Emirates NBD returned a stellar performance in 2015, but this year looks to be an entirely different proposition. Shayne Nelson, Emirates NBD Group’s CEO, tells Global Finance how the bank plans to drive growth and why consolidation is needed in the UAE banking sector.
Global Finance: Emirates NBD finished 2015 on a very solid note, with net profits increasing 39%. However, 2016 is a year of tightening liquidity. How do you see the situation unfolding, given your exposure to the UAE small- and medium-enterprise sector?
Shayne Nelson: 2015 was a strong year of growth for Emirates NBD. During the year, total assets crossed $100 billion and net profit surpassed 7.1 billion dirhams ($1.9 billion). The bank enjoys strong structural liquidity, thanks to our extensive branch network. Our loan-to-deposit ratio improved 1%, to 94.2%, during the last quarter of 2015, reflecting our strong, liquid position. As for the SME sector, one in four SMEs in the country bank with us. Less than 15% of our SME customers are borrowing customers, and less than 30% of our revenue from this segment comes from credit. As such, rising impairments in the industry in 2016 are much less of a concern to Emirates NBD.
GF: You have made major strides in dealing with nonperforming loans (NPLs). Do you expect the situation to continue to improve this year?
Nelson: We do not provide guidance on targets for NPLs in 2016. However, there is further scope for improvement in credit quality as the bank continues to work through the existing stock of impaired loans. We have been highly conservative with our provisioning and expect further recoveries from the legacy book.
GF: There are more than 50 banks in the UAE. Does Emirates NBD expect there to be consolidation in the banking sector?
Nelson: With the size of the UAE’s population, it is unusual to have so many banks, and there is a need for consolidation. It would help the industry overall and help banks achieve economies of scale, as well as the capital required to diversify and grow.
GF: Emirates NBD is heavily concentrated in the UAE. Do you anticipate geographical diversification? And if so, where is that likely to occur?
Nelson: Our non-UAE income currently represents about 6% to 7% of the group’s total income. We have a successful operation in Egypt, following our acquisition of BNP Paribas’s Egyptian assets and expect continued growth in Egypt and other regions where we operate—namely, Saudi Arabia, London and Singapore. We are also looking for opportunities within the North and East African regions.
GF: UAE consumers increasingly demand a smartphone banking experience. You have led progress in the market; what enhancements are you considering?
Nelson: In 2015 our mobile users grew by 60%, and our mobile app rates 4.5 out of 5 stars in the app stores. We continue to invest in creating solutions that offer simple, faster and more personalized banking. We are also investing in tools and platforms to offer customers access to digital services that assist them to make better financial decisions and grow their wealth.
GF: Following the lifting of sanctions against Iran, there is an expectation that Dubai will be a major beneficiary. What is the bank’s post-sanctions strategy?
Nelson: Following the announcement of Implementation Day in January 2016, further guidance was released. Emirates NBD is reviewing this further guidance in conjunction with our lawyers to understand the obligations / restrictions that the bank must comply with. At this point in time, there are no changes to Emirates NBD’s existing policies and procedures, other than the removal of relevant names from sanctions lists in Emirates NBD’s systems.