The popular media would have the world believe that banks are in crisis. A few are, but beyond the headlines lies a different story. Stephen Timewell, Charlie Corbett, John Rumsey, Jules Stewart, Charles Smith and Oliver Balch report on booming banks from around the world.

The markets are in disarray, mortgage holders are defaulting and banks are in crisis – that would be your understanding if you only relied on the newspapers and television as your information sources. In fact, in balance sheet terms, the crisis is affecting just a handful of the largest banks and, although many more are feeling the liquidity effect, for the majority of banks it is business as usual.

And in the emerging markets, opportunities for starting a bank, growing a bank and eventually listing a bank have never been better. Islamic finance in the Middle East, lending to the middle class in Africa and to lower income groups in Brazil, microfinance and servicing the average Japanese – all of these are hot markets with huge growth potential.

Aeon Bank, JAPAN

Japanese banks are huge but have traditionally been geared to servicing corporate borrowers and a handful of high-net-worth customers rather than ordinary people. That is why Japan’s biggest retail group decided to start a bank of its own. Results to date suggest that Aeon may have a point. From a standing start in late October 2007, Aeon Bank had collected ¥125bn ($1.25bn) in deposits by the end of the year in 193,000 accounts.

Aeon’s deposit rate for retail customers is only slightly higher than normal but the service it offers marks it out from traditional banks. Its branches are located inside the group’s stores and are open every day of the year from 9am to 9pm – unlike most other banks, which close at 3pm and do not open at weekends.

“We have also done our best to lower the entry threshold for ordinary people,” says Seiro Satoh, senior managing executive and head of corporate planning. “You can go into one of our branches pushing a shopping cart or carrying a baby and seek investment advice or discuss a personal loan or mortgage.”

Aeon has 26 branches, mostly in Japan’s two great urban complexes centred on Tokyo and Osaka. But the group is aiming to have 90 outlets by March 2010 and 130 by a couple of years later.

Big traditional banks might feel upstaged by Aeon but they are also keen to be part of the action. Aeon itself is the biggest shareholder in the bank, with 36%; nine big companies, including the three mega banks and Lehman Brothers, hold 5% each.

Al Inma Bank, SAUDI ARABIA

Reflecting the booming economy and the growth in Islamic banking, Saudi Arabia’s Al Inma Bank launched a $2.8bn initial public offering (IPO) in early April, the largest Saudi flotation ever, setting the stage for continued banking growth in the kingdom. Established by the government to satisfy the increasing demand for sharia-compliant banking products and the growing investor community, 70% of the new bank’s equity was sold in a successful 10-day offering.

The sharia-compliant bank has a paid-up capital of SR15bn ($4bn) similar to the kingdom’s third largest bank, Al Rajhi Bank, the fourth largest Islamic institution in the world, according to The Banker’s Top 500 Islamic Institutions (September 2007). Al Inma Bank has been under discussion for 18 months or more, and the planned universal bank is expected to compete in all retail, commercial and investment banking sectors.

Saudi authorities believe that there is plenty of room for a new big bank. In 2007, aggregate banking assets grew by 27.4% to SR1074bn ($286.4bn) and, with oil prices at $110 a barrel and the real boom in Saudi Arabia not yet fully under way in terms of massive spending on projects flowing through, Al Inma has enormous potential to take full advantage of the kingdom’s growth.

Al Rajhi plans to add 140 branches to its already leading network of 390 branches during the next 18 months and expand its leading ATM network by 20% to 1900. Although little is known about Al Inma’s specific strategy, it clearly wants to emulate Al Rajhi’s successful approach and has the backing to do so.

Araratbank, ARMENIA

The European Bank for Reconstruction and Development (EBRD) has extended a $5m credit line plus $1m under its trade facilitation programme to Araratbank, a privately-owned Armenian bank. The financial package will be complemented by a technical co-operation grant for institution building. The loan is provided for on-lending to micro, small and medium-sized enterprises, thereby addressing a major constraint for Armenia’s economic growth. Despite strong growth in recent years, Armenia’s economic potential remains constrained by difficulties in access to medium and long-term finance.

Armenian banks still have limited access to the international trade finance markets. This will allow Araratbank to roll out its trade finance operations and to start offering these products to clients. The EBRD financing to Araratbank will also allow for more competition among local banks and more choice for local customers.

“We are delighted with this continued co-operation with our bank, which is Armenia’s most dynamically developing bank,” says Ashot Osipyan, Araratbank’s CEO. “We are confident that the agreement will contribute to the fulfilment of our strategic plans. Araratbank holds a stable position in Armenia’s banking system and we are aiming to reach the leading position in the future.

