The cream of the crop for 2019 from the Middle East.

 

Bahrain, Ahli United Bank 

Ahli United Bank (AUB) takes home the Bahrain crown for the second consecutive year. The bank’s asset base continues to recover impressively after the 2016 contraction, rising by 6.8% over the 2018 review period, with net profits rising 12.7%. Such rises were accompanied by a healthy return on equity, which increased to 18.1% from 16.5% at the end of 2017, with the cost-to-income ratio narrowing to 27.1% from 28.8%. The ratio of the bank’s non-performing loans was unchanged at 1.9% over the period.  

One of the key landmarks for AUB in the past year has been the launch of its upgraded smartphone banking app, developed using agile development methodology. The new app, which enjoyed its initial release in March 2019, offers a significantly upgraded user experience, with features including online registration capability for new and existing customers, the ability to login with two-factor authentication using the smartphone’s biometric capabilities, and the social sharing of transfer and payment receipts.

The judges were also impressed by the bank’s international strategy, particularly the establishment of a new branch in the Dubai International Financial Centre in the United Arab Emirates. Also of note is the ongoing upgrading of services offered to AUB’s private banking clients, with a new suite of alternative investment products being launched in conjunction with providers such as TFS and the Carlisle Long Term Growth Fund. 

During the past 18 months, AUB has launched a suite of alternate investment strategies products that can deliver absolute and non-market correlated returns to its private banking clients.

“The bank’s success is attributed to its focus on its strategy to create a diversified, well-managed and integrated business model within a prudent risk framework, and the application of high standards of corporate governance within a merit-based and disciplined operating culture,” says Adel El-Labban, AUB’s group CEO and managing director. 

Iraq, Trade Bank Iraq 

Iraq remains one of the Middle East’s least-banked countries, with the financial sector dominated by a handful of large state-owned banks. Of these institutions, Trade Bank Iraq (TBI) has been selected as the country’s Bank of the Year, with the expansion of its overseas operations and the development of its retail offering offsetting mixed financial results. 

TBI’s asset base hit a three-year high in 2018, increasing by 8.66% during the year after decreasing in 2017. Net income, however, continued to fall, halving during 2018. The bank posted a corresponding drop in return on equity, which fell to 5% from 11% during 2018, while the cost-to-income ratio increased to 70%, from 29%, over the same period. One bright spot was asset quality, with the lender’s non-performing loan ratio improving to 17% in 2018 from 27% the previous year. 

The bank has worked hard in the past year to boost its retail banking offering, reducing its reliance on its core trade finance business. To this end, it has rolled out a series of retail products, including personal, car and student tuition loans, credit cards and a deposit certificate product. 

After opening a representative office in Abu Dhabi in 2017, TBI opened its first branch in Saudi Arabia in April 2019. The bank plans to upgrade its office in Abu Dhabi to an asset management company in 2020, and also plans to open a representative office in China in 2020. 

“TBI’s strengths derive from its employees’ passion to serve customers and communities across Iraq, as well as connecting Iraq to the international world of commerce to provide the needs of our country and citizens,” says Faisal Al Haimus, TBI’s chairman and president. 

Iran, Ayandeh Bank 

Ayandeh Bank, Iran’s largest commercial lender, has been awarded the country’s crown for a third consecutive year after combining impressive asset growth in a challenging operating environment with its open approach to the fintech community. 

The bank grew its asset base by 40% over the course of 2018, together with a 47% rise in Tier 1 capital, even as the country’s economy contracted sharply due to lower oil revenues and the imposition of new sanctions by the US in November 2018. Ayandeh Bank’s non-performing loan ratio fell during the year, while its return on equity rose.   

Among the most significant factors behind Ayandeh Bank’s ongoing success has been its financing of the Iran Mall complex, one of the world’s largest retail destinations, which opened its doors for business in 2018. The project is set to expand significantly in the coming years, with planned expansions including a multi-purpose sports complex, an exhibition centre and an international financial centre. 

Ayandeh Bank’s ongoing commitment to the fintech sector impressed the judges; its Finnotech open innovation platform has continued to grow, with 110 fintech companies co-operating on the platform thus far. 

The bank has also been proactive on the corporate and social responsibilty front, offering a IR12.5bn ($300,000) donation, as well as low interest loans, to those who lost their homes in widespread flash flooding that impacted much of Iran in March 2019.

“Ayandeh Bank has achieved success in a competitive market by focusing on the strategic cycle and reinforcing our financial strength, while offering new banking products and services,” says Jalal Rasoulof, CEO of Ayandeh Bank.

“We have also paid greater attention to private and corporate banking and pioneered in offering innovations, all the while managing our expenses and profitability.” 

