(MENAFN- Khaleej Times) The banking industry looks set to sustain positive trends this year due to strong macroeconomic economic indicators, sufficient liquidity and low interest rates in the country, according to a top banker.
Shayne Nelson, Group Chief Executive Officer, Emirates NBD, said the outlook for the UAE banks in 2015 remains very favourable, underpinned by robust non-hydrocarbon growth and low interest rates.
"The growth story in the banking sector is here to stay since banks now have enough capital to meet further economic requirements, where comfortable liquidity, growth in assets and profitability are expected to continue over the next few years," Nelson told Khaleej Times in an exclusive interview.
Taking advantage of the positive growth opportunity in the UAE, he said Emirates NBD remained on a growth trajectory in 2014, driven by a combination of very good revenue growth, substantial increase in core banking activities, as well as strong focus on keeping costs in control.
"In 2014, the bank's net profit increased by 58 per cent to reach Dh5.13 billion while the group's total income climbed 22 per cent to Dh14.44 billion. This is attributed to year-on-year revenue growth by each businesses, as well as significant improvement in the capital ratios, the impaired loan ratio and coverage ratios," he said.
Strong growth
The UAE's largest bank in terms of total income and branch network on Sunday announced financial results for 2014 and said Emirates NBD is the country's first bank, which reported over Dh10 billion pre-impairment operating profit as its all business units recorded strong business growth last year.
The retail banking and wealth management division continued to led the bank's business by registering strong growth in revenues, which rose eight per cent to Dh5.62 billion due to increase in commission and fee income.
Wholesale banking's year-on-year operating income rose by eight per cent to Dh4.82 billion while net interest income up by 10 per cent to Dh3.51 billion due to asset growth and yield management.
Private Banking division also showed strong growth in its core segments across the UAE, Saudi Arabia, Singapore and UK. The bank's Asset Management business has Dh10 billion plus in assets under management and now recognised as a leading asset manager in the country.
The bank's brokerage arm - Emirates NBD Securities - improved its market position by registering 14 per cent increase in trading volumes last year. Emirates NBD Capital Limited, the investment banking platform, ranked as the highest Middle East arranger and number three globally in terms of US dollar sukuk issuance. It acted as joint lead arranger and book runner for Dh8.1 billion worth of loan syndication and capital market transactions.
"In my first full year as Group CEO, I'm pleased to report that Emirates NBD delivered a strong set of financial results. 2014 saw a maturing of the Group's balance sheet and income statement," Nelson said.
The bank, which is listed on Dubai Financial Market, has strengthened its balance sheet due to improvement in capital, liquidity, and credit quality. This provides a solid platform to take advantage of growth opportunities in Dubai and the region, the bank said in a statement.
The UAE remains well-positioned to enjoy solid growth in 2015 driven primarily by an expansion in non-oil sectors, particularly manufacturing, transport, logistics and construction.
"We expect tourism to remain an important contributor to growth notwithstanding more challenging conditions in key markets such as Russia," the statement said.
Challenges ahead
Following the recent fall in oil prices, the bank has adjusted its 2015 UAE growth forecast down to 4.3 per cent from 4.8 per cent while the gross domestic product of Dubai is expected to hit 4.7 per cent in 2015.
"If the current growth trends are any indication, the road ahead for the banking sector is smooth, but not withstanding the challenges posed by a volatile global economy. Given the increased importance of the UAE market in the global context, it is only natural that our banks are not decoupled from external economic environments," Nelson said.
Following the financial crisis in 2008, he said banks have beefed up their risk management units and are also more careful in their lending practices with increased due diligence on the utilisation of funds and loans.
"We do not believe that we will see a similar situation as what was witnessed in pre-crisis times. However, we all need to be careful that mistakes of the past are not repeated," the Group CEO said.
Consolidation in banking
Nelson said the UAE's banking industry should consider consolidation to sustain the positive trends for a longer period in future. He said the emirate's banking sector needs consolidation or small banks should be merged to remain sustainable in the business.
"Yes, I personally feel that the banking sector here in the UAE is too crowded in relation to the population size. It is unusual for 50 banks to be operational in a country given the population, so consolidation would be good for the industry," he said.
"Scale is becoming increasingly important given cost and compliance pressures together with technology innovation investment required," he added.
Credit Bureau a good step
Nelson said Etihad Credit Bureau is a step in right direction and will benefit the banking industry by raising the bar in line with international standards.
"As the biggest retail bank in the country with over a million customers, we were among the first few banks to launch the pilot with the Etihad Credit Bureau," he said.
"We believe the establishment of the credit bureau is an important milestone in the evolution of retail banking in UAE, and will help banks get a better understanding of their customers and avoid excesses of the past. It will also enable customers with strong credit history to get a finer pricing on their loans," Nelson concluded.
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