Adel El-Labban, CEO of Bahrain’s Ahli United Bank, talks to Stephen Timewell about progress on his plans for a pan-Gulf retail network.

Most banks in the six states of the increasingly rich Gulf Cooperation Council (GCC) have tended to focus on their domestic markets and as a result remained relatively small compared with the region’s enormous wealth.

But now a few are breaking through traditional barriers, creating regional networks and realising some of the Gulf’s potential.

Bahrain’s Ahli United Bank (AUB) has been a pioneer of mergers and acquisitions in the Gulf and this remains central to the bank’s strategy.

In August, it took control of Kuwait’s seventh largest bank, Bank of Kuwait & the Middle East (BKME), in an overall transaction valued at $940m, making it possibly the largest ever bank acquisition in the Gulf.

With a 75% stake in BKME to add to the 40% stake in Al-Ahli Bank of Qatar acquired in 2004, AUB now has a significant presence in Bahrain, Kuwait and Qatar along with a considerable operation in the UK.

Its London subsidiary and Guernsey branch have been in operation since 1966, providing “a platform for catering to our regional clients’ retail and commercial banking needs in the UK”, says chief executive Adel El-Labban. “It also supports the development and diversification of our portfolio of commercial loans, and the origination of private banking products and services to be marketed across the AUB group.”

Asia-Mediterranean nexus

Mr El-Labban’s vision, which he began pursuing six years ago, is to build a branch network in the eight countries overlooking the Gulf, including Iran and Iraq, with a focus on the retail market. “The Gulf is blessed not only with wealth but also with strategic location. Its broad role as a link between Asia and the Mediterranean has not been explored yet, except in Dubai,” he says.

AUB has formed a joint-venture commercial bank in Bahrain, called Future Bank, with two Iranian partners, Bank Melli Iran and Bank Saderat Iran. Future Bank has a representative office in Tehran and has been granted an offshore banking licence in Kish in Iran. Mr El-Labban wants to expand business and trade flows between Iran and the Gulf states and eventually move his model for Future Bank onshore.

In Iraq, AUB has concluded a deal to buy 49% of Commercial Bank of Iraq and is waiting for regulatory approval.

Looking to the future, Mr El-Labban sees huge opportunities not only in Iraq but in the eight states as the middle class consolidates and grows and needs more sophisticated financial services. His goal is to acquire a minimum of a 10% cross-border share of the eight Gulf markets. He emphasises that this 10% stake is not in assets or loans that can be built up quickly but in a minimum 10% stake of client deposits – a much more important measure of real opportunities and potential profits. He does not want to exceed a 20% share on this measure but wants to concentrate on building a 10% stake in eight of the world’s richest client deposit bases, he says.

Financial bridge building

To reach the growing middle class and adequately service investors with amounts from $5000 to $5m to invest, he believes in the important role of not only the branch network, but also ancillary services. In response to the growth in oil prices and soaring asset prices in the Gulf, AUB has recently announced a partnership with the Russell Investment Group, a pioneer of multi-manager investing, which will help AUB to act as a “multifaceted financial bridge” between the international financial markets and Gulf clients.

AUB’s focus on retail and attracting client deposits provides a clear and distinct strategy. Few Gulf banks have pursued a regional strategy building from the branch up and, as a consequence, few have the synergies and size to cope with the growing wealth of the region and the financial needs of the increasing group of professionals managing the developments in the Gulf.

Five out of eight

At present, AUB has footholds in five of the eight states surrounding the Gulf. It is planning to gain a presence in the UAE, Saudi Arabia and Oman but this is more likely to be through friendly acquisition than through establishing a greenfield site. With BKME under its belt, AUB moves from 17th largest bank in The Banker’s latest GCC listing to a possible seventh. The region, including Iraq and Iran, has massive under-served wealth and AUB is one of the few to grasp fully its retail potential and adopt a focused strategy.

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