Israel, Bank Leumi 

Bank Leumi has taken the crown for Israel for the second year running, matching stable financial numbers with innovative new digital services. The lender registered a 2.18% growth in total assets – along with a 1.55% rise in Tier 1 capital – during 2018, with net profits rising 2.68%. While Bank Leumi’s return on equity slipped slightly from 9.8% in 2017 to 9.5% in 2018, cost control saw an improvement, with the cost-to-income ratio falling from 62.9% to 60.6% over the period. Non-performing loans fell again, with the ratio dropping to 0.89% at the end of 2018 from 1.01% at the close of 2017. 

The bank’s digital innovation particularly impressed the judges, especially its financial robo-advisor Videa. Initially launched in late-2018, Videa’s digital portfolio management platform is now offered to customers of all Israeli banks with a minimum capital threshold of just NIS50,000 ($14,300).

Bank Leumi burnished its fintech credentials in May 2019, with the creation of Global Alliance Fintech Link, a global online portal developed to drive client-focused innovation by facilitating collaboration between banks and fintechs. Through this platform, created in collaboration with Canada’s CIBC and National Australia Bank, fintechs can submit creative technology solutions in response to a wide range of opportunities and challenges identified by the banks.

“Leumi’s success is mainly attributed to our vision to stay one step ahead and constantly challenge ourselves, by adapting our operating model to the ever-changing needs of our customers in the digital era,” says Bank Leumi’s recently appointed president and chief executive, Hanan Friedman.  

“A great example is the recent establishment of our new data division, a first of its kind in Israeli banking, which was created in order to leverage Leumi’s data assets and enhance our data-driven offerings while providing our customers with the best value proposition.” 

Jordan, Arab Bank 

Arab Bank’s domination of Jordan’s banking scene continued in 2018, with the bank managing to combine financial growth and digital innovation in often challenging economic conditions. 

The lender registered a 54% rise in net profits for the year while growing its asset base by 2.1%, including a 5.1% rise in Tier 1 capital. These gains were accompanied by an improvement in return on equity, which rose from 6.3% to 9.5%, with the bank’s cost-to-income ratio rising only moderately from 39.5% to 40.4%. 

In addition to its solid financial performance, the judges were impressed by Arab Bank’s continued embrace of transformative digital solutions. The deployment of a finger-vein recognition service in Jordanian branches (and, subsequently, across the bank’s wider Middle Eastern footprint) has reduced transaction times within branches by more than 50%, with more than 80,000 registered users in the country. 

Arab Bank’s commitment to innovation is enshrined in its digital transformation strategy, which includes the establishment of an 850-square-metre space. The centre encompasses an innovation hub, an accelerator programme targeting post-seed/series-A type fintech companies, and the bank’s corporate venture capital arm, which targets investment in global fintech companies, typically with series A investment.

“Despite the challenging situation across the region, we continue to show consistent strong performance relying on our understanding of the region, prudent approach and well-diversified income streams,” says Nemeh Sabbagh, CEO of Arab Bank

“[Arab Bank] has managed to grow its business and profitability under varying regional circumstances, while ensuring the safety of deposits, providing excellent service to customers, and delivering steady returns to shareholders.” 

Kuwait, National Bank of Kuwait 

Kuwait’s economy recovered well in 2018 on the back of higher oil revenues, enabling the country’s government to press ahead with its sizeable infrastructure spending programme. National Bank of Kuwait (NBK), which once again wins the title of the country’s top bank in this year’s awards, has benefited thanks to its close relationship with the government, but has also made significant progress in strengthening its overseas footprint. 

A 15% rise in profits was one of the highlights of the lender’s financial performance in 2018, with return on equity rising from 10.8% to 12.8%. Impressively, NBK was able to achieve such increases while boosting efficiency, with its cost-to-income ratio improving to 31.3% in 2018 from 32.3% in 2017. 

NBK made important progress on the international front. In Saudi Arabia, the bank grew its branch network from one to three, and also entered the wealth management market via the launch of NBK Wealth Management Company. The bank also strengthened its presence in the Egyptian market, focusing on the relatively untapped retail segment. 

“The group’s diversification strategy is a key contributor to its strong and consistent financial performance,” says Isam Al-Sager, NBK’s group CEO. 

“We continue to strengthen our operations in regional and international markets, while focusing on the implementation of our digital transformation strategy in line with our commitment to become the bank of the future.”

In addition to international growth, NBK is increasingly putting digital transformation at the heart of its business, with the appointment of a chief digital officer and a chief data officer to help steer the process. The bank’s mobile banking offering has been upgraded to include video chat through mobile and online banking, and ‘selfie pay’.  

Lebanon, Blom Bank 

Blom Bank has seen off stiff competition to emerge as Bank of the Year for Lebanon, posting solid financial results in the midst of extremely challenging economic conditions, while streamlining costs via digital services and improved processes. 

