Take it to the bank

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Emirates NBD is already the Gulf's biggest bank by assets and is set to expand its sphere of influence.

Chairman Ahmed Humaid Al Tayer reveals the company's expansion plans for 2008 and gives his take on one of the biggest questions facing the region's leaders. Is it time to drop the dollar peg?

The chairman of the Gulf's biggest bank is looking weary after playing to a very tough crowd. In the space of 10 minutes, Ahmed Humaid Al Tayer has had to bat away a flurry of questions from a gathering of shareholders.

How much did the advisors appointed to handle the merger between Emirates Bank and National Bank of Dubai get paid? How much subprime debt does the bank have? Why aren't investors getting a chunkier end of year dividend? The questions come thick and fast and there is not much tea and sympathy to be had from the floor of the first Emirates NBD annual general meeting.

But Al Tayer isn't expecting anything other than a robust grilling from shareholders given their first opportunity to ask questions of management since Emirates NBD was formed last October.

"It is our first annual general meeting after the merger," he says with a shrug that seems to say 'I've heard it all before'.

Al Tayer is a veteran of the UAE banking and political scene and wears many hats, including vice chairman of Dubai Aluminium and Emirates National Oil Company. In the government he has served as minister of finance and industry, acting minister of public works and housing, minister of communications, and chairman of Etisalat.

It follows that a few troublesome shareholders are not going to cause him too much distress.

The question of the bank's exposure to the US subprime mortgage market is one that has been asked of many big financial institutions in the region this year as investors have tried to gauge the impact the lending crisis will have on local institutions.

Last month Gulf Investment Bank announced it has accrued losses of more than US$750m during the year, mainly as a result of its exposure to US subprime-related investments.

Global losses relating to the subprime crisis could top US$600bn, or about four times the value of losses declared so far, according to Swiss bank UBS.

Emirates NBD said it had some "indirect exposure" to subprime securities when it posted its results in February which were estimated at between US$10m and US$15m.

Al Tayer acknowledges that some banks in the region do have exposure to US subprime debt on their balance sheets, but insists the problem is not as acute as some commentators have suggested.

"Our market is basically isolated from subprime," he says.

"The products offered by the American banks are not attractive compared to the returns in our market."

He also believes that the Middle East region is in good shape to emerge from the global economic repercussions of a possible US recession. As the current account surpluses of the six Gulf states are predicted to top US$3 trillion, banks like Emirates NBD see no reason to significantly downgrade their growth forecasts.

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