Emirates NBD plans Saudi expansion and seeks M&A
Emirates NBD, Dubai’s biggest bank by assets, is looking to expand its presence in Saudi Arabia and plans to approach the banking regulator in the Arab world’s biggest economy next year to seek permission for 20 additional branches in the kingdom.
The lender is also looking for acquisitions of banking assets in the GCC, Africa and Turkey as part of its growth agenda, its group chief executive said.
Emirates NBD, which received the permission for three branches in Jeddah, Khobar and Riyadh earlier this year, plans to open them in the first quarter of 2018 and only then will it approach the regulator Saudi Arabian Monetary Authority (Sama) for additional licences.
“We will knock on their door once we have actually done that [opened branched],” Shayne Nelson, who has been at the helm of the Emirates NBD for more than four years, told The National. “We can certainly open a couple of dozen branches within the next three to five years if we get the licences. I think we would be very happy with that number.”
Emirates NBD was the first non-Saudi bank that was allowed to increase its branch network in Saudi Arabia. Mr Nelson said that despite current softer economic conditions, the kingdom is the place to be and grow into.
“It’s a terrific economy,” he said, adding that Emirates NBD does not want to open too many branches in the kingdom as technology is going to limit the requirements of a very large branch network in the future.
“I don’t think we are going to need a 100 branches,” he said adding that the eventual size of Emirate NBD’s branch network will be the subject to regulator’s approval but “we would love to have more”.
The lender, which had only one branch in the capital Riyadh before securing permission for three more, has chased Sama for a decade to expand in the country.
Once the regulator sees Emirate NBD’s success with the new branches, it might be inclined to issue more licences, said Mr Nelson.
“To be fair, Saudi authorities would like to see us get these [branches] opened, get them staffed up and start getting successful, and then they will be quite open,” he explained.
The strong relationship between Saudi Arabia and the UAE, the region’s second biggest economy, could also pave the way for Emirate’s NBD’s Saudi growth plans, Mr Nelson noted.
The bank, which bought BNP Paribas’ Egyptian unit about five years ago, is looking for further acquisition opportunities within East and North African markets, the broader Arabian Gulf region and Turkey, he said.
“That’s the geographic spread. Why those markets? Because we believe it’s important to be in the markets where the UAE has a strong relationship and strong capital and trade flows,” he said adding that the bank intends to remain “relevant to its customers” and wants to expand where the customers are expanding.
The hydrocarbon-dependent economies of the GCC, a region that accounts for about a third of the world’s proven oil reserves, slowed in the past two years after the price of crude fell from its mid-2014 peak, causing credit demand to decline, problem loans to rise and put assets quality under pressure.
Regional banks have been looking to expand to increase their balance sheets and cope better with a tougher operating environment. Earlier this year, Abu Dhabi’s First Gulf Bank and National Bank of Abu Dhabi merged to form First Abu Dhabi Bank, one of the top Middle Eastern lenders by assets.
Mr Nelson declined to say if Emirates NBD already has a deal on the table. “We continue to look at multiple targets,” he said. The lender, which boasts a capital adequacy ratio of 20 per cent, has waited a long time for the Egyptian acquisition and is willing to wait further for the right opportunity to come its way.
“It is no secret that we have been looking for quite some time. Every investment bank in the world knows we have surplus capital so we get every idea they can come up with for us to spend money,” Mr Nelson said.
However, the bank is cautious as “there is no better way for destroy value for shareholders than to make the wrong acquisitions, he added.