National Bank of Fujairah, or NBF, is upbeat on its commercial banking business and is confident in sustaining a strong double-digit growth during the next three years, a top official said.
The lender plans to target small- and medium-sized enterprises, or SMEs, to secure more business and is ready to support companies and individuals through its tailor-made facilities.
"NBF expects its commercial banking business will grow by 20 per cent to 25 per cent, year-on-year, over the next three years,” Rehan Ali, head of commercial banking at NBF, told Khaleej Times in an interview.
He said that the bank's growth momentum has continued into the first quarter of 2013, with net profit jumping 41 per cent to Dh90.7 million. The bank has also improved its total provision coverage levels from 53.9 per cent in 2011 to 79.7 per cent at the end of 2012, with the number hitting 86.9 per cent as of the first quarter of this year.
"Our steady progress shows that we are on the right track, and as the market continues to show signs of improvement, we will continue to grow by focusing on our core strengths in corporate and commercial banking, trade finance and treasury.”
Ali is of the view that a gradual improvement in the credit environment and a reversal in the risk-adverse attitudes of financial institutions has resulted in more liquidity in the market and has left industry experts optimistic that 2013 and the years ahead will augur a more positive period for the banking industry.
Shedding light on the fact that the commercial banking sector was showing signs of recovery after a period of instability between 2007 and 2010, he noted that the areas of concern during the recent financial crisis — slow loan growth and credit constraints — also seem to be declining.
"Risks from stressed assets and problem loans also seemed to be turning around. However, the biggest challenge facing entrepreneurs and small businesses in the UAE continues to be access to funding,” he said.
Support to SMEs
Ali notes that the situation is slowly changing as there are numerous calls to support the SME sector, and that banks are beginning to adopt a more welcoming stance toward such businesses.
"SMEs usually have limited knowledge of the procedures required to obtain funding and this can make the process a difficult proposition,” he said, adding that the bank had taken steps in order to increase assistance to such companies.
According to Ali, it is widely recognised that SMEs form the backbone of the UAE economy.
Official statistics suggest that these businesses make up to 95 per cent of the country's business sector and close to 60 per cent of its GDP. When asked about the different types of services NBF is offering entrepreneurs looking to launch an SME in the UAE, he said that the key focus of their business has been on providing aspiring entrepreneurs with access to tailor-made facilities for their individual requirements.
"One of the biggest challenges we see for companies that are starting out is that they lack the knowledge about the range of financing services available and how these products can help their businesses grow,” said Ali.
Speaking on NBF's allocation of funds to the SME segment, he said that the bank's commercial banking division was among the bank's fastest-growing business segments and that assets stood well over Dh1.5 billion. He revealed that the division constitutes 13.9 per cent of the bank's loan book and was equal to a quarter of its operating income.
Retail, metals business
Ali said that NBF worked to be different from other banks by developing its expertise in niche areas like the precious metals business, as well as expanding this service to include other traded commodities. NBF also enhanced its trade finance proposition by entering into an arrangement with Wells Fargo that will allow the bank to establish a presence in Hong Kong. In addition, this initiative will also enable the bank to support critical trade flows between the Middle East and Asia.
He said that NBF also offers retail banking products for its commercial customers. This offering was developed amidst calls to offer a comprehensive banking experience and provides services that are beneficial for new businesses as it helps them to efficiently carry out their banking requirements.
Ali said the bank recently launched its online banking portal, NBF Direct, which allows clients convenient and secure access to a number of the bank's services. With regards to products, he said that one of the most important services the bank offers companies is the NBF Business Loan, a collateral-free financing arrangement that provides access to up to Dh1 million in funding. It also features flexible repayment terms and Key Man Insurance.
"Despite tough competition from much bigger banks in this segment, NBF has continued to grow successfully. Indicative of our success is the recognition we have received from our clients and the rest of the industry,” Ali said.
"Our strength has been to weather both the difficult and robust periods together with our customers, and this focus of our commercial banking division has never changed. As the competition in this sector continues to increase, this reputation is what sets us apart from everyone else.”
Source: Khaleej Times