Emi­rates NBD plans Saudi ex­pan­sion and seeks M&A

The National - News - - BUSINESS - SARMAD KHAN

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.

Pawan Singh / The Na­tional

Shayne Nel­son of Emi­rates NBD

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