RAKBank racks up profits as customers come calling

RAKBank, the Ras al Khaimah-based retail lender, shrugs off new regulations on personal lending to post improved profits for the quarter.

RAKBank, the Ras al Khaimah-based lender, reaped the benefits of improving job prospects around the UAE as its predominantly retail banking business gained new customers.

The bank reported profits of Dh296 million, an increase of 23.2 per cent on the same period a year earlier.

RAKBank's profitability "reflects the growth in the bank's customer base across a wide range of personal and small business segments, which is emphasized by RAKBank's competitive product offerings and award-winning customer service," said Graham Honeybill, RAKBank's chief executive.

RAKBank, which is one of the UAE's biggest retail lenders, was able to sustain its margins following the introduction of new Central Bank regulations against excessive fees on personal lending, credit cards and auto loans. RAKBank derives 91 per cent of its revenues from retail banking.

On 1 May, the Central Bank implemented limits on personal loan charges and capped the amount that individuals could borrow.

"Following the introduction of the new Central Bank of the UAE guidelines for the retail banking segment, the bank is diversifying its product range and expanding further into business customer segments," the bank said in a statement.

In spite of the limits on personal borrowing, lending increased 1.9 per cent to Dh17.5bn, while net interest income rose 23.8 per cent to Dh488m.

That offset the effect of caps on bank charges, which caused income from fees and commissions to fall by 10.1 per cent to Dh121.2m.

Stabilisation in the UAE's employment market, following job losses during the financial crisis, had also ensured that RAKBank's retail lending business remained healthy, said Mahin Dissanayake, a financial analyst at Fitch Ratings.

Another part of RAKBank's growingprofitability was its lack of exposure to over-indebted corporates, which meant that it had set less money aside for bad debts, Mr Dissanayake added.

"They've not had to provide for the large Dubai-based companies that were restructuring," he said.

However, the bank's dependence on retail lending was a potential vulnerability in the quarters ahead, he added.

"We expect growth to be affected by the Central Bank rules, but those only came into effect recently," he said. "Going forward, the pace of growth is likely to be slow."