Lebanon’s banking sector came under enormous pressure in 2018, thanks to ballooning public debt levels and the knock-on impact of Syria’s civil war, together with the cancellation of the government’s subsidies on home loans. 

Despite such challenges Blom Bank saw a 5.2% rise in net profits and a 13% rise in assets in 2018, including a 9% rise in Tier 1 capital, even as non-performing loans rose and efficiency slipped. In the face of tighter margins, the lender has focused aggressively on improving its digital offering to enable savings on personnel and offer improved customer services. 

The growth in transactions on the bank’s digital platform in the 12-month period to March 2019 ranged between 20% and 203% according to the function, with a median increase of 60%. Growth in transactions for new services at ATMs, including credit card payments and cash and cheque deposits, reached about 50%, while overall transactions performed physically at the branch declined by 7.2%. 

As a result of such trends, Blom Bank was able to cut headcount from 2565 in March 2018 to 2443 in April 2019, with the number of employees expected to fall below 2400 by the end of 2019. 

“Blom Bank’s success rests on three ingredients: our conservative yet innovative strategy that gives priority to controlling risk and cost and maintaining asset quality and adequate capital and liquidity; our strong management team with extensive experience and excellent reputations as bankers; and our talented staff with superb skills and wide-ranging professionalism,” says Saad Azhari, Blom Bank’s chairman and general manager.

Oman, Bank Muscat 

In one of the most challenging economic environments in the Gulf, Bank Muscat has prevailed once again as Oman’s top bank, posting solid financial numbers while continuing to embrace digital innovation. 

Oman’s economy has been hit hard in recent years by lower oil prices, with economic diversification strategies taking time to raise non-oil revenues. Bank Muscat has not been immune from Oman’s challenging economic climate, with non-performing loans continuing to rise, albeit at a slower pace than in 2017. But the bank managed to post a 2% rise in net profits in 2018, compared with just 0.1% in 2017, while assets grew by 10%.

The bank has undertaken a series of system upgrades over the review period, notably a new customer relationship management system, integrated with multiple customer touchpoints using artificial intelligence to provide personalised offers and promotions. 

Another innovation was a new business-to-business platform designed to better serve the bank’s government and corporate customers, and an upgrade to its Swift and fraud management services. This latter system enables real-time fraud monitoring across channels including ATMs, point-of-sale systems, internet banking and interactive voice response. 

Bank Muscat also became the first bank in Oman to offer customer service via a verified WhatsApp business account. It has also rolled out near-field communication-enabled debit and prepaid cards in partnership with Visa under the bank’s ‘Just Tap’ brand. 

On the project finance side, Bank Muscat, along with its Islamic banking window Meethaq, signed a finance agreement with Al Mouj Muscat (a joint venture between United Arab Emirates-based Majid al Futtaim Group and the government of Oman) for a syndicated term loan worth OR115m ($299m) that will allow for the consolidation of Al Mouj’s financing facilities as well as infrastructure development in the Marina part of the Al Mouj integrated tourism complex. 

Palestine, Arab Islamic Bank 

Operating in one of the most challenging political and economic climates in the Middle East, Arab Islamic Bank has emerged as the winner for Palestine, with the judges impressed by its initiatives to encourage saving, call-centre upgrades and a new strategic rebrand, together with solid results. 

While the bank’s asset base grew by just 2% in 2018, Arab Islamic Bank was able to record an 11% growth in net profits for the year, compared with just 3% in 2017. Return on equity hit 6.49% in 2018, compared with 5.98% in 2017. The bank’s cost-to-income ratio, while high at 78%, was marginally lower than the previous year.

Among the upgrades the bank has made are those to its call centre, enabling clients to connect around the clock via channels including SMS, e-mail, Facebook and Whats-App. The bank has also upgraded its Islami Online and Islami Mobile digital offerings, which allow customers to check their balances, request cheque books, pay bills and make transfers to other customers’ accounts. 

Also of note are Arab Islamic Bank’s campaigns to encourage customers to save money. The bank introduced incentives to save, including a daily prize equivalent to about $2800 and a monthly prize equivalent to $28,000, as well as granting free purchase cards to clients who open a new savings account or replenish existing accounts. 

In a bid to offer banking services to all segments of society, regardless of their location, Arab Islamic Bank launched a mobile bank branch, an equipped vehicle that provides banking services in remote regions and Palestinian villages. 

“As the first Islamic bank in Palestine, we have been leading the Islamic banking sector for 24 years through our pioneering ideas and our local and global expansion,” says Hani Naser, general manager of Arab Islamic Bank.

Qatar, Qatar National Bank 

Qatar National Bank (QNB), the Middle East’s largest lender, had another stellar year in 2018, as the impact of tension with its Gulf Co-operation Council neighbours began to subside. While QNB’s 6% rise in assets was slightly slower than that recorded in previous years, Tier 1 capital saw an impressive 12% increase during the period, with its net profit rising 6%. 

