On the Up

What is your vision for leading the bank, and what are your core management priorities?

While our vision is still to become the world’s best Arab bank, our route to achieving this has changed. The premise of the new plan is a simple philosophy of being driven by the customer agenda, or what we call “being core to our chosen customers.” In that regard, moving away from a scale-to-scale model is important. Part of the problem with banks globally is that they tend to talk of market share in the same way as industrial firms, when really a bank’s share of the revenue wallet is more important. In that statement, you are dealing with clear risk and return criteria. Within that context, our customer profiles may vary; in certain businesses this means retail customers, and in others portfolio customers. In the wholesale banking arena the focus leans much more toward certain industry segments, and subsequently specific customers. Our customer-oriented strategy has three major tenets. The first is to lift NBAD from the number five position in the UAE in commercial and retail banking to number one. In wholesale banking, sometimes called corporate banking—even though the two are different—we are reasonably strong. And in terms of local banks, we are the number one player. And yet, in the retail and commercial bracket, we are massively underweight. Being number five, in my view, is not acceptable if NBAD is to be a strong force in the domestic market.

How is the rating significant in the post-2008 world?

You may wonder how this little bank in the Middle East, in global terms, is able to compete in this arena. The answer, again, is simple—our rating. If you lack a good rating, no one wants to deal with you. The financial crisis of 2008 changed the world and corporations now decide whether or not they want to deal with you, and not, as formerly, the other way around—they assess you. Our strategy is to bank these selected 800 customers in five general groups. The financial institutions comprising banks, insurance companies, real money funds, and sovereign wealth funds is the predominant one. The second aspect is to bank the energy sector. The third is to bank real estate and family conglomerates, while the fourth is aviation, aviation services and transportation services, not including shipping. The last concerns traders and retailers. We have to build up internal competency in that area. My view is that there is significant change in the world that people have not quite come to grip with—namely that we are moving out of a North-South world and into a West-East world, and that the West-East corridor stretches from Western Africa to Eastern China. It removes most of Europe and does not include Central Asia or Eastern Europe. However, the major economic zone traverses Southeast Asia and India to that part of the world, and will be the driving force in the world for at least the next 50 years. Many people are calling this the Asian Century, but I believe it belongs to the West-East corridor. Asia is one of the critical driving factors, is outperforming from every angle, and will continue to do so, bringing along the Middle East and Africa for the ride. In terms of the formation of megacities of more than 10 million people and solid GDP per capita growth, the focus is on that region. Urbanization brings about a middle class, which brings about growth. When you look at the three regions and you look at their strengths, it is easy to identify a strong work ethics, entrepreneurship, and industrialization, as well as surplus liquidity in Asia. It is simply an economic powerhouse, and not just driven by China, India, and Indonesia. In Southeast Asia, we are starting to see the emergence of Vietnam, Myanmar, and the Greater Mekong region. These are countries that have large industrious populations. They are also markets that boast solid policy and know that growth should be driven by private enterprise. Then you have the Middle East, especially the Gulf, with hydrocarbons and investment surpluses. It is beginning to form infrastructure that naturally interlinks, which we see in the ports and airline business and will see more of in the services business. There is potential for the rest of the Middle East to become much more economically independent if it can sort out its political issues. Additionally, Africa, particularly sub-Saharan Africa, has been massively underscored, and boasts huge agricultural, mining, and energy potential. In certain parts of Africa, including West Africa, there is a trend toward urbanization and the emergence of a big middle class. This should probably not surprise the world, but it does. If you consider at economic history over the past 2000 years, for all but 400 years these three continents have dominated economic growth. We are establishing our wholesale network in those five industry groups across that corridor and will bank people from within the corridor and those outside the corridor within it. This includes the likes of Shell, BP, JP Morgan, and probably, much more significantly, the Bank of China, DBS, UOB, Samsung, Emirates, Etihad, Mubadala, and so on. We will proficiently build flow products. What people don’t realize is that lending is the lesser product. Foreign exchange, trade, finance, and cash management are the biggest portions of the revenue wallet. The wholesale banking sector of those segments that we have targeted for activity is worth $140 billion. We are seeing the huge movement of the revenue wallet out of Europe to this corridor, which will be the leading economic zone for the next few years. And we sit in the middle of it. If you look strategically at why the British were so successful, and why Emirates airline and Jebel Ali Port are so successful now, it comes down to physical logistics. Proximity to market and a position in the flow is what you require, and what Abu Dhabi has. This is quite significant and our bank has the potential to capture this opportunity.

How will NBAD expand abroad?

We are looking to build five franchises, in addition to our UAE Gulf franchise, in five countries. Yet, this will take place a little further down the line; we need to get rings one and two in place first. We will look at destination markets of high growth and some volatility, which allows us to capitalize on our rating, high urbanization rate, aggressive GDP per capita, and urban growth. We want to create a business model that acknowledges that we are not going to be the number one bank in any of these countries, as that status is the preserve of a local bank, but one nonetheless that allows us to deploy significant offerings across our retail, commercial, and wholesale banking businesses around specific cities and specific targeted groups. For us, the affluent are important. We don’t need 5,000 branches in these destinations to be effective and generate money. We are looking to target specific countries. It could be Egypt, Malaysia, or elsewhere. We are really only starting to formulate these five countries now. Nigeria is also a very attractive market, for example. The mistake that people make is to think that global banking works; it doesn’t—not in terms of returns. It is becoming increasingly difficult, too, because of regulatory changes. We therefore have to strategically allocate our resources.

Why should UAE depositors contemplate moving to NBAD?

One of our value propositions, and I think this has been proven in times of crisis, is a solid rating and safety value. We are now one of the world’s 50 safest banks, and the safest bank in the emerging markets. This is clearly something that corporations and individuals want to deal with. We should add to that our customer proposition in terms of improved service and dedication to a relationship, rather than a product-push approach, which is something I emphasize considerably. Customers since 2008 are looking for safety and quality service. We have a lot to do, but I think we are well on the way in terms of relationships. There are few banks that take this, rather than the product approach, and all of them besides us, have major operations in Asia, or are actually from the continent. This insight and knowledge of the customer is something we have to maximize.

Where do you want to see NBAD in five years?

I want NBAD to be the best Arab bank in the world, having created a strong business offering across the West-East corridor. I also want the bank to adopt a borderless approach in the way it operates, having grown to two-and-a-half times the size it is today, while maintaining balance sheet prudence. Domestically, we want to be number one in the retail and commercial spheres here in the UAE. Lastly, having done those things, we will start to build our five strategic franchises abroad—I think that Egypt and Malaysia will definitely be two of them.

© The Business Year – March 2014