“This also stimulates more competition among local banks and more choice for local customers.”

Araratbank has already issued its Green Line debit card to customers, as well as innovative products like its four-year auto loans tailored for women. The bank has also launched a special mortgage facility for newly wed couples, a four-year loan with an 11% rate of interest.

Belarusian Bank for Small Business, BELARUS

The EBRD and seven international partners are launching the Belarusian Bank for Small Business (BBSB), which expects to receive its banking licence in May. The bank will provide financing tailored for privately owned small and micro enterprises, taking the opportunity to fill a gap in the Belarus banking market. The shareholders have agreed to invest €7m in BBSB and have pledged an additional €5m after the first two years of operations.

The EBRD’s partners in this project include leading international public and private financial institutions from Germany, Netherlands, Sweden and the US. All of them have global microfinance experience and want to increase the smallest businesses’ access to finance in Belarus. They have made a commitment to support BBSB with donor funds to ensure the implementation of its mandate.

“Belarus is one of the least developed banking markets in Europe and therefore it hasn’t been hit by the subprime crisis,” says Stephen Orlesky, who has been designated the bank’s chief operations officer. “Banks here do not hold subprime paper, and residential mortgages as a retail product are not offered in the traditional sense. Therefore, we will avoid the turmoil now affecting the global financial markets.”

Mr Orlesky says that the bank expects loans to average at or below €10,000, with a €200,000 cap on facilities to any one customer. Credit will also be made available to the micro sector in the form of loans averaging €2000 to €3000.

Banco BMG, BRAZIL

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Ricardo Gelbaum, chief financial officer at Banco BMG, says the bank’s success is a result of its unwavering focus on payroll-deducted loans, which the bank began to offer in 1998. This involves negotiating with public sector or private sector employees to take payments straight from their pay cheque, substantially reducing lender risk.

BMG has built up a portfolio of about $7bn, concentrating on public employees, who account for 80% of BMG’s credit portfolio. “This makes the vast bulk of our portfolio equivalent to sovereign risk because the payee is the government,” says Mr Gelbaum. The portfolio’s net charge-off has averaged about 1% in the past five years. The low-risk nature of the portfolio has proved a blessing in turbulent times for credit.

The market has been changing fast, particularly in the past year, says Mr Gelbaum. Competition has become more charged, with private sector giants such as Bradesco entering in force through its purchase of BMC, another specialist bank in the area; with foreign banks, including Société Générale and BNP Paribas, entering the market; and with state banks, such as giant Banco do Brasil, ramping up.

Nevertheless, Mr Gelbaum believes that BMG will continue to thrive and claims that other banks have an Achilles’ heel. “They don’t want to cannibalise other products, such as overdrafts, credit cards and personal loans, because profits on these loans are higher,” he says. By focusing purely on payroll-deducted loans, BMG avoids those conflicts.

The bank is expanding its model to the untapped mortgage market, durable goods and auto loans. “[In] the next few years, we will focus on how to increase and cross-sell different products as well as motivating other Brazilians to use payroll deduction,” says Mr Gelbaum.

Banque Commerciale du Rwanda, RWANDA

Banque Commerciale du Rwanda (BCR) is Rwanda’s second largest bank. It was established in 1963 and was privatised in 2004 when the government sold an 80% stake to emerging market private equity specialist Actis.

Since then, its market share has grown to 25% from 20% and it boosted its post-tax profits in 2007 by 32.2% to RwFr3.1bn ($5.7m), from RwFr2.1bn in 2006.

BCR chairman Nkosana Moyo says that profit was driven by boosting the bank’s customer base. “We outperformed competition by rolling out new products and continuing to be innovative, which attracted more customers to our network,” he says.

BCR recently launched two retail products: a savings account and personal loans. It has also launched leasing finance for small businesses.

In terms of growth and performance, owner Actis is optimistic. Simon Harford, a senior partner at Actis says: “It’s performing very successfully. We felt we could help drive the bank in a successful direction and get good returns on investment. Both have been proven true.”

Looking ahead, the Rwandan government has plans to sell its remaining 20% stake in BCR on Rwanda’s newly established stock exchange. The stock exchange, which was launched in January, already trades bonds.

In November, BCR announced that it was the first bank in Rwanda to join the International Finance Corporation’s (IFC) global trade finance programme. The IFC will issue guarantees of up to $2m against the bank’s underlying trade transactions, covering payment risk and helping to increase Rwanda’s global trade volumes.

Banco Daycoval, BRAZIL

The secret of Daycoval Bank’s success has been to focus on the mid-market segment and consumer loans, and keep a tight rein on leverage, enabling it to access funding cheaply. “By keeping to conservative borrowing, we can raise money at 103% of the CDI [inter-bank lending] rate, compared with a more typical 107% for peers,” says Carlos Dayan, executive director of the São Paulo-headquartered bank.

