Retail, property and telecoms – the wind of change has already thoroughly swept through these industries in the Gulf with more malls, iconic destinations and mobile operators than we know what to do with. Banking, however, is the industry where your attention span should, if it isn’t already, be firmly fixed for the next two to three years. Over this time period the industry will change dramatically to become one of the most dynamic, not just in the Middle East but in the world.
Some may point to the GCC banking industry as immature, however many institutions have been operating since the 1950s and 60s and have firmly established positions in their domestic, and increasingly, foreign markets. The recently rebranded Mashreq, for example, has recently celebrated its 40th anniversary. Where the maturity has yet to arrive, however, is in capital markets; asset management; securities; brokerage; the stock markets and exchanges such as commodities and their intricacies as well as in the investors themselves; how they invest; what they invest in; how in fact they invest and crucially whether they make an adequate return on their initial investment.
Where maturity has yet to kick-in is in the number of finance houses spread across the Gulf. There are 46 banks in the Emirates alone, 15 in Qatar and a growing band of others in Bahrain, Kuwait and, naturally the biggest market, Saudi Arabia, where alongside the old favourites such as SAMBA, an increasing number of foreign financial institutions are beginning to set up base and play their high spending, highly experienced hand.
This week, Arabian Business examines some of the leading players in the Gulf’s banking and finance sector, what they have done in 2006, and most importantly what they plan to do next.
Kingdom of Saudi Arabia
SAMBA Financial Group
SAMBA was formed following a Royal decree dated on February 12, 1980 to take over the then existing branches of Citibank in Riyadh and Jeddah. Citibank had opened its Jeddah branch in 1955 and its Riyadh branch in 1966.
SAMBA was formed in accordance with a programme adopted by the Kingdom in the mid-1970s under which all foreign banks were required to sell majority equity interests to Saudi nationals.
The principal terms and conditions of the deal were: 44.5% of the equity was sold to the Saudi public for cash, under rules, which favoured the allocation of shares to small Saudi subscribers. Share allocations were made to an estimated 166,000 individual subscribers.
An additional 15.5% of the equity was sold for cash to a selected group of Saudi founders, including the original Saudi members of the board of directors. Saudi nationals, therefore held 60% of the total share capital. Citibank acquired the remaining 40% of the equity in exchange for the assets of its Riyadh and Jeddah branches. Citibank entered into a technical management agreement under which it agreed to manage the new bank.
This agreement was provided that Citibank would second staff to the new bank and provide technical support and that it would not receive compensation for these services (other than as a shareholder) except for reimbursement of actual expenses. At end of 1991, Citibank sold part of its equity ownership in SAMBA to two Saudi national agencies for social welfare. As a result, 70% of SAMBA’s share capital was held by Saudi nationals and institutions and Citibank retained 30% ownership of the share capital of Samba.
On July 3, 1999 SAMBA merged with the United Saudi Bank (USB) by exchanging one new share in SAMBA for each 3.25 existing shares in USB. The merged bank retained the SAMBA name and there was no change in the composition of the board of directors. The merger did not affect the technical management agreement with Citibank. This resulted in Citibank holding 22.83% of the shares of the merged bank. However, near the end of 2002, Citibank sold 2.83% of its shareholding to a Saudi agency. As a result, Citibank holds 20% of the share capital of SAMBA.
On September 14, 2003 Samba moved to full local management, culminating a transition plan previously agreed with Citigroup. SAMBA was the first bank to offer priority banking (gold and diamond); phone banking; credit shield; saving linked insurance; cash deposit through ATMs; speed cash remittance service and automated signature verification. It was also the first bank to establish a dedicated investment department, introduced the first local equity fund and the first fund, (SAIF), open to overseas investors and listed on the London Security Exchange.
Latest:France’s BNP Paribas plans to issue medium-term bonds in Saudi Arabia, valued in Saudi riyals. The bank has appointed the SAMBA Financial Group as the lead manager for the issue. The value of the bonds has not been revealed.
