Cityscape of Emirate of Ras Al Khaimah with inset portrait of Rakbank chief executive Raheel Ahmed

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Rakbank chief executive Raheel Ahmed talks to John Everington about the outlook for the UAE economy in 2023, the bank's strategy for remaining competitive in a crowded market, and the outlook for the country's neobanks.

Q: Economic growth is expected to have risen to 5.1% in the UAE in 2022, according to the International Monetary Fund (IMF). What is the economic outlook for the year ahead, both in the country as a whole and the emirate of Ras Al Khaimah (RAK)?

A: The economic climate in the UAE is very different to much of the rest of the world right now. The IMF has revised its outlook for [gross domestic product] upwards several times. Inflation at 5.6% is higher than it has been but is still low compared with most other countries. Business sentiment is very strong. Real estate continues to boom, especially at the luxury end, with the [small and medium-sized enterprise (SME)] sector – an area that Rakbank has traditionally specialised in – also looking very healthy.

We predict that the UAE’s growth trajectory will continue into 2023, perhaps at a slightly slower pace. You can’t expect to see comparable levels of growth given everything that’s happening around the world. At the same time, the oil sector and government spending are likely to remain buoyant and there’s a lot of resilience in the wider economy.

Crucially, the UAE government has liberalised its visa regime, attracting longer-term residents via its golden visa scheme [first announced in 2019] and enabling people to stay longer in the country when they’re between jobs. These have been positive moves, which have ensured that there wasn’t an outflow of expats during the pandemic.

The outlook for RAK remains positive. Over the years it has managed to carve out a profitable niche for itself as a ‘staycation’ and international tourist destination distinct from what is offered by other emirates. Manufacturing and construction also continue to grow. The local authorities have also been very fiscally disciplined as well.

Q: Rakbank in October 2022 reported its highest quarterly net profit since 2015. What are your expectations for 2023?

A: On a broad level, we continue to be very positive, having seen growth on both sides of the balance sheet over the past year, with that growth having accelerated in recent months.

Naturally as interest rates rise you might expect to see a slowdown in products like mortgages and some loans as affordability becomes more of an issue for some borrowers. At the same time, though, there are lots of very affluent customers that have newly arrived in the UAE for whom minor changes in interest rates won’t make much of a difference.

We see overall business sentiment remaining strong, with the SME segment supported by strong growth in the government and corporate sector, and tourism in particular. On the back of such developments, we feel we’ll continue to see strong growth into at least H12023. After that there might be a slight slowdown, but we’re very bullish for the next six to nine months.

Q: Which verticals within the SME sector are seeing the most growth in the UAE right now, and which ones are struggling?

A: Construction remains very important, particularly within the residential and hospitality spaces. SMEs serving government and infrastructure sectors continue to do well, given the high spending that’s been happening, together with those in the tourist space. There’s more caution when it comes to commodities and re-exporting, given the economic challenges elsewhere in the region and beyond.

There’s caution when it comes to commodities and re-exporting, given the economic challenges

Q: The past six years have seen significant consolidation in the UAE’s banking sector, creating a new class of megalenders. Yet the country remains heavily banked, with 60 foreign and national banks on the Central Bank of the UAE’s register. How can smaller lenders such as Rakbank remain relevant and profitable in such an operating environment?

A: We're currently going through a very deep cultural transformation in a bid to become more of a technology company than a bank, while at the same time creating a great working environment that will attract great people to come and work with us.

Everyone likes to talk about digitisation these days. For us we want to use digitisation to be able to offer a truly personalised service offering for our retail, corporate and SME customer base. To that end, we’re investing heavily to build up world-class capabilities in areas including artificial intelligence, machine learning and data analytics.

Being a smaller lender gives us the opportunity to bring the full range of our service propositions to our customers when they need them, as opposed to a larger bank that will often be more siloed in its approach.

Q: The UAE market has also recently witnessed the launch of a number of digital-only lenders, such as Al Maryah Community Bank, Wio and Zand. How much of a threat are such banks to established players like yourselves?

A: I’m of the opinion that more competition is good for customers, and that these new digital entrants will raise the bar for everyone. It’s going to be interesting to see how successful they will be at scaling up their operations in a regulated industry while maintaining consumer trust, while also seeing how the established players continue to up their game in response.


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