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Chris Taylor

UAE, ABU DHABI - Finance

A Prudent Dream

CEO, Abu Dhabi Finance (ADF)

Bio

Chris Taylor is an experienced chartered accountant with substantial financial services experience. He has spent six years in the UAE, and has nearly two decades of diverse experience across the international banking and insurance sector. Prior to joining Abu Dhabi Finance (ADF), he was Head of Internal Audit at the National Bank of Fujairah in 2007, and served as Director of Compliance and Operational Risk Management for Retail Banking Operations in Europe for Bank of America. He has BA Honors in Geography from Liverpool University.

"The main challenge is the ability of mortgage providers to match their lending with their own borrowing requirements."

How has the company’s market share grown since it was established in 2008?

Abu Dhabi Finance (ADF) was launched with the aim of becoming the best provider of residential mortgages in the UAE. Whilst this vision does not necessarily mean we intended to become the biggest mortgage provider in the country, I am pleased to confirm that we quickly established ourselves as the mortgage provider of choice in Abu Dhabi, which was our preferred market of entry. There is no official data available to confirm the total mortgage market size in the UAE, but our market intelligence reports confirm that by 2011 we were providing more than a quarter of all conventionally financed mortgages in Abu Dhabi. This trend has continued through 2013, and we believe that our service standards and relentless focus on client service has helped us achieve these results. We were particularly proud of the industry recognition we achieved in 2013 when ADF was awarded “Best Home Finance Company in the Middle East” at the Banker Middle East Industry Awards 2013.

How did ADF formulate its business strategy in the aftermath of the economic downturn?

ADF launched just as the crisis was unfolding at the end of 2008. Our fundamental strategy of focusing on providing exceptional client service and becoming the best mortgage provider in the UAE did not change. ADF set out to be, and will remain, a prudent lender. Our credit policy has served us well throughout the downturn and our credit book has one of the lowest delinquency ratios in the industry. We have focused on technology and process enhancements to ensure we are able to provide flexible products to our clients at a reasonable cost. This has allowed us to consistently improve our turnaround times and mortgage processing speed at the same time as reducing administration and staffing costs. I was particularly proud when ADF was awarded the “Best Use of Technology” for our Oracle system implementation at the Banker Middle East Industry Awards in 2011, as this reflected two of our core values: ‘”One Team. One Goal” and “Continuous Improvement.” In addition to the above responses, we delayed our planned launch into the Dubai mortgage market during the downturn, but we are now actively providing residential and commercial mortgages in both Dubai and Abu Dhabi.

“The main challenge is the ability of mortgage providers to match their lending with their own borrowing requirements.”

What effect are European sovereign debt and the slow US recovery having on ADF’s operations?

Everyone knows that the real estate market is a cyclical market that is exposed to all forms of global economic crisis. The recent challenging economic conditions adversely impact all players in the sector, including the government, developers, and finance providers, as well as prospective investors and home purchasers. The debt crisis has made it harder to access long-term liquidity, which is something that will be critical to the development of a long-term, sustainable mortgage market in the UAE. Recently, however, we have seen an improving liquidity situation and economic outlook. Consumers are more confident and, in fact, August 2013 was one of our busiest months since launching in 2008. We have a funding line in place with First Gulf Bank, and with ongoing shareholder support are well positioned to continue providing residential and commercial mortgages across the emirates of Abu Dhabi and Dubai.

The UAE is still experiencing growth despite the stagnant Western markets. What trends are you noticing in the demand for your products and services?

We are seeing several trends, including: a renewal of interest from non-resident real estate investors; an upturn in applications from business owners looking to invest in a home for their business with the help of our Tijarati commercial mortgage product; and a shift in the balance from mortgages being used for investment purposes to mortgages for end users. In addition, as the financial services market matures in the UAE, client expectations of service levels are increasing. At ADF, we pride ourselves on our passion for clients, and so we welcome improvements in service standards across the board. We ensure we do our best to exceed client expectations through enhancements to our product range, our mortgage process, and our training programs for staff. We were very pleased to receive the “President’s Award for Customer Experience Management” at the 2012 UAE Customer Service Week Star Awards.