Meanwhile, a consortium consisting of Suez Energy International, Gulf Investment Corporation and the Arabian Company for Water & Power Projects, has completed limited recourse financing for the Marafiq Independent Water and Power Project (IWPP) in Jubail, northeast of Saudi Arabia. The financing is in five tranches: a 22-year loan of US$1.5bn, an export facility of US$645m provided by the Korea Export Insurance Corporation, an Islamic Ijara facility of US$600m, an equity bridge facility of US$496m and a debt service reserve account facility of US$130m. The syndicate is led by BNP Paribas, Gulf International Bank and SAMBA Financial Group, together with Bank Saudi Fransi, Arab National Bank, Saudi British Bank, Saudi Hollandi Bank, Arab Petroleum Investments Corporation (Apicorp), Bayerische LB, Bank Of Tokyo-Mitsubishi UFJ, Calyon, Dexia Crédit Local, DZ Bank, Fortis Bank, HSBC, ING Bank, KBC, KfW, Mizuho, Natixis, Royal Bank of Scotland, Sumitomo Mitsui Banking Corporation, Société Générale, Standard Chartered Bank, West LB, Arab Bank, Mashreq, Shinhan Bank, and Woori Global Markets Asia.
United Arab Emirates
Mashreq
The recently renamed and rebranded Mashreqbank, now Mashreq, has a 40-year history in the UAE and the Gulf and is one of the region’s brightest banking stars. Its long-standing chief executive Abdul Aziz Al Ghurair and his father have guided the bank from beginning life as the Bank of Oman in 1967 to its current position as the largest private bank in the UAE. Through a winning combination of innovation, consistency and prudence, Mashreq has established itself as a stable and profitable bank for its customers.
Mashreq was the first bank in the UAE to install ATM cash dispensers.
Just as the UAE has enjoyed strong and consistent growth in recent decades, Mashreq has continued to expand the range of services it offers to customers, becoming a fixed and highly respected part of the financial landscape for businesses’ and individuals’ across the country.
Mashreq has always prided itself on its innovative, pioneering spirit as well as claiming to be “consistently ahead of the competition” in the development of new products and services, whether in foreign trade services, direct banking or comprehensive mortgage products.
Mashreq was the first UAE bank to install ATM cash dispensers, issue debit and credit cards and the first to introduce consumer loans. It has now rebranded, re-trained all its staff and encouraged ‘ethical selling’ – selling products to clients that clients need, and even telling customers that if Mashreq can’t help them, another bank will.
Latest:Mashreq’s retail division continues to thrive, however its treasury and capital markets team, that generates around 30% of Mashreq’s overall revenue, is rapidly developing into a success story of its own. Mashreq capital, Mashreq asset management and Mashreq securities are all growing their side of the business and taking advantage of the Gulf’s developing economies. Mashreq Capital, for example, the first of the company’s division to launch at the Dubai International Financial Centre (DIFC), became the first-ever DIFC approved hedge fund. It was appointed at the end of last year but launched in March this year.
Meanwhile, Mashreq’s treasury and markets arm became the first local institution to become a clearing room member of the Dubai Gold and Commodities Exchange (DGCX) and, more recently, a floor member of the Dubai Mercantile Exchange (DME), that has linked up with US partner Nymex to launch the world’s first crude oil futures contract.
United Arab Emirates
First Gulf Bank
First Gulf Bank (FGB) is one of the largest equity-based banks in the Emirates. Established in 1979 and headquartered in the UAE capital Abu Dhabi, the bank provides financial services in various business and industrial areas with a wide network of branches across the Emirates.
Today it is recognised as a world-class organisation committed to maximising shareholder, customer and employee value. The bank focuses on delivering products and services that address the needs of a dynamic economy, perpetuate progress and meet customer requirements. In line with its commitment to excellence it also continues to raise service standards, while simultaneously investing in technology, systems and people.
Latest:Four of Abu Dhabi’s leading business names, including First Gulf Bank, ALDAR Properties, Surouh Real Estate and Reem Investments, have joined forces to launch Inshaa Properties in AED US$136m joint-venture. Inshaa, which means ‘construction’ in English, has been launched as a joint stock company with an authorised capital of US$136m by First Gulf Bank, which holds a 40% stake, and three of Abu Dhabi’s mainline real estate developers, with a 20% shareholding each.
The new company will participate in a range of activities including freehold and leasehold, property management, property development and advisory services.
The Wall Street Exchange Centre, a subsidiary of Emirates Post, has entered into an agreement with First Gulf Bank to allow the financial institution’s customers to pay credit card bills at any of the 18 branches of Wall Street Exchange across the UAE. Details of the bills paid at the Wall Street Exchange branches will be automatically entered in the systems of First Gulf Bank, while the customer will get a printed receipt of the transaction. The agreement was signed by Abdullah Bin Ghaleb, managing director of Wall Street Exchange, and Amit Vanshu, head of retail at First Gulf Bank.
