The Banker Awards 2012 – Middle East

Middle East

Qatar National Bank

Ali Shareef Al-Emadi, group chief executive, Qatar National Bank

Qatar National Bank (QNB) is no doubt the envy of banks not just across the Middle East, but the world over. The lender had an exceptional year in 2011, claiming the title of the largest bank by asset size across the Middle East and north Africa (MENA) region, the most profitable, and the second largest by Tier 1 capital.

Its assets grew by 35.17% to stand at $82.9bn by the end of 2011, driven largely by a 47.3% expansion in its loan portfolio, giving QNB the largest loan book in the region. Meanwhile, its profits grew by 32% during 2011 to reach $2.06bn.

These impressive figures saw the bank jump from 11th position in 2011 to second in The Banker’s 2012 Top 100 Arab banks ranking after boosting its Tier 1 capital by 73% to $8.2bn. Its market share exceeds 45% of banking sector assets in Qatar.

In May 2011, QNB increased the bank’s capital by 25% after carrying out a rights issue amounting to $3.49bn that was fully subscribed and will be used in part to help the bank fund its future expansion.

QNB also continued to pursue a successful regional expansion strategy during 2011. It increased its branch network across the Gulf to meet growing demand, but also launched operations in Lebanon and South Sudan.

With regards to acquisition activity, QNB improved again, taking a controlling 69.9% stake in Indonesia’s Bank Kesawan in January 2011. Kesawan operates a network of 40 branches, with total assets of about $492m.

“Our regional expansion strategy for 2013 will focus on expanding and solidifying our presence in the MENA region through a combination of organic and inorganic growth. A number of countries in the region are attractive to us, [particularly] those with a large market in which we do not currently operate,” says Ali Shareef Al-Emadi, QNB’s group chief executive.

“Egypt is one example where we are in the final stage of evaluating an opportunity to acquire the Egyptian operations of Société Générale. Other countries include Turkey, Saudi Arabia and Morocco. The implementation of QNB Group’s regional expansion strategy is in line with the overall strategy that extends into 2017 which will see the bank become a Middle East and Africa icon.”

During 2012, QNB increased its stake in a number of institutions including the United Arab Emirates’ Commercial Bank International from 24% to 40%, and Iraq’s Mansour Bank from 23% to 51%. It also entered into Libya through acquiring a 49% stake in the Bank of Commerce and Development.

Indeed, QNB has been expanding rapidly in the past few years, and today operates in 24 countries around the world through a network of 334 branches. Operations outside of Qatar made up a 16% share of QNB’s profit in September 2012, but the bank is aiming to substantially increase that ratio to somewhere between 40% and 45% in the next three to five years, as a result of it expansion strategy.

“I see QNB Group further expanding its reach in Asia beyond our existing presence in Singapore, where we have had a branch for almost four years, and in Indonesia, through QNB Kesawan,” says Mr Al-Emadi.

Bahrain

Ahli United Bank

The year 2011 was arguably the toughest that Bahraini banks have ever endured. Aside from the challenges presented by the eurozone debt crisis and the regional Arab Spring conflicts, Bahrain also faced political and economic upheaval within the country.

Against this backdrop, Ahli United Bank’s (AUB’s) net profits grew by 17% to record its highest ever figure of $310.6m, while growing its assets by 7% to $28.3bn and its Tier 1 capital by 16.6% to $2.31bn.  

In April 2011, at the peak of the Arab Spring, AUB raised $490m in Tier 1 and Tier 2 capital from the International Finance Corporation’s capitalisation funds. AUB also improved its total provision coverage ratio from 119% in 2010 to 135% in 2011.  
AUB’s strategy to provide both local and intra-regional market access to its customers provided the bank with a natural hedge against singular market disturbances. AUB has a presence in seven countries in the Middle East and north Africa (Mena) and despite the Arab Spring affecting three of these (Bahrain, Egypt and Libya), the past couple of years have demonstrated the strength and diversification of AUB’s regional franchise.  

Meanwhile, in June 2011, AUB increased Commercial Bank of Iraq’s paid-up capital to $85m through a combination of bonus and share rights issues, increasing its stake from 56% to 68.2%.    

The confidence in AUB’s business model and financial prospects is best illustrated by the fact that rating agencies Fitch and Standard & Poor’s awarded the bank a higher credit rating than the Bahrain sovereign in 2011.

