The cream of the crop for 2018 from the Middle East.
Ahli United Bank (AUB) emerged as the clear winner in the Bahrain country category this year. The lender enjoyed impressive growth over the 2017 review period with total assets climbing by 6.1%, while net profits increased by 8.4%. More encouragingly, this was accompanied by an improvement in AUB’s return on equity, which jumped from 15.6% to 16.5%. Over the same period, the ratio of the bank’s non-performing loans fell from 2.3% to 1.9%
At the heart of the bank’s growth story is its emphasis on information technology. AUB has worked particularly hard to improve its cyber security framework by employing global specialists to conduct a comprehensive assessment of its risk exposures. The recommendations made under this analysis were addressed by the bank to ensure a robust control framework of both information and physical security. Among others, the measures adopted by AUB include the development of a next-generation security operations centre, upgraded distributed denial of service protection, advanced attack detection and prevention, data loss prevention and mobile device management.
AUB’s private banking arm also impressed the judges, based on the launch of a number of alternative investment strategies products, which deliver absolute and non-market correlated returns for its client base. For instance, the bank has launched a US real estate private equity fund known as the US Senior Housing Fund with about $20m raised to be invested in a portfolio of senior housing communities.
“AUB’s success is driven by its ability to achieve consistent growth in core earnings through its geographically diversified franchise across the Gulf and Middle East and north Africa region. AUB has prudently developed and expanded its business segments, assisted by a robust risk management system, an intelligent cost spend culture and a focus on cross-border opportunities and services extended to its client base,” says Adel El-Labban, chief executive of AUB.
Ayandeh Bank has weathered the ups and downs of a volatile domestic operating environment to emerge as the country winner for Iran. In local currency terms, the bank saw its total assets grow by 44% over the 2017 review period, while net profits jumped by 41%. This occurred as Ayandeh’s Tier 1 capital increased by 9%. These encouraging numbers were backed by an array of products, services and wider innovations that ensured the lender scooped the top spot for a second year in a row.
One of Ayandeh Bank’s headline projects is its financing of the Iran Mall complex. Set to be one of the Middle East’s largest retail and leisure venues, the Iran Mall is likely to transform the country’s commercial, cultural and tourism landscape. The first phase of the project is valued at about $8bn.
The judges were also impressed with Ayandeh Bank’s approach to opening banking. The lender has, for instance, opened up its application programming interfaces to fintechs and other businesses under its Finnotech Open Innovation Platform. In addition, the launch of Finnova, a co-working space and accelerator for fintech, continues to position Ayandeh as a leader in the Iranian market. Finnova not only provides a working space for early-stage fintech start-ups, it also offers mentoring, technical support and seed money. A total of 49 start-ups have engaged with Finnova.
In the field of corporate social responsibility, Ayandeh Bank has launched a banking services system for the blind. “We trust that, in partnership with all of our stakeholders, we will be able to build more powerful infrastructures in Ayandeh Bank to create a stable future and enjoy further success, says Dr Jalal Rasoulof, CEO at Ayandeh Bank.
Bank Leumi has matched a strong set of results with a long-standing commitment to product and service innovation to scoop this year’s country award. Over the 2017 review period the lender saw its total assets increase by 2.8% as Tier 1 capital increased by 6.3%. Net profits, meanwhile, jumped by an impressive 13.7%. This was achieved in tandem with a marginal improvement to the bank’s return on equity, which climbed from 9.3% to 9.8%. In addition, Bank Leumi’s cost-to-income ratio fell from 66.3% to 63%.
In its push to innovate, Bank Leumi has become the first lender in Israel to offer digital mortgage applications. Known as ‘Digital Mortgage’ the offering allows customers to seek a pre-mortgage qualification through a PC or mobile. Authorisation is granted in a single working day, including an approval, in principle, which specifies the loan amount, customised interest rates, monthly repayments and a link with which to upload documents in order to proceed. Customers can then continue with the application through digital-only channels. Only one visit to a branch is required to sign the final paperwork.
This product offering is a marked improvement from the traditional method of requesting a mortgage, in which a customer was required to visit a branch between two and four times to complete an application. Bank Leumi is the first Israeli bank to offer a product of this kind. Meanwhile, the growth story of Bank Leumi’s fully mobile bank ‘Pepper’ – the first of its kind in Israel – goes from strength to strength.