United Arab Emirates
Abu Dhabi Commercial Bank
ADCB was formed in 1985 as a public shareholding company with limited liability. In 2003 ADCB challenged itself to rebuild its foundations, with the aim of becoming the UAE’s leading financial institution.
ADCB continues to implement new ideas and it is through a continued investment in deeper relationships extended to a broader client base that will position it strongly to create a robust, more diversified business, linked to a wider range of products and services.
ADCB is a diversified full service bank. Other than banking services that span corporate, retail and commercial banking, ADCB is active in the areas of treasury derivatives, infrastructure finance, private banking and wealth management. Since 1985 ADCB has reported successive years of record profits and solid consistent and growth.
Its approach is driven by the ability to create value for its customers by leveraging its skills and expertise. It has a strong franchise, supported by a network of 40 UAE branches and two in India. The government of Abu Dhabi, through the Abu Dhabi Investment Authority (ADIA), holds 65% of its capital with the rest held by various UAE institutions and nationals.
Latest:The National Bank of Abu Dhabi, the largest UAE lender by assets, is restructuring its business to prepare for consolidation in the industry, according to bank officials and ADCB is thought to be an acquisition target.
The bank, at the centre of merger speculation since two Dubai-based rivals announced plans to tie up, has appointed consultancy firm McKinsey to advise it on the restructuring.
The UAE’s largest banks have been gearing up for consolidation after the National Bank of Dubai and Emirates Bank International said earlier this year they planned to merge in a US$13bn deal.
Qatar
Qatar Islamic Bank (QIB)
Formed 25 years ago QIB has undergone a recent change in approach and customer look and feel. According to its executives its new identity signifies the “beginning of a new era of development and growth” at the bank, while still adhering to the fundamental principles, core values and directions stipulated by the teachings of Islam, upon which it was founded as a Qatari shareholding company a quarter of a century ago.
Since 1985 ADCB has reported successive years of record profits and consistent growth.
It’s new identity also signifies the bank’s commitment to expand its presence in international markets such as Europe, Asia, Middle East and North Africa and, at the same time, continue to effectively contribute to the further development of the national economy.
According to the business its new logo symbolises the bank’s aspirations for international expansion and its dedication to remain “transparent and credible”. This stems from its vision to be a pioneering international Islamic bank; its mission to provide innovative Islamic financial solutions and its values of integrity, transparency, justice, cooperation, teamwork, loyalty, commitment and excellence.
Latest:The bank’s board of directors have set out a six future goals including:
• To consolidate the bank’s position in the Islamic financial services industry by being a distinct leader
• To provide the Islamic banking industry with innovative products that fulfill customer needs
• To maintain its ongoing growth in various sectors and maximise the returns of its shareholders and investors
• To enhance the skills of its employees and retain qualified professionals
• To increase its presence even further in the Qatari market
• To enter into new strategic alliances
Kingdom of Bahrain
Bank of Bahrain and Kuwait (BBK)
According to the bank it prides itself on a “foundation of dedicated service”. The Bank of Bahrain and Kuwait, or BBK, was established on March 16 1971 in accordance with the Amiri decree and started operations a year later.
The shareholding is a unique structure where the general public and quasi-government institutions in Bahrain hold 50%, while the other half is held by nine banks and investment companies from the state of Kuwait. In 1972, the bank began operations with a capital of US$2.5m. Today, it has grown to become one of the largest commercial banks in Bahrain, with a capital base of US$270m.
The bank has a strong regional presence. In addition to the 18 domestic branches that it has in Bahrain, it also has a branch in Kuwait, as well as two branches in India and a representative office in Dubai, UAE. In the last few years, the bank has established a number of subsidiaries in the areas of brokerage, financial services and credit cards.
BBK takes pride in being able to provide a full range of lending, deposit, treasury and investment services to various sectors of the domestic and regional markets, using state-of-the-art technology. The bank plays a major role in financing infrastructure and industrial projects in Bahrain and the Gulf, creating products and services that cater to the needs of individual borrowers, depositors and investors.
Latest:Bahrain’s banking community is to support the financial services development department of the Economic Development Board in hosting a showcase reception during the IMF/World Bank meetings to be held in Washington DC, USA, in October later this year.
