The Middle East’s Best Banks went above and beyond through the crisis.
This year was an exceptional one for everyone, everywhere, but perhaps even more so in the Middle East, where the economic slowdown induced by the pandemic was amplified by the drastic drop in oil prices and production.
As a result, regional GDP contracted by 3.8% in 2020, reports the World Bank in its April update, adding that the estimated accumulated cost of the pandemic in terms of GDP losses to the region’s economies by the end of 2021 will amount to $227 billion.
To try and weather the storm, governments set up stimulus packages and borrowed massively to sustain health care, housing and social welfare. As is often the case in times of crisis, structural imbalances were pointed out as major impediments to economic recovery, and decision-makers pulled the reform agenda back from their priority lists.
Overall, banks showed resilience. There were no major crashes; and although mergers and acquisitions might pick up again in the aftermath of the pandemic, it should be for the best as the region is still mostly overbanked. Economic recovery is on the horizon but will depend greatly on the uptick in oil prices as well as on governments’ capacity to roll out successful vaccination campaigns and reopen their economies.
In that particularly challenging context, Arab Bank retains its title as Global Finance’s Best Bank in the Middle East for the sixth consecutive year. With only $54 billion in assets, the bank wins not on size but on its deft capacity to scale across the region—now with more than 600 branches spread over 16 Arab countries, including war-torn territories such as Yemen and Syria where it maintains a presence despite conflicts. The bank generates 70% of its income outside of Jordan.
Arab Bank CEO Nemeh Sabbagh attributes its success to sound fundamentals, prudent business practices, a well-diversified business model and unique cross-border capabilities. “These are important qualities for our stakeholders: our customers, staff, shareholders and the communities where we operate,” he says.
Another key element that makes Arab Bank stand out is its diversified revenue stream. In contrast to Gulf countries where the oil rent fuels banking powerhouses through state deposits, Jordan is deprived of hydrocarbons and Arab Bank is mainly funded by customer deposits outside its home market. Given the deterioration of the macroeconomic environment, Arab Bank had a tough year in 2020. It reports a severe drop in profits and a 77% drop in net income.
Throughout the months however, Arab Bank continued to support investments in the real economy through important water, agriculture, real estate and transport projects in several countries including Qatar, Egypt and Tunisia. Faced with the pandemic, Arab Bank also showed strong community engagement at the regional level, donating a total of $25 million to national relief funds in Jordan, Palestine and Egypt.
“Arab Bank took several strategic initiatives to help mitigate the unprecedented economic and market conditions of the Covid-19 global pandemic: safeguarding its healthy liquidity and capital ratios, maintaining resilient asset quality metrics and scaling up digital banking initiatives and channels across the group,” says Sabbagh. “We continue to stand by our customers, staff and communities to help them deal with the severe implications of this global pandemic. Our digitalization strategy, investments, and innovations in products and services over the past few years are serving us well in weathering the pandemic’s impact, providing seamless and uninterrupted services to all our customers across all our locations.”
To better adapt to a fast-changing world, Arab Bank is now betting on green finance, especially renewable energy and solar plants. Innovation and technology are also an area of heavy focus through venture capital AB Ventures or with in-house innovation lab AB Innovation Hub and fintech program AB Accelerator. In 2020, Arab bank completed 13 investments in fintech firms. Arab Bank also reaps the award for Best Bank in Jordan, where it has over 20% market share of customer deposits.
In the Gulf Cooperation Council (GCC), the 2021 award for Best Bank in Saudi Arabia goes to SABB (Saudi British Bank) for the second year in a row. Notwithstanding the pandemic, the bank recorded a 2.6% revenue growth and continued supporting major infrastructure projects as part of Vision 2030, the monarchy’s blueprint for economic diversification.
The kingdom’s third-largest bank by assets since its merger with Alawwal, SABB is also the local subsidiary of HSBC, giving it a competitive advantage as the most international bank offering. The bank is a leader in cash management, trade finance and also private banking, with a strong commitment to cater to the needs of the next generation of high net worth individuals in one of the world’s fastest-growing wealth management markets. In 2020 the bank’s Premier customer base grew 9.3%.
The bank is a local leader in financial innovation. In 2020, SABB participated in the Saudi Central Bank’s Instant Payment Service pilot project to accelerate financial transactions between banks. The bank has several digitization projects in the pipeline, including cutting edge technologies such as customer biometrics and blockchain (Ripple).
Mashreq is our 2021 Best Bank in the United Arab Emirates (UAE), an award it previously won in 2019. Although the bank is not in the national top three when looking at total assets, market share or share of deposits, the largest local private bank in the UAE makes a difference when it comes to innovation and scaling abroad.
While oil prices are plummeting in the Middle East, Mashreq sees investment banking opportunities in foreign emerging and frontier markets. Moreover, it has demonstrated a capacity to make it work not only for itself but also for regional investors. In 2020, 32% of the bank’s total deals originated outside the region, with 67% liquidity in those deals tapped from investors in the Middle East and North Africa region. Mashreq closed $6 billion worth of deals in Asia, $1 billion in Egypt and $700 million in Africa where it is the number one GCC based bookrunner. Already a leader in innovation and new technologies, Bank Mashreq accelerated digital onboarding and paperless transactions during the pandemic.