Looking ahead, Adel El-Labban, group chief executive and managing director of Ahli United Bank, says: “AUB believes in the long-term growth potential of the Mena region in spite of the short-term challenges. Continuing high oil prices and planned government investments in infrastructure projects will continue to support economic growth and provide attractive, prudent financing opportunities.”

Iran

Pasargad Bank

Pasargad Bank stood out as the best bank in Iran for achieving impressive results across the board. Its net profits for 2011 surged by 62.19% to IR9836bn ($803m), its Tier 1 capital by 30.82% to IR43.41bn and its assets by 23.76% to IR221,808bn.  

The growth in its Tier 1 capital saw it occupy the number one spot as the fastest moving Middle Eastern bank in The Banker’s annual Top 1000 World Banks ranking published in July. It climbed from 471st position in the 2011 ranking to 266th this year.

With a capital adequacy ratio of 24.71%, Pasargad has the highest CAR among Iranian banks. Simultaneously, it was successful in growing its return-on-equity from 19.32% in 2010 to 23.87% in 2011 and cutting its non-performing loan ratio from 5.75% to 4.64% over the same period, giving it the lowest NPL ratio among all Iranian banks.

Pasargad also grew its market share in trade finance to 47% in letters of credit and 31.26% in issuance of guarantees, as well as increasing its market share in granting facilities to 24.26% among the 12 Iranian private banks.

In recognition of the fact that electronic banking is developing rapidly in Iran, Pasargad established an information and communications technology company that is dedicated to introducing new banking technologies and preparing the bank’s technology roadmap. On the innovation front, it introduced a new long-term deposit account, with a periodic profit that can be invested in the same account for up to five years, with an estimated 171% return on profit.

Looking forward, Bank Pasargad believes that investment banking – only available in Iran since 2006 – has strong potential. The bank is currently seeking to expand its products and services in this field, namely through the issuance of profit participation certificates, sukuk and growing its merger and acquisition capabilities.

“During 2013, we want to increase our capital and grow our market share in the Iranian banking sector,” says Majid Ghassemi, chief executive of Bank Pasargad. “We are also keen to expand our private and corporate banking services, as well as grant more facilities to large projects due to our increased capital size.”

Israel

Bank Hapoalim

In 2011, Bank Hapoalim successfully completed the second year of its three-year strategic plan to strengthen its position as a leader in Israel’s banking sector. This saw it solidify business across most market segments, growing revenues while continuing to adapt to an increasingly competitive environment.

Indeed, the bank posted a 25% increase in net profits to $719m during 2011. It concurrently also grew its assets by 11% to $93.3bn and its Tier 1 capital by 9.1% to $6.8bn. Hapoalim boasts the country’s largest retail market share and customer base – representing one-third of the Israeli banking sector.

Despite the uncertain economic environment, the bank has continued to grow its small business customer base. Credit to this segment grew 7.1% in 2011 – with small business lending now accounting for almost 10% of all lending. For this, it has provided credit through various funds, including the bank’s specialised Poalim for Growth fund, the state-backed Small Business Fund, and it is planning to launch sector-specific funds with leading organisations in Israel.

Founded in 1921, Hapoalim’s rich history has not prevented it from showing considerable innovation in the digital technology space. In 2011, it launched Poalim Connect, an online banking service that connects customers to everything that happens in their accounts, as well as to their banker and their branch.  

In a country of about 7.5 million inhabitants, Hapoalim now has 850,000 clients using its mobile and online banking services who perform more than 1.3 million information queries every day. Customers are able to access their bank accounts from over 100 different types of mobile devices.

“During 2012, Bank Hapoalim is executing the final year of its current three-year strategic plan,” says chief executive Zion Kenan. “The bank is emphasising rapidly growing areas and competing for a larger share in the middle-market and small-business sectors.”

Jordan

Arab Bank

Founded in 1930 as the first private sector financial institution in the Middle East and north Africa (Mena), Arab Bank has carved out a reputation as one of the most stable banks in the region.

At a time when the Mena region is facing major political upheaval, Arab Bank has successfully maintained its strong position, with net profits growing by 13% to $305.9m during 2011 owing to an increase in its core earnings.

However, the bank has also worked hard to grow new lines of business, as shown by the launch of its specialised department for smaller-sized clients within its small and medium-sized enterprise (SME) segment. It also expanded its specialised SME unit presence to underserved areas, away from cities.