The theme of the reception will be: ‘Bahrain – The Winning Formula – First for Finance in the Middle East’ and will be held at the prestigious Smithsonian’s National Portrait Gallery on Friday, October 19. As well as the chance to highlight Bahrain’s exceptional status as the financial capital of the Middle East to a global audience, it is an excellent networking opportunity and offers an attractive base for business interests.
Sponsors of the showcase reception so far include BBK, Al Salam Bank, Eskan Bank, Gulf International Bank, Investcorp, National Bank of Bahrain, Securities & Investment Company (SICO) and United Gulf Bank.
Sultanate of Oman
BankMuscat International (BMI)
BankMuscat is the largest bank in Oman with a network of over 100 branches in Oman and a representative office in Dubai, United Arab Emirates.
The bank has a strategic stake in Centurion Bank of Punjab, a private sector bank in India, and has set up BankMuscat International BSC, an independent banking entity, in Bahrain.
Latest:Shortly after the devastating cyclone that hit its native Oman, BMI launched Al A’Awn in aid of its victims. Coming after the nation’s leading bank announced that it was giving away US$8m towards the rehabilitation of Cyclone Gonu victims and also deferring all loan repayments of its customers by two months, BankMuscat has announced the launch of the nation’s first 0% interest loan in aid of cyclone victims.
Named Al A’Awn (support) loans, the new product will be available with immediate effect to all existing BankMuscat customers in the Muscat Governorate of Sharqiya who have their salaries assigned to the bank (on the date of the launch of the programme) and who draw a monthly salary US$1300 or lower.
Loans of up to three times a person’s salary will be credited directly to the loan account of the person in question within 24 hours of receipt of the completed loan application form.
Speaking at the launch of the product, Abdul Razak Ali Issa, CEO, BankMuscat said: “This is our third initiative to offer support to people nationwide. The recent cyclone as we all know has wrecked havoc across the nation.
“There are thousands of people in dire need of support and assistance. The zero percent Al A’Awn loans we believe will help over 20,000 of our customers nationwide take a small step toward rebuilding their lives.”
In addition to interest charges, the bank decided to waive all bank charges in the facilitating of the Al A’Awn loans.
BankMuscat is also currently in the process of accepting donations from nationals and residents to His Majesty’s Cyclone Victims Relief Fund in association with Oman Charitable Organisation.
People can walk into any of the Bank’s 100 branches nationwide and deposit their contributions to account number 3950150.
Kuwait
National Bank of Kuwait (NBK)
Under the patronage and attendance of First Deputy Premier and Foreign Minister, HH Sheikh Sabah Al Ahmad Al Jaber Al Sabah, NBK celebrated its 50th Anniversary in a big event held at the Sheraton Hotel on May 19, 2002.
In an address marking the occasion, Sheikh Sabah praised the prominent banking achievements realised by NBK.
He said that NBK played a “major role” in the development and growth of the Kuwaiti economy since 1952 when it was established as the first national bank in Kuwait and the Gulf region.
He said that it is fitting to pay tribute to those who have worked hard for the last 50 years to make this dream a reality.
He commended them for their far-sighted vision and for doing such a wonderful job for the country.
NBK’s chairman, Mohammad Abdul Rahman Al Bahar traced back in his word the bank’s history.
“On May 19, 1952, an Amiri decree was issued to establish the first national bank, NBK. Today, NBK is not only a bank in Kuwait, it is a part of the country’s history and we are very proud of that,” said Al Bahar.
In 1953, NBK achieved US$451,000 in net profit and last year it achieved US$365m. It is a long story of success.
Latest:In light of the success of the summer internship programme conducted for the last seven consecutive years, the National Bank of Kuwait recently commenced the first in a series of its 2007 summer internship programmes.
These are two-week courses custom-made for Al Azraq account customers mainly comprised of high school students aged between 15 and 18 years of age.
National Bank of Kuwait Group general manager for consumer banking, Adel Al Majed said that NBK sees the internship programme as an extension of NBK’s education outreach services and a demonstration of the bank’s long-standing social involvement as well as its national commitment towards providing the youth generations.
Al Majed added that the five-hour daily sessions of the two-week internship, which runs from June 17 to 28, 2007, featured a mixture of theoretical and practical training dedicated to providing the interns with invaluable knowledge on a variety of subjects.
These include teamwork, creative thinking, means of self expression and modern banking work procedure, in addition to helping interns to have greater exposure to daily banking work procedures.
The bank is well known for its summer internship programmes and training courses and intends to continue with this for many years to come.
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