Abu Dhabi Islamic Bank (ADIB) plans to expand in North Africa as the lender seeks to access more-populous markets.
The bank applied for licences in Algeria and Libya and is considering Tunisia and Morocco, chief executive officer Tirad Mahmoud, said in an interview.
"We are seeking to expand in nations with "a critical mass in terms of population and economic activity,” Mahmoud said. The bank wants to be better placed to serve companies, such as Dubai-based mall operator Majid Al Futtaim, which operate across the Middle East and North Africa and rely on global lenders such as HSBC Holdings and Citigroup, he said.
Peers including Doha-based Masraf Al Rayan said in February it plans to buy into a Libyan lender and convert it into an Islamic business.
Lenders are pursuing new markets to explore growth opportunities outside the country and region. Since 2008, ADIB has moved into countries including Saudi Arabia, home to about 28 million people, Egypt, whose population exceeds 80 million, and Sudan, Mahmoud said. Islamic financial assets could double to as much as US$3 trillion by 2015, Standard & Poor's forecast last year.
"Regional companies, when they choose their banks, choose those that are present in all their key markets and they give them regional mandates in working capital management, trade, and foreign-exchange flows,” he said.
Libya, where almost all of the 6.6 million people are Muslim, has no stand-alone Islamic lenders, while Tunisia passed a law in July to allow Sukuk sales to boost Sharia-compliant banking. Morocco and Algeria plan to expand their Islamic banking businesses and are drawing up plans to sell Sukuk.
"The population in these countries want Islamic banking and the Arab Spring has increased its acceptance,” Geert Bossuyt, chief executive officer of Dubai-based consulting company Khalij Islamic, said. "I'm not surprised either that the GCC banks are taking the lead in entering these countries because you need to have banks with experience and deep pockets,” Bossuyt said.
Emirates NBD bought BNP Paribas's Egyptian unit in December, the same month Qatar National Bank SAQ agreed to buy Societe Generale SA's Cairo- based subsidiary. Abu Dhabi Islamic-Egypt is the country's fifth-biggest publicly traded bank.
"International expansion usually coincides with lower profitability because you are entering markets you don't know,” Jaap Meijer, director of equity research at Dubai-based Arqaam Capital, said by phone. "We are not always thrilled by banks expanding beyond their own borders, particularly if it's a greenfield expansion, because the pay-out is quite slow.”
Longer term, economic growth in North Africa will benefit banks, especially in resource-rich countries such as Libya and Algeria, Skouridou said. Domestic business is picking up as the UAE recovers from a property-market crash. Bank lending in the second-largest Arab economy expanded 5.2 per cent year on year in May, double the growth rate at the end of 2012, according to central bank data. ADIB's second-quarter profit increased 15 per cent, the fastest in more than a year.
Source: Khaleej Times