Winner of The Banker’s Lifetime Achievement Award, Ibrahim Dabdoub has steered National Bank of Kuwait successfully through many crises, maintaining a balanced operating style and stressing the importance of trust and relationships. Writer Stephen Timewell.

 

Click here to view an interview with Lifetime Achievement Award winner – Ibrahim Dabdoub

 Most bankers face challenges at some stage of their career, but it is in the difficult times that the best bankers show their true mettle. Just as the global credit crunch has shown that some are just ‘fair weather’ bankers and cannot take the financial heat, others, over many decades, have been able to withstand and survive extraordinary crises and, with loyal and dedicated staff, produce hugely successful institutions.

 One such outstanding survivor is Ibrahim Dabdoub, group chief executive officer of National Bank of Kuwait (NBK). He has not only steered the bank through a series of financial dramas over almost five decades in one of the most politically volatile areas of the world, but has also uniquely managed his bank through a fully fledged invasion by Iraq in 1990, and then successfully regained the bank’s number one status in the region.

The Banker, in its recent global banking awards, was pleased to present Mr Dabdoub with the Lifetime Achievement Award for an extraordinary career in banking, who started at NBK in 1961 and remains a role model to bankers across the globe with regards to what relationship banking is all about. NBK also won The Banker’s 2008 Bank of the Year Award for the Middle East region and for Kuwait.

Trust and integrity

 NBK is the bank in the Middle East rated highest by the three major global rating agencies and this has not happened by accident. Trust and integrity have been an integral part of Mr Dabdoub’s management style.

 Although there has often been a lot of speculative activity surrounding Kuwait, NBK has maintained an ultra-conservative approach that has kept it clear of many of the speculative excesses. This was admirably demonstrated in the 1982 stock market crash, better known as the ‘Manakh Crisis’, where NBK’s innate conservatism and balanced operating style protected it from the shockwaves that devastated the Kuwaiti economy at the time and left NBK the only local bank not adversely affected by the crisis.

 From taking the job of deputy-chief executive in 1981 to becoming CEO in 1983, for more than a quarter of a century Mr Dabdoub has successfully steered his bank through a series of crises in an often politically turbulent region. But his greatest test came in August 1990 when Iraq invaded Kuwait and took over the bank.

 The following represents Mr Dabdoub’s account of how he dealt with the unprecedented act of the Iraqi invasion and how he kept the bank operating while under occupation. It also demonstrates the importance of trust and relationships in banking.

 “On August 2, 1990, at 6am, I received a call in London saying the Iraqis were in Kuwait City and had taken over the bank,” he recounts. “It was a big shock. I knew that most of the bank’s directors were in Europe so I arranged a board meeting in London on August 3, at the London branch of NBK. The decision was clear: we either closed down the branch and went home or we continued. But in order to continue, we needed a lot of help.”

 Unlike today, where NBK has a bank subsidiary in London, in 1990 it only had branch status and was not a legal bank. Also, there was no precedent for trying to run a bank from an overseas branch, except perhaps a French bank through a branch in Switzerland during the German occupation in the 1940s. But, nonetheless, NBK accepted the challenge and sought help, and not surprisingly the first call was to the London office of the Kuwait Investment Office (KIO), an arm of the Kuwait Investment Authority.

 Mr Dabdoub and his chairman were blunt: “We need money; I need about $1bn to keep the bank going.” At that time, NBK had assets of about $15bn and wanted to keep up with payments. But Mr Dabdoub admits in this interview, for the first time, that the KIO was unwilling to assist. “Unfortunately they refused, they did not help at all, and it is not fair for me to not say it,” he says.

 Undeterred by the KIO’s refusal to help, and armed with just $10m in available funds, Mr Dabdoub and his team literally started to beg for funds, asking banks with deposits at NBK for help. While there was considerable sympathy, banks were concerned about the branch’s legal status. So Mr Dabdoub went to the Bank of England and sought help from the then deputy-governor Eddie George (who later became governor of the Bank of England).

Watch the video 

Interview with Lifetime Achievement Award winner – Ibrahim Dabdoub

Crucial letter

 “Eddie was hugely helpful in providing a letter of support of a type regarding the branch’s status – in effect, a letter of comfort,” says Mr Dabdoub. With this, his team started negotiations with the banks and NBK started making basic core payments and gathering funds. The major banks clubbed together to back the team with its ‘Eddie George’ letter. Confidence began to grow and the cash started to come in. “By the end of August, I had $2bn in cash and I felt at ease,” Mr Dabdoub recalls.

 At this time, there were other positive developments. The governor of the Central Bank of Kuwait had escaped from Kuwait to Saudi Arabia and opened an office at NBK in London. NBK was helping the other Kuwaiti banks with payments and, through the extreme courage of one Palestinian staff member, all of NBK’s bank records were smuggled out of Kuwait to Jordan. The ‘bank records’ story is remarkable because it also involved a courageous cousin of the Kuwaiti ruler, who managed to get hold of one of only four satellite phones in the country after the invasion, and thereby maintain communications with the bank in London.

 With this single phone, Mr Dabdoub was able to talk to his staff in Kuwait and devise a plan where the back-up records of the bank, held on cartridges, were smuggled out of the country at great personal risk. Putting the cartridges among his childrens’ toys, the Palestinian staffer avoided detection in a highly dangerous escape to Jordan. By the end of August, Mr Dabdoub held all the records of the bank in London. “By then we started lending to our customers, only small amounts, but NBK was the only bank able to operate.”

Reconstruction work

 By December 15, when the US made the decision to invade, NBK had expanded operations and sent a team to Washington to work with the Pentagon on plans for the reconstruction of Kuwait.

 In the 1990s, after the Gulf war, NBK played a vital role in rebuilding the Kuwaiti economy. “We opened all the letters of credit for the reconstruction of Kuwait,” Mr Dabdoub notes proudly. This included the financing of a $5.5bn jumbo loan in 1991 for the Kuwaiti government, considered the biggest loan in the Arab region.

 “The government of Kuwait needed the bank and we were there for them. It is a paradox that we helped the government but they refused to help us,” Mr Dabdoub concludes. In reflecting on the ‘invasion crisis’, he highlights the importance of relationships, staff loyalty and building a strong corporate culture. “Once you build a strong corporate culture it stays there, but you have to be tenacious to maintain it. Unfortunately, you often see cultures collapse, these days, at the first sign of crisis.”

 Clearly NBK, under Mr Dabdoub’s leadership, has built an extraordinarily strong banking culture to manage its way through the most extraordinary of crises.

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