"Leumi's success is mainly attributed to three factors: Leading digital transformation in Israeli banking through innovative products and solutions such as 'Digital Mortgage' and our pioneering mobile-only bank - 'Pepper', tailored to Millennials; maintaining the highest quality credit portfolio in the Israeli banking industry based on a strict risk management policy; and a multi-year streamlining process which includes an in-depth organisational restructure as well as the establishment of a dedicated Operations Division," notes Rakefet Russak-Aminoach, president & CEO of Bank Leumi.
As one of the Middle East and north Africa’s banking powerhouses, Arab Bank has been exposed like few others to the currency volatility that has afflicted the Middle East in recent times. Despite these challenges, the bank has performed admirably. Profits hit $533m after tax and provisions in 2017, up from $532.6m in the previous year. Excluding the impact of regional currency devaluations, the group’s net profits increased by 8%. The group’s net operating income increased by 8% over the review period, a figure that jumps to 12% if the effects of currency devaluations are excluded.
Arab Bank’s commitment to innovation once again caught the attention of the judging panel. The three pillars of its innovation strategy are based around the bank’s innovation hub (known as ABiHub), its fintech accelerator AB Accelerator and its corporate venture capital unit known as AB Ventures. Together, these innovation arms work to create an ecosystem that collaborates with external fintech groups and venture capital institutions.
ABiHub, for instance, acts as an incubator for the exchange of ideas between the bank and leading emerging fintech groups in the region. In doing so, it ensures that Arab Bank’s staff are kept abreast of the latest technologies, while allowing fintechs a space in which to test and develop their propositions.
Meanwhile, as part of its wider digitisation drive, Arab Bank has successfully deployed finger vein recognition technology across all of its branches in Jordan and is doing the same in Egypt, Palestine and the Gulf Co-operation Council countries. This technology is used in over-the-counter branch transactions to cut the time of each transaction by half, while also meeting the bank’s objective in working towards paperless branches.
“The broad diversification of Arab Bank’s business model regionally and globally allows us to continue our strong performance despite the region’s challenging conditions,” says Nemeh Sabbagh, chief executive of Arab Bank.
Kuwait, National Bank of Kuwait
By any measure, the National Bank of Kuwait (NBK) enjoyed an outstanding performance over the 2017 review period. Net profits grew by 9% as total assets increased 7%. Tier 1 capital, meanwhile, rose by 7%. This was achieved as the bank’s cost-to-income ratio fell to 32.3% from 33.8% and its return on equity increased, marginally, from 10.2% to 10.8%. Non-performing loans, meanwhile, remained relatively steady at 1.4%.
This strong set of financial results have been backed by NBK’s pioneering approach to engaging with new technologies. The bank has joined global blockchain platform RippleNet in what is likely to be a big step forward for the bank’s cross-border payments solutions, particularly when it comes to remittances. It is in the process of applying this technology to its Kuwait business as well as in its branches across the region.
Moreover, the launch of NBK’s ‘Selfie Pay Service’ and biometric authentication, in partnership with Mastercard, is an offering that the lender bills as a first for the region. As part of Mastercard’s Identity Check Mobile (IDCM), the service allows NBK Mastercard holders to authenticate online transactions through facial recognition or fingerprint recognition. In doing so, it eliminates the need to enter pin codes, passwords or security questions.
In addition, the bank has launched the NBK World MasterCard Credit Card, which boasts a fingerprint sensor built inside the card. Customers need only provide a matching thumbprint when the card is in use. For merchants with terminals that use conventional technology, a pin code can be used, meaning that the card is universally accepted.
In a competitive Lebanese country category, the country’s largest lender by total assets, Bank Audi, scooped the top spot this year. The bank’s strong net profit growth in recent years is testament to its diversified growth strategy in a challenging domestic and regional market: in 2015, 2016 and 2017 net profits increased by 15.1%, 16.6% and 18.9%, respectively. Though in 2017 net assets dipped by a marginal figure (-1.2%), Tier 1 capital jumped by 14.6%.
