NBAD counting on beefed up retail operation and new strategy to pay off

More than 1,500 delegates re expected at the NBAD-organised Global Financial Markets Forum in Abu Dhabi. Ravindranath K / The National

National Bank of Abu Dhabi said it expects the investment it has made over the past two years into various lines of business to start paying dividends, giving it a leg up as the economy slows amid lower oil prices.

The bank, the biggest in the UAE by assets, has invested heavily to strengthen its retail business, as well as other lines including trade finance and syndicated loans since chief executive Alex Thursby took the top job in 2013.

The strategy is starting to bear fruit, according to the lender’s chief financial officer, James Burdett.

Even the bank’s push to secure business in emerging markets – reeling from the fallout after the collapse in the price of hydrocarbons and other commodities – is reaping rewards because the lender started from a low base and was able to get fresh business quickly, he said.

“The biggest upside for us is our retail business in the UAE and that’s the business that we’ve traditionally underinvested in,” Mr Burdett said yesterday on the sidelines of the Global ­Financial Markets Forum, organ­ised and hosted by the bank in Abu Dhabi.

“Because the bank was previously focused on wholesale banking, it [retail] was neglected,” he said. “It’s a business that gives high returns and we are looking to develop that. We’re renovating our branches, we’re making them sales and service outlets where historically they’ve been processing shops. We’ve invested significant money into it.”

While there isn’t a breakdown for the exact amount of money spent on improving its retail op­era­tion, NBAD’s total ex­penses grew 10 per cent last year to Dh4.08 billion from Dh3.69bn in 2014, according to a recent investor presentation.

After he was appointed, Mr Thursby said that he wanted to streamline the lender by focusing on growing the retail businesses at home and in a few other emerging markets, as well as going after a US$137bn corporate banking market in a “West-East” corridor that spans Africa, the Middle East and Asia.

Under a five-year strategy, NBAD divided itself into three core businesses of global wholesale, global wealth and retail and commercial operations in the Arabian Gulf.

Not everything, however, has gone according to plan, Mr Thursby said at the event yesterday, and the branching out of the bank’s retail business overseas will be limited for the time being to Egypt, a country that is giving it good returns despite its current economic difficulties.

For the UAE economy, the IMF forecasts growth for this year at 2.6 per cent, a cut of 0.5 percentage point compared with its Octo­ber projection of 3.1 per cent growth. The drop in the price of oil has also weighed on the rate of lending here, but Mr Thursby said he still expects loan growth to be in the mid-single digits this year.

Levels of bad debt are also rising, but Mr Burdett said the country was in a much better state than it was in during the fin­ancial crisis.

“Unquestionably, with lower oil prices, there’s more stress in the market and I think it manifested itself initially in the SME sector,” Mr Burdett said. “We believe that there will be a small contagion into the contracting space, but I think things were a lot better than during the last financial crisis.”

Last month, NBAD reported net income fell to Dh1.03bn in the fourth quarter from Dh1.37bn in the same period of 2014. Impairment charges, or money set aside to cover bad debts, more than doubled in the fourth quarter last year to Dh436 million compared to Dh200m in the same quarter of 2014.

NBAD said last month that the higher impairment charges were owing to a mix of difficult operating conditions, concerns over the ability of small businesses to pay back debt and putting aside more cash to cover fut­ure non-performing loans.

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