During 2011, the bank also introduced a new cash management proposition – Corporate@Arabi – aimed at catering to customers across the Mena region. Corporate@Arabi is a web-based platform that is designed to meet corporate clients’ needs in cash management domestically, regionally and globally.

Arab Bank’s growth has continued into 2012, with the bank reporting net profit after tax and provisions of $360.3m for the first half of 2012 compared with $327.2m for the same period in 2011, an increase of 10%.

“We are present in countries in our region that are facing challenges and are in transition. We have managed risks very effectively and prudently and were able to increase our earnings in most of these countries,” says Nemeh Sabbagh, Arab Bank’s chief executive.

“Our challenge will be to understand the emerging trends in our region and to grow our business franchise accordingly. We will focus on leveraging more effectively on the synergy inherent in our presence throughout the Arab world and the major international financial centres.”

The bank already boasts the widest Arab banking branch network in the world. With a capital of more than $30bn, it operates through a network of 600 branches in 30 countries across five continents.

Kuwait

Gulf Bank

Gulf Bank saw its two-year turnaround plan come to fruition during 2011, which saw it make a series of sweeping changes, as well as introduce new initiatives across the bank that have been highly successful, as reflected in its 60.2% increase in net profit to Kd30.6m ($108.4m).

“In 2011, our key successes were with the turnaround in the bank’s profitability and the launch of our ‘We Promise’ campaign, which guaranteed our customers the best and fastest banking services – such as same-day turnaround on loans and cards,” says Michel Accad, chief executive and chief general manager of Gulf Bank. “A year after its successful launch, this is still a unique proposition in the region.”

Indeed, the We Promise programme has set a new benchmark for banking transaction processing turnaround time in Kuwait. Consumer loan credit approval and disbursement takes an average of two to four days in the local market, while Gulf Bank is able to complete the entire process the same day, with 80% of loan applications currently approved within two hours. Since its launch, the monthly consumer loan origination volume has increased from Kd11m to Kd20m.    

Recognising that the small and medium-sized enterprise (SME) segment has been underserved, the bank enhanced the team’s capabilities during the early part of 2011 and has deployed SME experts in 22 of its branches.

Today it has about 8400 SME customers with deposits of Kd76.9m, and some 380 SME customers with Kd42m in approved credit facilities.

In addition to these improvements to its service, Gulf Bank has worked with business information company Dun & Bradstreet to develop a credit approval scoring process to define value propositions while providing a fast turnaround time. Furthermore, the bank continued to grow its franchise, with its branch network increasing from 49 to 56.

Lebanon

Blom Bank

In 2011, Blom Bank recorded a solid return on assets of 1.57%, a return-on-equity of 17.3%, a cost-to-income ratio of 39% and a profit per branch of $4.31m, ranking it first among its peers, based on its unconsolidated numbers, for each of these financial indicators.

Blom’s assets grew by 3.7% to $23.2bn and it recorded net profits of $331.5m. This performance was achieved despite taking additional collective provisions of $34m and a contraction in the balance sheet of its Syrian affiliate by more than 40%, all of which is testament to its sound business model.

Not only has Blom weathered both the regional and global crisis extremely well, it has also successfully maintained growth. During 2011, Blom expanded its small business portfolio by signing a partnership agreement with the European Social Fund for Development, the focus of which is lending to small enterprises (maximum loan amount is $75,000) that are unbanked.

In August 2011, Blom’s asset management department launched an equity-based fund in the Saudi Arabia, and in late 2011 it launched Lebanon’s first money-market fund targeting large institutions. Both offerings met with great success in Lebanon – the first because it gave Lebanese customers a way to invest in the restricted Saudi market, and the second because it provided an innovative and lucrative liquidity management solution to large institutions.

Then in December 2011, Blom introduced a new, one-of-its-kind service in the Middle East, which enables its clients to send money from any internet-connected device. The recipient does not to be a Blom client, and can withdraw the money from the nearest Blom bank ATM, without the need for either a card or a bank account.  

“I think the main plan for 2013 is entering the promising Iraqi market, in Baghdad and Erbil,” says Saad Azhari, chairman and general manager of Blom Bank. “We also see growth opportunities in Egypt in both retail and corporate banking.”