Meanwhile, in March 2018 the European Bank for Reconstruction and Development (EBRD) completed an equity investment in Bank Audi. This marks the first ever investment in Lebanon by the EBRD and its first equity investment in a banking institution in the southern and eastern Mediterranean region. The multilateral bank acquired about 2.51% of Bank Audi’s total common shares outstanding.
Bank Audi’s commitment to technological innovation has seen the lender modernise the core banking system for its Egyptian unit in 2017, while work is under way to update the system for its Lebanese business and is scheduled for completion in 2018. In addition, the bank rolled out debit card instant issuing in its branches, while Bank Audi has also revamped its moblie banking app through an improved interface and enhanced services.
Notably, in a home market and a wider region beset by various political and economic challenges, Bank Audi has been able to maintain its asset quality. Consolidated gross doubtful loans stand at 3.5% of total loans, against a Lebanese system average of 5.7% and 4.2% for the region.
“We are delighted to win. This is a renewed testimony of our sustained performance, despite the many challenges facing our region, and a proof of the soundness of our strategy,” says Samir Hanna, chairman and chief executive of Bank Audi.
Oman’s economy has endured serious headwinds in recent years. Sub-optimal growth has accentuated the need to diversify, even as oil prices have gradually increased over the past year. But despite these challenges, Oman’s banks have continued in relatively good health. Though profit and asset growth for the sector as a whole has dipped, a number of the country’s leading lenders have turned to innovation to bolster their growth. Bank Muscat, this year’s winner, stands apart in this respect.
Its net profits in 2017 were only marginally positive in local currency terms, increasing just 0.1%. Asset growth was also subdued, showing an expansion of just 3%. But over the 2017 review period, the lender’s Tier 1 capital grew by 18.1%. Bank Muscat’s return on equity was healthy, at 11.4% , though this did represent a small contraction from 2016, in which it was 12.5%. Its cost-to-income ratio, meanwhile, was 42.2%.
Bank Muscat is the first lender in Oman to launch a social media account dedicated to customer service. This Twitter account is available 24 hours a day, seven days a week, and allows customers to post queries and provide the bank with feedback. In addition, surveys and customer feedback initiatives are deployed through this Twitter account, ensuring that Bank Muscat is kept abreast of customer sentiment around its products and services.
In the retail banking sector, Bank Muscat was also the first lender to launch a digital wallet in Oman.
“Bank Muscat is focused on its dynamic customer-centric vision to make a difference in banking excellence and further improve the bank’s leadership by offering simplified and integrated banking solutions,” says Abdul Razak Ali Issa, chief executive of Bank Muscat.
Bank of Palestine continues to prosper in deeply challenging circumstances. Economic growth in Palestine hit 2.7% in 2017, a figure that is expected to fall in the coming years in light of ongoing restrictions to the operating environment. The unemployment rate in the West Bank in 2017 was high, at 18%, though in Gaza it reached 44%. Meanwhile, only 41% of individuals aged between 15 and 29 were deemed to be active in the labour market in 2017, according to the World Bank.
Nevertheless, Bank of Palestine has once again navigated these difficulties, and others, to post a strong performance. The lender’s net profits in 2017 increased by 1.89% after jumping by 22% in the previous year. Total assets grew by 18.5% while Tier 1 capital rose by 10.1%. Underscoring these figures are a set of impressive product and service innovations. This includes Bank of Palestine’s ‘Pay to Friend’ service, in which its customers can easily and securely transfer funds to merchants or individuals by using their mobile number. This is a faster form of transfer, since routine approvals are not needed, and permits customers to execute one-off, smaller value payments with ease.
The bank’s international expansion is also gaining traction. Following the launch of a representative office in Dubai, Bank of Palestine inaugurated its first representative office outside of the Middle East in Santiago, Chile, in November 2017. This office will act as a hub for the nearly 1 million Palestinians living in Latin America, while also granting Bank of Palestine an opportunity to capitalise on the nascent but growing trade between the region and the Middle East.
Qatar National Bank (QNB) enjoyed another outstanding year in 2017, despite the various economic and political headwinds that hit both the domestic economy and wider region. Net profits grew by 6% in local currency terms, while total assets increased by 13% and Tier 1 capital rose by 11%. These figures are all the more notable given that QNB posted high growth numbers in the previous year. The bank’s return on equity is high, at 18.7%, while its cost-to-income ratio sits at an enviable 29.1%.
