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Wed 19 Mar 2014 03:11 PM

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Abu Dhabi lenders said to vie for Barclays ops in UAE

Sources say Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank are competing for retail business

Abu Dhabi lenders said to vie for Barclays ops in UAE

Two Abu Dhabi lenders are vying to acquire most of Barclays' retail banking operations in the United Arab Emirates, with a final decision expected next month following a highly competitive bidding process, banking sources said on Wednesday.

The lenders - Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank - are now the frontrunners to acquire the business, the sources said, speaking on condition of anonymity as the information isn't public.

"Barclays is still in the process of assessing each of the bids. Our focus is to ensure we do what's best for our customers and employees," a Barclays spokesman said without elaborating.

Both ADCB and ADIB declined to commentTwo Abu Dhabi lenders have emerged as frontrunners to buy most of Barclays' retail banking operations in the United Arab Emirates (UAE), with a final decision expected next month after a competitive bidding process, banking sources said on Wednesday.

Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank are vying to take control of the assets, the sources said, after the British lender said in September it would offload a retail portfolio in the Gulf Arab state including credit cards, mortgages, personal lending and deposit-taking operations.

Barclays plans to retain its two branches in the UAE, while its wealth management business would not be part of the sale.

Around half-a-dozen local and international banks, including Citigroup, Standard Chartered and Commercial Bank of Dubai, had expressed interest in buying the operations, said the sources who were speaking on condition of anonymity as the information isn't public.

It was unclear if all those lenders had lodged bids and the sources gave no indication of the likely value of the sale.

"Barclays is still in the process of assessing each of the bids. Our focus is to ensure we do what's best for our customers and employees," a Barclays spokesman said without elaborating. Both ADCB and ADIB declined to comment.

Foreign lenders have been withdrawing from retail business in the UAE as they evaluate the reach of their operations following the 2008-2009 financial crisis and in light of new rules on capital being brought in under the Basel III regime.

They also face intense competition from local banks, who have significant liquidity to deploy and have targeted retail banking for its higher margins and profitability compared with corporate business.

However, Citi and Standard Chartered, along with HSBC , have sizeable retail banking presences in the country, which includes oil-wealthy Abu Dhabi and trade and tourism hotspot Dubai.

The high interest in the Barclays operations pushed up the valuation substantially, according to the sources.

One, at a UAE lender which looked at the business when it first came onto the market but didn't bid, said he expected the final price to be in the high-single-digits or even low-teens in terms of multiples of earnings, but gave no further detail.

ADCB, the third-largest lender in Abu Dhabi, has actively targeted the local operations of foreign lenders in the past as it seeks to expand its franchise.

It purchased the UAE retail operations of Royal Bank of Scotland in 2010 for $100 million and was among the frontrunners looking to buy Lloyds Banking Group's UAE business in 2012 before losing out to HSBC.

For ADIB, the largest sharia-compliant bank in the emirate, questions may be raised about whether an Islamic institution can acquire the assets of a conventional lender without corrupting its principles.

However, one of the sources said this wouldn't be a problem and that the parts of the business which Barclays is selling, such as mortgages and deposits, could be easily integrated into an Islamic bank.

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Mohammed 5 years ago

In its quest for making the Dubai economy well known globally and enjoy a competitive combination of cost, market and environmental advantages and create an ideal and attractive investment climate for local and expatriate businesses alike, the City State is so highly investor and banking friendly that the biggest beneficiaries are the foreign banks operating in Dubai. They have been able to make (and still making) huge profits (not withstanding the still on-going 2008-09 global financial crisis) by way of earning truck-loads of income from its customers by way of service charges, commission earned and interest income and remitting the same to their respective head office. In no other place in the Middle East region can banks make such amount of net profits. Being operating branch offices, they do not have any mandatory Basel 3 norms applicability locally. Is this going to be sustainable is to be seriously studied and seen. The moot question is who is bearing all the cost