided level, according to comments by Central Bank governor Mubarak Al Mansoori earlier this week.

Though it is unclear what the final shape of the new regulations will be, a flexible cap will help fuel the growth of the property sector in the country.

RAKBank, which trades on the Abu Dhabi Securities Exchange, has also grown its SME loan book to about Dh8.3bn in the first nine months from Dh7.9bn at the end of last year, Mr England said. The bank expects that to rise to Dh8.5bn at year end.

“Say we close the book at Dh8.5bn this year, the number would be Dh9bn next year. It will be relatively slow growth but there will be growth,” he noted.

SMEs, which account for a major chunk of businesses in the UAE, are still cautious about raising debt, unsure of the economic headwinds as global growth slows, Mr England said.

“We are probably doing 60 to 70 per cent of new SME lending at the moment and even with that sort of market share we are struggling to grow the book,” he said.

RAKBank's total loans and advances grew 4.3 per cent during the first nine months of the year, which will slow down next year as demand for credit remains subdued.

“The gross loans and advances that you will see in our published accounts would be around 5 per cent for the full year [2019],” he said. “I’m forecasting a little bit lower [loan growth], probably 3.5 to 4 per cent would be the max for us next year.”

The bank, which reported a 19 per cent year-on-year rise in its third-quarter net profit, is focusing attention on digitalising its products and services but will not reduce its physical presence like Dubai’s Mashreq Bank, which is closing half of its brick-and-mortar branches.