
Trade Finance In Wartime
The huge drop-off in trade involving Russia and Ukraine has hit trade finance hard.
Despite tightening liquidity in the Gulf banking sector, Bahrain’s largest lender reported robust profits in 2015. After leading a slew of product launches, AUB’s group CEO and managing director believes the bank’s prudent risk management will underpin its expansion. He spoke to Global Finance at the bank’s headquarters in Bahrain.
Global Finance: Banks in Bahrain face a weak domestic operating environment. How will Ahli United Bank deal with tighter market conditions?
El-Labban: The operating environment remains very challenging. Faced with lower oil revenues, the government is taking steps, which include reducing government subsidies, streamlining expenditure and undertaking economic and fiscal reforms. AUB is well placed to face the tough business environment on account of its diversified business model, with no single-country dependence. Bahrain represents around 12% of overall net profit.
GF: In the nine months to September 2015, net profits increased 11.3%. How does the full year performance look?
El-Labban: AUB continued its solid growth for the full-year 2015 and recorded a net profit of $537.2 million in 2015, representing an 11.3% growth over a net profit of $482.5 million in 2014. The increase in operating income was underpinned by an increase in net interest income, despite very low prevailing absolute-interest-rate levels. The net interest income increase was achieved primarily through a moderated increase in lending volumes, as well as deployment of liquidity in nontrading investments within a conservative and diversified risk framework.
GF: Are there any product enhancements in the works?
El-Labban: We have actually made a number of product and service launches:
GF: There was some discussion AUB was considering a sale or merger. What is the status of those discussions?
El-Labban: AUB has been subjected to unnecessary rumors in the past. Any serious proposal or approach would be disclosed as part of mandatory disclosure regulations. However, AUB continues to evaluate proposals to expand into new identified
markets and existing markets through organic as well as inorganic routes.
GF: Do you plan to widen your network?
El-Labban: AUB aims to expand into core Gulf countries such as Saudi Arabia, the UAE and Iran, as well as in identified secondary markets like Turkey and Switzerland.
GF: In view of the fall in oil prices, what is the outlook for the banking sector in the GCC?
El-Labban: The fall in oil prices, slowdown in economic growth and tightening liquidity are expected to translate to lower growth for regional banking. Banks with stronger risk culture and focused business models will be better prepared to face these economic challenges.
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