This year again, the National Bank of Kuwait (NBK) is our winner for the Best Bank in Kuwait. Despite the pandemic, NBK was able to report positive results, with $821 million in 2020. With 36% market share, NBK is a leader at home and one of the region’s highest-rated lenders. The bank is in the process of growing its private banking and wealth management operations in Saudi Arabia while at the same time carrying out retail expansion in Egypt, the region’s biggest market, with a population of over 100 million.
Isam Al-Sager, NBK Group CEO, attested to the staff’s “efforts to provide an exceptional banking experience to its customers, despite the unparalleled economic circumstances wrought by the Covid-19 pandemic.” NBK signed several partnerships with local fintechs to develop new products and services.
Community engagement was key in 2020, and the bank showed its commitment with donations to several regional pandemic and humanitarian relief funds. “We provided support and will continue to work closely with governments, regulatory bodies and other stakeholders in order to continue contributing to economic growth and development across all the geographies where the bank operates,” adds Al-Sager.
Once again, the Best Bank in Bahrain award goes to Ahli United Bank (AUB). The biggest lender in Bahrain, with $40 billion in assets, showed solid results despite the pandemic, thanks to its prudent and regionally diversified business model. AUB reported the country’s biggest profits in 2020 with $452 million, a 38% drop year-over-year compared to 2019’s $730 million. Return on equity remained high at 10.4% (compared to 17.7% in 2019) and return on average assets stood at 1.2% (from 2.1% in 2019).Adel El-Labban, group CEO and managing director of AUB, credits the bank’s “solid underlying fundamentals, continued resilience and strong performance even during one of the most unprecedented and challenging years.”
AUB operates 150 branches in Bahrain and also in Kuwait, Egypt, Oman, Iraq, Libya and the UAE. Most of the bank’s profits originate outside its home market, making AUB a fast-growing regional player. Offshore operations abroad might become even more important as AUB is looking to expand operations in Saudi Arabia and more importantly, merge with Kuwait Finance House to create one of the world’s largest Islamic banks, with over $100 million in assets. The acquisition has been postponed due to Covid-19. During the year, AUB demonstrated community engagement, donating over $4.7 million to support humanitarian efforts in Bahrain and the region.
Since 2017, Global Finance’s 2021 Best Bank in Oman award goes to Bank Muscat. With $32 billion in assets and 35% market share, the bank clearly outperforms competition in its home country. In 2020, net profits amounted to $424 million, a 12% drop from 2019; but the bank remains strong. Customer deposits grew by 4% over the same period.
With a forward-looking stance, the bank looks to build strength in ESG for a more sustainable future, while investing in technology to help get there. During the pandemic, the bank increased its online presence and digital offerings, with the volume of mobile transactions soaring 43% in 2020.
Throughout the year, Bank Muscat’s investment banking arm also played a key role in structuring the sultanate’s international bonds and sukuk issuances. In the fast-growing segments of private banking and wealth management, Bank Muscat can count on strategic tie-ups with international banks. By revisiting its medium-term strategy and business plan, the bank has been successfully building on its customer-centric vision, sustainability and readiness for the future while maintaining market leadership.
“This award is a strong validation of Bank Muscat’s continued leadership position in financial services and its pioneering sustainability and CSR (corporate social responsibility) programs in Oman,” says Sheikh Waleed K. Al Hashar, CEO.
This year’s Best Bank in Qatar goes to Commercial Bank of Qatar, an award the country’s third-largest lender by assets had previously won in 2018. Commercial Bank is involved in major infrastructure deals for the upcoming 2022 World Cup and has demonstrated outstanding leadership during the Covid-19 crisis. The bank is also a leader in trade finance, digital banking and innovation. In 2020 it launched a brand new Corporate Mobile Banking app.
“The pandemic presented both a challenge and an opportunity to demonstrate resilience and provide our clients with world-class banking services, particularly in the digital field,” comments Commercial Bank Group CEO Joseph Abraham in a public statement. “The investment we have made in our business under our five-year strategic plan meant that Commercial Bank was able to swiftly adapt to the new operating environment and was well placed to capture the fundamental shift in customer behavior towards digital that was accelerated by Covid-19.”
In North Africa, our choice for Best Bank in Egypt 2021 goes to multiple-time winner Commercial International Bank (CIB), the country’s biggest private sector lender and third-largest bank in assets.
Praised by industry experts as the most forward-looking local player, CIB’s growth strategy is based on data analytics, technology and human resources. The bank has its own innovation lab, venture capital fund (CVentures) and a 23% stake in the country’s biggest e-payment platform, Fawry. In late 2020, CIB launched its “bank of the future” program to further enhance digitization. A local leader in CSR and green finance, the bank is expected to issue Egypt’s first corporate green bond in 2021.
This award also takes into consideration CIB’s expansion in sub-Saharan Africa through the opening of an office in Ethiopia and the acquisition of a 51% stake in Kenya’s Mayfair Bank in April of last year. As Egyptian banks are increasingly looking at opportunities abroad, CIB chose to target East Africa through corporate and wealth management.
This year’s Best Bank in Palestine award goes to The National Bank, the country’s second-largest banking group with $2.7 billion in assets. Set up in 2012, the bank is growing fast thanks to a diversified portfolio, strong focus on digital banking and several mergers and acquisition deals both at home and abroad. In July 2020, National Bank acquired the Jordan Commercial Bank’s Palestinian operations. During the pandemic, the National Bank was a partner of choice for international institutions sending funds to support Palestinian small to medium enterprises, notably a $50 million aid package from the European Investment Bank.