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Mon 8 Mar 2010 11:14 AM

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Bank of Sharjah, BNP to tap Mideast market

Two banks are in final stages of setting up a joint venture for private banking sector.

The UAE's Bank of Sharjah plans to join forces with France's biggest lender BNP Paribas to tap the fast-growing Middle-Eastern market for the very rich, the company's general manager said on Sunday.

The two banks are in the final stages of setting up a joint venture with possibly a 50-50 ownership structure to cover the Middle-Eastern private banking market, Bank of Sharjah's executive director and general manager told Reuters in an interview.

The number of high net worth individuals, usually those with investable assets of around $1 million, in the oil-rich Gulf region is expected to grow about 6 percent between 2008 and 2013, despite a recent drop as a result of the financial crisis.

"To tap the potential of the region (Middle East) you need the local know-how and in order to be credential you need the expertise of a solid bank like BNP Paribas," said Varouj Nerguizian at the bank's headquarters in Sharjah.

"The idea is to serve wealthier high net worth customers directly from the Gulf ... we have access to money that they (BNP) cannot have ... it's easier for us because we are a local bank and we know the people better," Nerguizian said.

The BNP Paribas deal would become the latest example of a local bank teaming up with a European counterpart. Abu Dhabi Commercial Bank earlier in March announced a private banking partnership with Schroder & Co Bank AG, a subsidiary of Schroders PLC, one of the world's biggest asset managers. Middle Eastern banks in recent years have slowly started to develop their private banking franchise in a market that is dominated by foreign players such as Citigroup and HSBC.

Bank of Sharjah, a mostly UAE-focused corporate lender with a market value of $1.1 billion, was an affiliate of BNP Paribas until 2002 when the Paris-based lender sold its stake.

Bank of Sharjah acquired BNP's Lebanese assets in 2008 and also owns 81 percent of Emirates Lebanon Bank, while the remaining 19 percent still belongs to BNP. Bank of Sharjah may consider buying the remaining stake from BNP, Nerguizian said.

"We are considering the possibility, I think we should do it this year, it is the right time," he said.

Sharjah is the third largest of the seven members of the United Arab Emirates.

Bank of Sharjah made AED475 million in full-year net profit in 2009. Nerguizian expects AED550 million ($149.7 million) in 2010 net profit, although if regional stock markets remain weak, full-year net profit will be around AED500 million, he said.

The bank is considering establishing a European footprint, either by acquiring a small bank or obtaining a licence.

"I think we are going to pursue that shortly ... there is a lot of a business between Europe and the UAE that you can capture through that entity," Nerguizian said.

Shares in Bank of Sharjah closed at 2.04 dirhams on Sunday and have risen nearly 9 percent in the past three months, outperforming the Abu Dhabi exchange where the stock is listed. (Reuters)

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