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Alex Thursby

UAE, ABU DHABI - Finance

New Avenues

CEO, National Bank of Abu Dhabi

Bio

Alex Thursby joined NBAD after six years at ANZ Bank, where he was CEO of International & Institutional Banking and of Asia Pacific and America. He also served as Head of Corporate & Institution Wholesale Banking NE and was the architect of ANZ’s international expansion. Before ANZ, he served for 21 years at Standard Chartered Bank, working in areas as diverse as corporate and institutions, wholesale banking, derivatives, and lease finance, and in regions including Africa, the Americas, and Asia Pacific. During his career, he has worked in Hong Kong, Indonesia, Singapore, the UAE, and the UK. He earned his bachelor’s in business administration in Australia. He also attended London Business School (International Business Consortium) and the Senior International Management Programme at INSEAD, France.

"A key area in the capital market space that we are developing is debt capital markets and sukuks."

How has the bank managed to achieve such strong credit ratings?

The primary aspect is that our credit rating reflects three core elements that are important. The first is that we are part of Abu Dhabi and Abu Dhabi itself is AA rated. That is an excellent backdrop to have, particular versus many other places in the region. Abu Dhabi has a strong balance sheet, a strong liquidity position, huge reserves, and a sustainable domestic oil industry; therefore, you can understand why the rating agencies have rated it this way. I am sure that if you took out the conflict aspect of the Middle East that it would be AAA. The Western rating agencies fear that risk. The second is that we have a strong capital base with a business model that we have built and are transforming further. We pay a healthy dividend but always ensure that our capital strength remains—our governance, business model, and dividend policy are all about making sure that our capital position, at all times, remains strong. The rating agencies like that. Meanwhile, people want to buy our tier one paper, which is currently trading at about 102, demonstrating the demand in the market. Rating agencies want people to have access to capital, be conservative relative to dividend policies, and own a business model and government structure that ensures that capital is always maintained. Then, finally, is our liquidity. We have a strong liquidity, even in global terms. It is interesting that Standard & Poor’s was so positive about our liquidity position in the sense that oil prices are down and banks are affected; however, we have been able to build liquidity offshore and that has broadened our pool of depositors and liquidity providers. We run an extremely safe stress test ratio and extremely conservative loan-to-deposit ratios versus the global marketplace, which I believe is the third primary reason.

How do you expect the bank to develop to enhance market efficiency in terms of securities lending and borrowing?

A key area in the capital market space that we are developing is debt capital markets and sukuks. In some regards, sukuks are much more of a global phenomenon, not just in Saudi, Malaysia, or Indonesia. And we want to be a leader in developing a true global sukuk marketplace, which is over-the-counter based and has opened up avenues of investors. The great thing about sukuks is that Islamic investors and Western investor types both invest in them. Hence, the opportunity for this marketplace is enormous. We feel that Islamic finance is a growth industry, but it is starved of being able to access debt instruments through the marketplace, and our job, on a sukuk basis, is to develop that and, within that, we want Abu Dhabi and the UAE at large to be a significant player. We see the significant players as Hong Kong, the UAE, the UK, and Malaysia to an extent. Our job is to develop that. In terms of Western-style bonds, we want to develop capital markets with credit. Here, we want to develop the financial center of Abu Dhabi to be able to also participate in African debt capital markets, South Asian debt capital markets, and so on.

What is behind the decline in the percentage of non-performing loans?

We have been through a really purple patch. Up until 2014, we had high growth, good oil prices, and lots of investment. The post-2008 positioning involved a lot of restructuring and many improvements were made. I believe the effects of 2008, globally, will be with the world for another 15 years at least. I am not suggesting that the rehabilitation after 2008 has finished here in the UAE. We are getting knocked around by the oil prices, and you would expect nothing less. It is a good thing in some regards because it will force us to look more to the diversification that we have attempted as a country and have actually executed very well. Therefore, continuing to find value we can create in the global world, we have done it with transport, tourism, logistics, and so on, but there are other areas that have to develop, such as financial services. The reality is that I would expect the operating environment for banks to be tougher in the coming years than it was in previous years. That environment will cause some economic realignment, which will hurt some people and benefit greatly some others. That realignment will affect the banking industry. Our strategy has worked well. We are only two years into our first five-year plan to transform the bank. But, it has been good the way that the bank has started to build its international business. We have had a few years of hard work and customers want to work with us. We are starting to see the benefits of that. We are driving mortgages with dirham payroll in Egypt, which is putting two countries together and providing a retail solution. You would not have seen that five years ago in a UAE bank. It is not just the wholesale side, but retail as well.

What is the bank’s involvement in developing SMEs?

First of all, we have totally rebuilt our commercial banking proposition. Some SMEs will always say they need more funds. The reality is that some need it, others do not. Across the world, in terms of the ratio of deposits to loans from SMEs, deposits are larger. SMEs as a segment globally are liquid and progressive. Sometimes, it’s not loans they need, but great banking services so they get paid on time, don’t get ripped off, and remittances are quickly made and credited. They might need two- or three-day support. However, inherently, SMEs are not huge suckers of capital, which surprises people. We are trying to build a business around those and improve our services and value proposition, which allows SMEs to access foreign exchange at competitive rates and get it quickly through electronic delivery, as well as allowing them to trade across the region. All of those things are what we are trying to provide, in addition to some loans. The second thing we are trying to do with the academy is to help SMEs get the skill sets to run a business successfully and understand cash flows and problems, to help educate them in allowing their businesses to continue to be successful, or even progress into something far grander. The academy is exactly about scaling up. We need to move the SME debate from just lending to a banking service, with good prices to help SMEs succeed. I am a huge believer that Asia was built around SMEs, some of which became some of the great industrial conglomerates that we see today. In my view, SMEs are critical for the success of Europe. In the UK, they employ 45% of the people. If you look at Dubai and Abu Dhabi, what drives so much of it is the SME segment. It is an attractive sector for banks, but you have to do it the right way. You have to create some scale and you have to create the right value proposition and the right business model to respond to that. That is what we have done, we believe. It is an attractive sector, of course, and it will continue to be so. In many regards, it is probably the most attractive sector in the long term.

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