Stifled by a population of 8.3 million, many of the United Arab Emirates’ biggest banks are heading to Asia and Africa to capture a USD 137 billion corporate-banking market.
National Bank of Abu Dhabi (NBAD) is the emirate’s biggest lender, and already has presence in 17 countries within Britain and China.
Its international business added 17% of the revenue in the nine months leading to September, and it plans to boost its growth – and fees – by building new hubs in financial centres such as Mumbai and Lagos, with secondary plans to create hubs in Singapore, Hong Kong, London, Paris and Washington DC.
Second-ranked First Gulf Bank PJSC aims to double the share of profit from its international offices – from 7% to the early teens – and is currently planning for offices in China, Indonesia and South Korea.
Islam is the most prominent religion in North Africa, and Abu Dhabi Islamic Bank PJSC, the Emirate’s largest Islamic bank, has applied for licenses in both Algeria and Libya and is considering expansion into Morocco and Tunisia.
Lastly, the National Bank of Fujairah (NBF) – based in one of the UAE’s less developed emirates – is planning to open trade finance offices in Africa as it benefits from the UAE’s upward growth.
Accessing trade flows
The UAE, made up of seven distinct emirates, holds around 51 lenders.
The country has the biggest banking market within the Gulf Cooperation Council, which is made up of six nations including Saudi Arabia and Qatar.
Abu Dhabi, the UAE’s capital and the biggest and the richest of the emirates, holds around 6% of the world’s oil reserves, and is joining neighboring Dubai in tourism, metals, ports and real estate investment in order to diversify its economy.
Yet domestic growth opportunities, for the most part, may be running dry – especially for the bigger banks.
Whilst growth could be achieved by re-investing in the UAE’s construction, public sector and real estate markets, growth opportunities outside the UAE boast a number of advantages.
Expanding aboard not only cuts dependence on local real estate markets and bestows access to the new region’s trade flows; international expansion can also help beat regulations which restrict lending to companies related to the government.
The region’s other leading banks have also been confronted with growth issues.
The Persian Gulf’s biggest bank by assets, Qatar National Bank SAQ, agreed to pay USD 1.97 billion to purchase the France-based Societe Generale SA’s Egyptian unit.
Within the UAE, Dubai’s Emirates NBD PJSC finalised plans to purchase the Egyptian unit of BNP Paribas SA for a cool USD 500 million.
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