How would you evaluate the competiveness of the sector?

ADF operates in a very competitive sector, with low interest rates and many mortgage offerings available on the market. Clients are prepared to spend more time shopping around for the best mortgage offering available to them. A number of competitors tend to dip in and out of the mortgage market as they have a portfolio of products to focus on. As ADF is a mortgage specialist, we aim to offer a consistently superior product and service range. As we are currently seeing an upturn in the real estate sector across the UAE, a number of new entrants are joining the mortgage market. Competition across service and price is great news for home purchasers. We are seeing a number of aggressive products in terms of loan-to-value (LTV), which is of some concern to me. There is a danger that a real estate bubble can be created through the easy availability of mortgages, where little or no deposit is needed from the client. This can encourage flippers or speculators to take on mortgages in the hope they can sell the property quickly, clear the mortgage, and make a profit without risking their own capital. ADF prides itself on being a responsible lender and, whilst we will always try and help a client buy the property of their dreams, we also encourage them to be prudent in relation to the amount they can afford to borrow.

What can be done to ensure the Dubai real estate crisis in 2008-09 is not repeated in Abu Dhabi and the UAE?

The real estate sector is cyclical and there is always the risk that unexpected or unavoidable external events can trigger a real estate crisis. However, there are a number of areas in which the government, regulators, developers, and finance providers can help. There have been a number of positive developments at the government and Central Bank level in the past few years. For example, recently enacted laws concerning cancelled projects in Dubai enhance the ability of borrowers to recoup investments from failed projects. Government level control over developments and developers can help to ensure an appropriate balance of supply and demand. Well-targeted fees and charges at the municipality and developer level can deter speculators from entering the market and be used to stimulate long-term investors in the real estate sector. Regulators can help to ensure that the hot money that flows into the country is controlled, and that banks are lending in a prudent and sensible manner. Increased capital charges for high-risk mortgage lending is one way in which this could be done. Finally, the availability of long-term funding, through securitization vehicles, is also important to allow lenders to match fund the mortgages they are providing. Currently, there is little activity in this area, which makes it challenging for mortgage providers to ensure a steady flow of mortgage loans into the market place.

What are some of the challenges facing the real estate finance market?

The main challenge is the ability of mortgage providers to match their lending with their own borrowing requirements. Whilst there will always be an element of liquidity mismatch, this challenge is particularly severe in the UAE. There is little international appetite for securitization vehicles backed by UAE property due to the lack of fully developed laws and regulations. There have been few, if any, successful residential-backed mortgage securitizations in the UAE in the last few years, and this is the major challenge. Re-possessing property, which unfortunately is part and parcel of the mortgage lending business, is also time consuming and expensive. A smoother re-possession process that reduces costly court procedures is required, and ensures customers are treated fairly. This would enhance the affordability and availability of mortgage finance in the UAE.

Earlier in 2013 the company launched Tijarati, its commercial mortgage product. How has this been received?

The launch has gone well. We are seeing plenty of interest, particularly from the SME sector, across Abu Dhabi and Dubai. We are on track to meet our commercial loan book target for the year and intend to expand the product further in 2014. Clients have been excited by the product offering, and particularly by the availability of longer-tenor mortgages, which have not previously been available for commercial mortgages.

What plans does the company have to launch new products in the near future?

We are working on enhancing the flexibility of our current mortgage product, which will ensure the ADF mortgage offering continues to be the most flexible in the marketplace.

What will ADF look to focus on over the next five years?

ADF has three areas of continued focus, including: providing the best range of residential and commercial mortgage products to support the real estate sector across the UAE; continuing to provide the highest levels of transparency and client service in the market; and ensuring we continue to develop our staff and add value to the communities in which we operate.

© The Business Year – October 2013

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