Beyond the numbers, QNB has also invested heavily in its omni-channel offerings. This includes the launch of interactive teller machines (ITMs). Described by the bank as a ‘self-service and semi-assisted new-generation digital banking facility’, ITMs allow QNB’s customers to conduct banking transactions with a teller over a high-quality video link. This allows customers to access and use all of the services and benefits available at a physical branch 24 hours a day, seven days a week, without an appointment. In turn, ITMs offer a significant cost saving for the bank.
The upgrade of QNB’s mobile banking application is also delivering major benefits to its customers. With the ability to access global accounts from across the bank’s international network, clients can execute a wide variety of transactions. This includes sending cash to any mobile number, make card and utility payments, request cash advances and deposit cheques, among many other offerings. Customers can also chat to service representatives through the application. In terms of security, QNB has introduced both device registration and biometric authentication for its mobile banking service, ensuring that customers receive the highest levels of protection.
Al Rajhi Bank’s success story has not been dented by a more challenging domestic operating environment. In fact, the bank has strengthened its position in the market over the past 18 months. Net profits in 2017 hit 12%, after hitting a similarly high 14% in 2016, while total assets also increased by 1%.
Over the same period, Tier 1 capital grew by 7%. More impressively, Al Rajhi’s return on capital improved over the review period by reaching 16.94% from 16.49%, while its ratio of non-performing loans was lowered to 0.74%, from 1.24%.
As the lender pushes hard to diversify into corporate banking – it has, over the years, developed a reputation as a predominantly retail bank – impressive results are already being generated. New products, including a trade finance payment option in Chinese yuan and sharia-compliant treasury offerings, are going hand in hand with investments into service channel diversification. This resulted in more than 100 new corporate banking relationship managers, as well as 20 branches exclusively for corporate banking customers and more than 300 cash deposit machines at client premises.
Consequently, Al Rajhi Bank has doubled its net income from corporate banking to SR1.6bn ($427m) in 2017 from SR800m in 2016. With it, the contribution of corporate banking to the group’s net income has increased substantially to 17.6%, from 9.9%.
Al Rajhi Bank has also focused on its female customer base in recent years by launching new products, including exclusive credit cards and auto finance offerings for women, as well as increasing the share of its branches with a dedicated women’s section from 23% to 28%.
United Arab Emirates, Dubai Islamic Bank
Dubai Islamic Bank (DIB) has emerged as one of the fastest growing lenders in the Middle East in recent years. Much of this growth has come from the bank’s priority of creating ‘value from within’ and the unlocking of internal efficiencies, while driving forward with new business opportunities. But it has also emerged as a result of DIB’s approach to capacity creation: in essence, addressing the liquidity and capitalisation constraints that have held back many of its peers.
Basel III implementation has, for example, meant that adequate capital positions have become even more important for regional lenders. As a result, the bank executed two rights issuances, one in 2016 and one in 2018, which have allowed it to continue on the path of its impressive growth agenda.
Net profits in 2017 were up by 11%, after increasing by 5% in 2016, as assets grew by 18% and 17%, respectively, over those periods. Notably, the bank’s cost-to-income ratio fell from 34% in 2016 to just 30% in 2017. Its return on equity also moved in the right direction over the same period, rising to 18.7% from 17.8%. Meanwhile, its ratio of non-performing loans fell marginally to 3.4%, from 3.9%.
The recent launch of DIB’s mortgage proposition ‘MyHome’ also points to the bank’s ability to offer innovative, market-leading products. Not only does MyHome have one of the widest rate offerings in the market, it also lets customers reach decisions over their monthly repayments, or even furnish and decorate a property at discounted rates through DIB’s relationships with third parties. Moreover, MyHome comes with its own credit card offering to help customers cover the costs linked to the acquisition of a new home.
Dr Adnan Chilwan, group CEO of Dubai Islamic Bank, says: “Our success is a result of a mindset change – the competition is not out there; it’s inside. We have to move up a notch every day from where we were yesterday.”