Oman

National Bank of Oman

National Bank of Oman (NBO) underwent impressive growth in 2011 – recording a 26% increase in profits to OR34.2m ($88.84m) and a 24% rise in assets to OR2.23bn. This growth was driven to a large degree by the success it achieved in its retail division, in particular by improving its market share in low-cost deposits by more than 4% in just one year. Low-cost deposits now constitute 50% of its portfolio.

A notable achievement for NBO was the launch of its Tijarati loan product to address the growth needs of small businesses.
As with most countries, small and medium-sized enterprises (SMEs) are major drivers of economic growth and employment in Oman, but their financial needs are sorely underserved. The Tijarati loan offers flexible and convenient business loans for SMEs that need immediate finance for working capital, expansion and business line diversifications. The key feature of this product is the interest rate, which is 6.5% a year.

The loan will be offered to business entities of a minimum of two years old that are owned or managed by Omani nationals. The minimum loan amount is OR5000 and the maximum is OR50,000, with repayment periods ranging from one year to five years. NBO will also provide insurance facilities to the customer for life and permanent total disability to cover the loan amount in the event of any sudden setback faced by the owner of the company.

NBO’s success has continued into this year. It has posted a 12% growth in net profit to OR30.37m for the first nine months of 2012 on the back of robust demand for credit in the first two quarters of the year.

In conjunction with global consultancy McKinsey, NBO has formulated and started implementing a new strategy for the bank to carry it forward until 2015.

Qatar

Qatar National Bank

Qatar National Bank (QNB) was the clear winner of this country award. It made headlines throughout 2011 and always for the right reasons.

It ranked as the most profitable bank in the Middle East and north Africa (MENA) region in 2011, generating net profits of $2.06bn, an annual increase of 32% driven largely by a 47% rise in loans and advances.

It also posted a tremendous 85% increase in Tier 1 capital to $10.48bn and a 35% growth in assets to $82.94bn – meaning that it now ranks as the largest bank by asset size across the entire MENA region, as well as boasting the largest loan book.
This performance saw QNB increase its market share of assets among Qatari banks to 49.7% in 2011, from 47.1% in 2010, while its share of Qatari banks’ profits rose to 50.2% from 46.5% over the same period. QNB is the largest asset manager in the country – overseeing an asset pool of more than QR10bn ($2.72bn).

In May 2011, the bank launched its subsidiary QNB Financial Services – becoming the first Qatari bank with an independently regulated licensed brokerage unit. Its electronic trading platform provides clients access to stocks listed on the Qatari, United Arab Emirates and Omani securities markets.

QNB also continued to pursue a successful global expansion strategy. In January 2011, it acquired a controlling 65.59% stake in Bank Kesawan in Indonesia. Kesawan operates a network of 33 branches, with total assets of about $492m. QNB also launched operations in Lebanon and South Sudan, giving it a presence in 24 countries.

“Investment banking through QNB Capital and brokerage through QNB Financial Services are areas of focus going forward,” says Ali Shareef Al-Emadi, QNB’s group chief executive. “And I will add to that upscaling retail banking through QNB First – our priority banking service – which we intend to roll out beyond Qatar, across the region.”

Saudi Arabia

National Commercial Bank

Last year saw National Commercial Bank (NCB) make solid and significant progress. The 27.3% growth in its net profits to SR6.01bn ($1.6bn) was mainly due to the successful execution of its new strategy to diversify income sources, grow revenue from core activities, and improve efficiency – leading to a 12.5% reduction in operating costs.

Total assets increased by 6.7% to SR301.2bn – leading to expanded lending activities that rose 7.7% to SR135.3bn. Foreign exchange income grew by 36%, gains on sale of investments by 14.9% to SR325m and shareholder’s equity by 8.3% to SR35.6bn. All of these are significant increases given the bank’s size.

NCB also continued to grow its distribution channels in 2011 through expanding its branch and ATM network. Seven new branches increased its total in Saudi Arabia to 288, while 165 new ATMs were established, bringing the total to 1791. More than 1700 point-of-sale machines were added.

Furthermore, NCB has been making a big push to keep apace with digital technology advancements. Some 88% of its 280 million customer transactions are now conducted electronically through alternative channels. For example, total remittance transactions exceeded 1.8 million due to 12 new ‘QuickPay’ centres opening, which serve 185,000 customers. NCB now operates 25 such centres, with another 13 currently in the planning stage.