Significantly, such increases were complemented by improvements in both return on equity – which rose to 21% in 2018 from 18.7% in 2017 – and the bank’s cost-to-income ratio, which fell for the second year in a row to 25.8%, from 29.1%. The non-performing loan ratio remained stable at 1.9%, compared with 1.8% at the end of 2017. 

This improvement in efficiency stems largely from QNB’s efforts further improve integration with its international subsidiaries, as a means of extracting value across all businesses by leveraging capabilities, streamlining the global product offering and consolidating operations. The bank’s subsidiaries in Turkey and Egypt have benefited from this strategy, leveraging the group’s wholesale banking capabilities to capture additional revenue opportunities. During 2018, deposits increased by 10% and 7%, respectively, in Turkey and Egypt, while loans increased by 17% and 22% in local currency terms. 

QNB has also maintained its commitment to digital transformations through innovations such as interactive teller machines (ITMs) that enable a two-way video link between a customer and a remote bank teller. Designed to increase efficiency, the ITM project, first launched in October 2018, has seen a series of refinements in 2019, including enabling single tellers being able to interact with customers from multiple ITMs, and improved reconciliation between the ITMs and QNB’s core banking operations. 

The bank has also expanded its self-service cheque deposit service, previously available solely to retail customers, to corporate and small and medium-sized enterprise customers, and continues to roll out terminals that enable bulk cash deposits. By late 2019, the bank had 20 ATMs that supported cheque deposit services, with four machines supporting bulk cash deposits.  

Saudi Arabia, Al Rajhi Bank 

Al Rajhi Bank has again emerged as Saudi Arabia’s top bank, as the world’s largest Islamic financial institution capitalises on growing demand for sharia-compliant banking services in a supportive regulatory environment. 

While Al Rajhi’s Tier 1 capital fell by 13% in 2018 on the back of government demands for increased zakat payments from the Islamic banking sector as a whole, the bank posted otherwise impressive numbers, with profits rising 13% and its total asset base increasing by 6%. Return on equity surged to 19.8% from 16.9%, with cost to income falling to 31.7% from 32.9%. The bank’s non-performing loans ratio, meanwhile, was stable at 0.7%.

Al Rajhi has benefited in particular from government initiatives to boost home ownership in Saudi Arabia, launching mortgage products targeting segments such as defence personnel, government sector employees on the verge of retirement, and non-salaried customers. Home ownership in 2018 rose by 4% across Saudi Arabia, with Al Rajhi’s market share of new mortgages rising to 27.9% from 20.6%.

The bank has been pushing hard to complement its strong physical presence in retail banking with a robust digital offering; 56% of all customer transactions were being performed digitally by the end of 2018, while the number of retail customers using the bank’s ‘Mubashar’ online platform grew by 61% to 3.6 million during the year, with corporate users growing 12.5% to about 40,000 in the same period. 

United Arab Emirates, Emirates NBD 

Dubai’s largest lender, Emirates NBD, has regained its title as Bank of the Year for the United Arab Emirates, with its solid financial performance being accompanied by a pioneering approach to digital banking. 

A 20% rise in net profits was a 2018 highlight for the bank, with assets and Tier 1 capital also continuing to rise. Return on equity after deducting intangibles and additional Tier 1 capital increased to 22.1% in 2018 from 20.2% in 2017. And while the bank’s cost-to-income ratio rose slightly to 32.3% from 31.3% in this time, its non-performing loan ratio improved to 5.9% from 6.2%. 

The judges were particularly impressed by Emirates NBD’s embracing of open banking, and the accompanying changes made to its business model and underlying IT architecture. The bank initiated a pioneering project to custom build more than 500 application programming interfaces in house to facilitate open banking; about 300 have been completed to date, with the full library expected to be finished by mid-2020. 

Early results of the project include the forging of partnerships with major regional banks in late 2018 in key remittance markets, such as India, Pakistan and the Philippines, to boost the efficiency of Emirates NBD’s DirectRemit product; the launch of chat banking via WhatsApp in April 2019; and a voice-banking partnership with  Amazon’s Alexa the following month. 

Also notable has been the growth of Liv, Emirates NBD’s digital bank for millennials, which crossed the 250,000 customer mark in June 2019. 

“This prestigious title highlights our efforts in ensuring that Emirates NBD continues to lead the region’s banking sector in digital innovation, product offering and corporate social responsibility,” says Shayne Nelson, Emirates NBD’s group chief executive officer.

“As we prepare for Expo 2020 Dubai next year, we will continue to strengthen our proposition to be the bank of choice for shareholders, customers and employees.”

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