The bank also uses multiple funding strategies to ensure diversification, including a fast-growing deposit base, which is increasing by about 50% per year; FIDCs (funds with securitised assets) to move corporate and consumer loans off-balance sheet (it has issued two and is planning a third); and tapping international markets, including through its successful 940m-reais ($562m) IPO last year, when foreigners snapped up 70% of the offering.

The bank has been rolling out a programme of regional branch openings to reach companies in all of Brazil’s states; it had 25 at the end of last year (Brazil has 26 states and a federal district). Managers at these branches are expected to visit and talk to farm and business owners. “That’s something that big banks rarely make the time to do,” says Mr Dayan.

Competition in this middle market segment is heating up, with Bradesco creating a dedicated subsidiary, but Daycoval has the track record and expertise to keep its lead, Mr Dayan reckons.

Daycoval is also competing aggressively in the consumer credit area and built a 650m-reais auto-loan business in a year. The secret, again, is in picking overlooked markets: while its competitors are chasing the new car market, Daycoval is funding used car purchases.

Compartamos, MEXICO

In times of reduced liquidity in the global markets, Mexico boasts a success story from an unexpected sector. Compartamos, a microfinance bank, has increased its loan portfolio by 35% to $383m since issuing an IPO in April 2007.

Surprising even the most optimistic industry observers, the Mexican microfinance institution (MFI) raised $450m through the offering – more than 12 times the shares’ book value. “The IPO was successful first because of the good financial performance Compartamos had shown in the past and because of its potential for growth in the future”, says Fernando Álvarez, the bank’s chief financial officer.

The deal, which was managed by Credit Suisse, was open to qualified international buyers as well as Mexican investors.

Microfinance institutions provide small loans to low-income customers to help set up small businesses. The sector has gained considerable investor interest since the 2006 Nobel Peace Prize went to Muhammad Yunus, founder of the Bangladeshi MFI Grameen Bank.

Established initially as a non-profit organisation 18 years ago, Compartamos obtained a full commercial banking licence in 2006. It is Latin America’s largest MFI in terms of clients with working capital loans; its customer base stands at 838,000, a 36% increase since going public.

Mr Álvarez concedes that the deal was also helped by the lack of other Mexican banking IPOs on the horizon. In addition, investors perceived the microcredit market in Mexico as untapped and relatively free of competition.

Equity Bank, KENYA

Kenya’s biggest bank in terms of depositors and capitalisation, Equity Bank, confidently announced in late January that its business was in good shape despite the political turmoil that swept across the country that month. It subsequently posted a Ks1.9bn ($30.8m) post-tax profit for the year to 2007, up 151% on the previous corresponding period.

Loans and advances to customers in 2007 grew by 100% from Ks10.9bn in 2006 to Ks21.8bn last year, and total assets increased by 165% from Ks20bn in 2006 to Ks53.1bn last year.

The bank’s fortunes were boosted in December 2007 when African private equity specialist Helios Investment Partners spent Ks11bn on a 25% stake in the bank. The boost to its capital base means that its liquidity ratio is up to a whopping 77%, from just 38% in 2006, leaving it with vast amounts of excess cash to invest.

The bank plans to spend much of its new wealth on cornering the low-income mortgage market in Kenya. It will pump the money into Housing Finance, the Kenyan home loans financier in which it bought a 25% stake last October. Equity Bank chief executive James Mwangi says Housing Finance is a critical part of its strategy for 2008. It will allow the bank to take advantage of the opportunities expected to come out of the reconstruction funding following the post-election turmoil.

“The outlook looks very promising indeed after the peace deal and the opportunities arising especially in reconstruction funding,” Mr Mwangi told journalists earlier in the year. Equity Bank floated on the Nairobi Stock Exchange in August 2006.

Guaranty Trust Bank, NIGERIA

Guaranty Trust Bank (GTB) is something of a pioneer in Nigerian banking circles. In 2007, it became the first Nigerian and African bank to be listed on the main market of the London Stock Exchange through the issue of a publicly listed $750m global depositary receipt. Following that, in March this year, it gained an operational licence from the UK’s Financial Services Authority, becoming one of the first African banks to offer a full range of corporate and retail banking services in the UK.

The 18-year-old GTB has established itself as the sixth largest bank in Nigeria by assets and not only survived the recent consolidation process, but also was one of the few banks to grow organically rather than by acquisition. Segun Agbaje, deputy managing director of GTB in Lagos, tells The Banker that average asset growth in the Nigerian banking industry last year was about 90% but GTB’s asset growth was almost 200%.