NCB also extended its reach by launching four corporate service centres in remote and industrial areas across Saudi Arabia, bringing the total to seven. In many of these locations, NCB is the only bank providing services tailored to corporate clients and helping to serve the daily needs of small and medium-sized enterprises.

NCB’s Turkish subsidiary, Turkiye Finans Katilim Bankasi, in which NCB owns a 64.68% stake, saw its assets grow by 26.5% in 2011, the result of robust expansion in the bank’s loan portfolio and customer deposits, which grew by a respective 30% and 13.2%.

“Achieving this award confirms the strength of NCB’s position,” says chief executive Abdulkareem Abu Alnasr. “The bank has successfully built on its strong solvency and capital base, which led it to ranking first in the Middle East region by Tier 1 capital in 2011; the most important criteria in measuring the financial strength of banks.”

United Arab Emirates

Abu Dhabi Commercial Bank

The record results achieved by Abu Dhabi Commercial Bank (ADCB) in 2011 bear testimony to the successful execution of its turnaround strategy adopted two years ago. With a clear focus on the domestic market and its core business lines, ADCB’s financial performance improved across the board, leading to a 680% jump in profits to Dh3.06bn ($833m). Tier 1 capital rose by 35% to Dh21.8bn, operating income by 21% to Dh6.07bn, while return on equity increased from 1.5% in 2010 to 16.7% in 2011.

The most notable landmark for 2011, however, was the sale of ADCB’s equity stake in RHB Capital Berhad in Malaysia at a profit of Dh1.3bn. The sale significantly helped the bank to improve its capital levels – with its capital adequacy ratio increasing to 22.51%, from 16.65% in 2010.

The Royal Bank of Scotland retail business, which ADCB acquired in October 2010, was also successfully integrated over a period of just 12 months. The acquisition has added more than 200,000 customers, 300,000 credit cards, 51 ATMs and three branches to ADCB’s armoury, and extended the bank’s domestic network to 48 branches and 294 ATMs. It has also positioned ADCB’s credit card business as a market leader.

ADCB also relaunched its Islamic banking window in 2011, which has proven to be a strong contributor to the growth of the business, accounting for much of the year’s expansion in retail, small and medium-sized enterprises and corporate banking.
Through a joint venture with Bank of America-Merrill Lynch, ADCB is now able to provide full-service transactional banking services worldwide, and the launch of the branch in Jersey, a British crown colony, in December 2011 introduced offshore banking services to ADCB’s retail customers.

ADCB also successfully placed a $500m sukuk, a first for the bank, and a conventional bond issue was positively received in the market, highlighting a healthy appetite to invest in the business.

“As we look ahead we will continue to take advantage of future improvements in the domestic economy, and based on this we will grow our business by following our five-year business strategy which will build a stronger and more resilient bank,” says Alaa Mohamed Eraiqat, executive director and chief executive of ADCB.

Yemen

Yemen Commercial Bank

The populist uprising and the political crisis that followed in Yemen have had severe repercussions on the country and its banking sector. In light of the adverse operating environment, Yemen Commercial Bank (YCB) saw a sizable reduction in credit demand and therefore decided to focus its efforts on maintaining stability through shoring up its non-interest revenue streams and concentrating on trade finance, specifically letters of credit.

It improved its relationships with all of its correspondent banks so as to obtain the highest deposit return with them, thereby decreasing the required cash margins. It also continued to invest in treasury bills – investing YR40.5bn ($188.4m) against an interest rate average of 23% a year.

The bank also worked hard to strengthen its liquidity position. The strategy paid off, with its capital adequacy ratio (CAR) growing from 20.03% in 2010 to 28.11% in 2011. 

“The increase of the bank’s CAR to 28% is the best proof of the success of our strategy to enhance the bank’s liquidity and reduce exposure to risks,” says Ayed Al-Mashni, chief executive and general manager of YCB. “It is worth noting that this ratio is more than triple the requirement of both the Central Bank of Yemen and the Basel III Committee’s recommendation of 8%.”

On the technological front, YCB continued to develop and update its banking system so that it is compatible with the new Swift system programmes. It also continued to implement its high-quality protection programmes, such as its Anti-Money Laundering and Office of Foreign Assets Control systems.

“Looking forward, we hope that wisely exercised politics and the international community’s support to Yemen will help the bank to expand its investment opportunities,” says Mr Al-Mashni. “We want to be able continue to offer services that exceed our customers’ expectations and to keep our CAR above 25%.”