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Sun 6 Apr 2014 10:20 AM

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Barclays to sell UAE retail unit for $177m

Abu Dhabi Islamic Bank, the emirate's largest Islamic bank, will acquire the accounts of 110,000 customers

Barclays to sell UAE retail unit for $177m

Barclays has agreed to sell its retail banking
operations in the United Arab Emirates to Abu Dhabi Islamic Bank (ADIB) for an
expected price of AED650m ($177m), ADIB said on Sunday.

The emirate's largest Islamic bank said it would
acquire 110,000 customers through the deal, helping it expand into serving
expatriates, who comprise most of the population in the Arab world's second
biggest economy. The deal is still subject to approval by the UAE's central

Around half-a-dozen local and international banks,
including Abu Dhabi Commercial Bank, Commercial Bank of Dubai , Citigroup and
Standard Chartered, had expressed interest in buying the Barclays operations,
according to banking sources.

The British bank had said last September that it
would offload its retail portfolio in the UAE including credit cards,
mortgages, personal lending and deposit-taking operations.

Some foreign lenders have been withdrawing from
retail business in the UAE as they evaluate the reach of their operations
following the global financial crisis, and in light of new Basel III rules on

Foreign banks also face intense competition from
local banks, which are enjoying a strong recovery of the UAE economy and real
estate market; they have large pools of liquidity to deploy and have targeted
retail banking for its higher margins compared with corporate business.

"The decision to exit the UAE retail banking
space, while not taken lightly, allows us to focus on our businesses in
corporate and investment banking and wealth and investment management,"
John Vitalo, chief executive for Barclays in the region, said in a statement.

"These businesses are strong, performing well,
and have significant future growth potential."

ADIB's net profit for the whole of 2013 grew 21 percent to AED1.45bn; loans were up 21 percent to AED61.7bn,
while deposits jumped 23 percent to reach AED75.5bn.

Islamic banking bans interest payments but involves
structures that resemble them. Former Barclays customers will now be asked to
convert their credit card accounts, deposits and customer loans into Islamic
instruments at ADIB.

It is not clear that all of them will do so,
although Islamic banking is a mainstream business in the Gulf and many
customers bank with sharia-compliant institutions for business rather than
religious reasons. ADIB will offer jobs to all Barclays retail employees and
work with the British bank to ensure a seamless transition for customers, it

In 2010, Abu Dhabi Commercial Bank bought the UAE
retail arm of Royal Bank of Scotland for around $100m. That included
three branches of RBS along with 250,000 customers.

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