Arab Bank CEO Nemeh Sabbagh talks about growing with the region and reaching for opportunities throughout the world.
Global Finance: What is driving the growth of Arab Bank in the Middle East and North Africa (MENA) region?
Nemeh Sabbagh: Arab Bank continues to grow its business across MENA despite the region’s challenging circumstances. The Bank has shown consistent solid performance, relying on its deep understanding of the region, prudent approach and well-diversified income streams. In addition to sustaining growth year-on-year during this difficult period, the Bank maintained the quality of its credit portfolio with no increase in nonperforming loans and a provisions coverage ratio reaching 100%.
Arab Bank has a unique model which relies on its wide geographic presence, with over 600 branches across 5 continents. The Bank’s extensive global network makes it uniquely positioned to help international companies tap into Middle East markets, and at the same time act as a primary enabler and supporter of local companies with international growth ambitions.
GF: Today, what are your prospects for regional growth and expansion?
Sabbagh: We are cautiously optimistic about the prospects and opportunities of the Arab economies. Overall economic growth is expected to gradually improve, following several challenging years. The global economic recovery since 2017, including in Europe, is helping to firm up oil prices and increase export opportunities across the region, particularly among North African countries. Economic growth in oil-exporting economies is expected to improve due to a recovery in oil prices, a slowdown in fiscal-consolidation measures, and continued efforts focusing on reform, diversification and privatization. Also, oil-importing countries are expected to benefit from ongoing fiscal and structural reforms as well as from the recovery in oil-exporting countries, which can boost exports, remittances, tourism and investment. The whole region would benefit from stabilization of regional conflicts and the beginning of a process of reconstruction.
GF: What types of products or services have strong potential for growth in MENA banking?
Sabbagh: The banking sector can play an important role in providing financial services for increasingly important public-private partnerships for the provision of public infrastructure, or supporting privatization efforts. The expected recovery in trade is also an opportunity for increasing the financing of trade, whether intraregional or international. There are also opportunities for expanding financial services for private investment, which is expected to increase along with growth. Across the board, emphasis on improving financial inclusion in MENA presents opportunities for broadening the net of customers benefiting from financial services, including small and medium enterprises. Also, the financial industry can contribute to the reconstruction effort, as it gets underway in several countries.
GF: How do you deal with regulatory standards such as anti-money laundering (AML) or counter-terrorist financing (CTF)?
Sabbagh: Regulatory divergence is a key cost driver, with global banks finding themselves in the challenging position of having to navigate the complexity of an uneven regulatory landscape to comply with applicable laws and regulations and meet supervisory expectations. Arab Bank’s approach is to continually benchmark bank policies and practices against international leading practices to proactively identify and manage evolving risks and requirements. Additionally, the Bank has centralized key compliance facets including AML/CTF policy, Sanctions & Interdiction, and Investigations. On the other hand, while investment in compliance advanced-technology solutions is critical in an increasingly complex environment, equally important is investment in the people element by seeking to nurture and retain talent.
GF: What is your stance on fintech? How could it change banking in the MENA region?
Sabbagh: In the coming few years, challenger banks and disruptive banking solutions are expected to impact banks’ market share and operating modules as they continue to influence and shape consumer behavior and user experience across the banking landscape. Such developments mean that fintech integration in the banking ecosystem is no longer an option, but rather an obligation.