The bank, which has more than 500,000 customers and subsidiaries in Gambia, Sierra Leone and Ghana, has its eyes firmly set on a burgeoning Nigerian middle class. “Even though consumer lending has not exploded, it has grown. I think in Nigeria over the last three years, because of the oil, you have a middle class again, which you didn’t have four five years ago,” Mr Agbaje says. “The commercial bank, which was about 15% of our loan book, is now up to about 34%.”

Home Credit, UKRAINE

Home Credit Group, part of international consumer finance specialist PPF Group, recently acquired two Ukrainian financial services companies, Bank AGROBANK and PrivatKredit, which have been merged and recapitalised with a bond issue under the ownership of Home Credit BV.

Home Credit aims to provide a range of affordable and uncomplicated financial services products to the Ukrainian market. It will focus primarily on providing consumer finance services in the form of consumer loans and revolving credit, notably credit cards. Bank AGROBANK provides commercial and retail banking services through 22 branches throughout Ukraine, and PrivatKredit, one of the Ukraine’s leading non-banking financial institutions, provides consumer finance services through its network of more than 1000 point-of-sale outlets in Ukraine.

“The double acquisition of Bank AGROBANK and PrivatKredit is in line with Home Credit Group’s international expansion strategy,” says CEO Alexander Labak. “The strategic rationale for Home Credit entering the Ukrainian market stems from its high growth potential and the prospect of utilising the synergies that materialise from our presence in central and eastern Europe. In the near future, we aim to become one of the country’s leading players in the consumer finance market.”

Mr Labak says that the acquisition of a consumer finance provider and a commercial bank creates significant synergies between two robust financial businesses, enabling the creation of an extensive portfolio of financial products and services. “Our competitive advantage is the very strong entrepreneurial spirit and commitment to deliver results while putting in place tight risk management,” he says.

Noor Islamic Bank, UAE

Dubai is never short on ambition or scale, and in January this year a new giant was launched with massive aspirations and massive capital. Noor Islamic Bank with a paid-up capital of Dh3.6bn ($1bn) was born big and has big plans – to become the world’s largest Islamic bank within five years.

Owned 50% by the Dubai government through the Dubai Group and the Dubai Investment Corporation, the Noor Islamic initiative mirrors the approach applied in other major strategic investments by ruler Sheikh Mohammed bin Rashid, where alternative vehicles are established in significant growth areas. Dubai is also the controlling shareholder in the highly successful Dubai Islamic Bank, the largest Islamic bank in the United Arab Emirates (UAE) and the ninth largest in the world, according to The Banker’s Top 500 Islamic Financial Institutions listing.

With Islamic finance expected to double to between 20% and 25% of the UAE financial sector in two to three years’ time, and to continue to grow at almost 30% annually worldwide, Noor not only plans expansion in the UAE, but also in the region and internationally.

According to chief executive Hussain Al Qemzi, formerly head of Sharjah Islamic Bank, Noor’s initial focus will be on consumer and corporate banking, planning to open 20 branches in the UAE this year. With 400 staff already on board, Mr Al Qemzi is considering acquisitions in the Gulf and studying opportunities in China, Pakistan and Indonesia (areas with large Muslim populations), and also in Europe, north Africa and elsewhere in Asia.

Banco PanAmericano, BRAZIL

Banco PanAmericano has been a pioneer in serving one of Brazil’s most difficult markets to tap, the low-income segment that is chronically underserved in Brazil. Classes C, D and E have been rapidly gaining in economic prowess thanks to large increases in the minimum salary and falls in unemployment in the country.

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“The low-to-middle income [population] is hugely underbanked and yet this is exactly the area with the greatest need for credit,” says Wilson de Aro, finance director at the bank’s São Paulo headquarters. “There is a minimum of 46 million working Brazilians who do not have a bank account and we have 38 years of experience in serving the market,” he notes.

Growth of credit to individuals, at 33%, is outpacing growth of corporate credit, at 18%, says Mr de Aro, while PanAmericano has been growing at annualised rates of 38%. The bank has two main segments: collateralised loans on vehicles and housing, where longer tenors and lower rates are the order of the day, in addition to the rapidly growing market for credit cards and personal loans.

PanAmericano has built up a rich mine of information on low-income consumers, and Brazilians are much less leveraged than US citizens. “A Brazilian saves up and buys when he has accumulated the money – he gets his first good car at 40. An American spends his whole life in debt,” says Mr de Aro.

The bank has consistently beaten its forecasts on provisioning, which although high at 4.1% is much below the 6% that the bank forecast, Mr de Aro notes.

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