The banking environment in the UAE has changed substantially over the last year. Driven by an expansion in the non-oil sector, namely services and construction, a strong momentum of growth was observed in 2014 with GDP growth of 5.2 percent (see Fig. 1). As a result, banks are performing quite well, having posted a considerable growth in assets, deposits and net profits for 2014, and maintaining healthy capital adequacy ratios in the process. Total assets have increased by 18 percent, reaching AED 2.31trn ($628bn) in 2014 and total customer deposits rose by 11 percent, hitting AED 1.42trn ($386bn). These impressive growth figures have been bolstered by the recent regulatory reforms in the UAE and should help to protect the economy, which in turn will secure consistent economic growth in the years to come.
The GCC banking system remains sound, profitable and well capitalised
But despite the overall economy’s positive performance, global oil markets face a new and challenging environment, and with it, UAE banks could face a much tougher operating environment if prices do not improve. The credit gross is likely to drift lower over the years given the expected slowdown in economic activity, leading to reduced scope for deposit growth. Government spending is expected to remain high, as both Dubai and Abu Dhabi have announced planned infrastructure spending, including projects related to the hosting of the 2020 World Expo. Dubai’s successful attempts at diversifying its economy and expanding its global reach makes it less vulnerable to oil price fluctuations, and a boost in business activity is expected in the next few years.
Moreover, a strong dollar, to which the UAE currency is pegged, has helped cushion the impact of the fall in crude price. Expansion of the non-oil sector is emerging as the key driver for economic growth, and will help boost overall GDP in 2015.
The GCC banking system remains sound, profitable and well capitalised, and UAE banks have emerged as one of its top performers. Total assets of GCC banks grew by 10.4 percent to $1.2trn in 2014. In comparison, UAE banks witnessed stronger growth in total assets, up 18 percent, reflecting a higher contribution. The focus on raising non-interest income paid dividends in 2014. UAE banks recorded a very strong growth of 30 percent in non-interest income in 2014, while GCC banks have increased their non-interest income by 15 percent last year.
Rising star
“The UNB Group continues to strengthen its financial position, balancing growth with prudent risk management principles in line with the group’s core strategy of consistent growth”, UNB CEO Mohammad Nasr Abdeen told World Finance. “The consistent growth in underlying business, focussed strategy and our deep commitment to all our stakeholders has resulted in record profits with the UNB Group achieving a profit of AED 2.02bn ($549.93m), an increase of 16 percent compared to the previous year.”
The Union National Bank Group, to give it its full title, is one of the rising stars of the GCC banking system, publishing a solid set of financial results (see Fig. 2) with the loans and advances increasing by seven percent to AED 64.1bn ($17.45bn) in 2014 across various economic sectors, while the investment portfolio of the group saw a significant surge, increasing by 47 percent during the year to AED 11.6bn ($3.15bn). The increase in its investment portfolio mainly comprises of high quality fixed income issuances by regional and local issuers. The total assets of the group increased by seven percent in 2014 to AED 93.5bn ($25.25bn) in 2014, with customers’ deposits recording a growth of four percent in the same year.
UNB is a leading bank in the UAE, a position it holds by consistently offering award winning products and services, designed to meet the needs of different customers. As a result, the bank is uniquely positioned with a strong customer centric platform reflected in its tagline: ‘The bank that cares’. Based on the principle of creating value for all stakeholders the ‘we care’ approach is focused on shareholders, customers, employees, business partners, the environment and society.
“UNB’s sustained and strong performance over the years can be attributed to the inspired leadership provided by the Chairman and the Board of the Directors, who fully support the CEO and the top management team in their pursuit towards achieving the business goals”, said Abdeen.
“UNB’s leadership is closely involved in developing, implementing and improving UNB’s management system to support the delivery of its strategy. UNB is successfully moving closer to achieving its Mission [2013-2015], which is to grow shareholder value and maintain financial solidity, through innovation, staff well-being and outstanding customer service.”
Economic success
The bank has received consistently strong assessments by reputed credit rating agencies and enjoys a robust capital adequacy position, which is well above the mandated requirement. It is firmly committed to excellent service and the senior management of the bank have encouraged and championed the adoption of this business framework.
Several leading industry bodies both locally and internationally have recognised the group’s endeavours and achievements in this area, which Abdeen and his colleagues view as a source of recurring encouragement. UNB is a winner of a Sheikh Khalifa Excellence Award, as well as the Dubai Quality Gold Award, which makes it the first organisation to win these two impressive accolades simultaneously. Not only that, but it has garnered praise from within its industry, helping to affirm its strong and stable reputation as a market leader.
Since its inception, UNB has played an active part in contributing towards the economic success of the UAE led by its truly visionary leaders who have ensured continued prosperity and economic growth for the country. The bank has pledged to continue with investment into technology and infrastructure for the provision of technologically advanced and secured services to its customers. During the year 2014, the core banking solution available across the group entities was extended to the overseas branches in Kuwait and Qatar. It also received the ISO Information Security Management Systems (ISO 27001:2013) Certification Audit for all its UAE offices including its subsidiaries. And UNB continues its efforts to support the corporate and retail business through its innovative product offerings and its commitment to provide superior customer service. Not only that but the bank has been growing its franchise, especially in areas like SMEs, Islamic financing, brokerage services, structured finance and private banking.
Responsible ethos
The bank has always been a responsible corporate citizen and supported development at the local and international level. Corporate social responsibility (CSR) is a key area of focus for UNB and is intrinsically embedded in the bank’s vision and strategy. Therefore, it is committed to making a positive impact on its customers, employees and communities where it operates, with a dedicated budget allocated for CSR initiatives each and every year.
“The bank has been consistently supporting CSR initiatives over the years, ensuring that it plays an important and active role as a responsible corporate citizen and plays an active role in supporting the development of the local and international community by supporting various CSR initiatives and projects in different categories such as education, Emiratisation, community causes, special needs, climate change and environment”, said Abdeen.
“As a testament to its commitment and development to CSR, UNB has recently become the first bank to be verified to follow the guidelines of ISO 26000 by Lloyd’s Register Quality Assurance (LRQA). UNB received the ISO 26000 Statement of Implementation certificate after an extensive evaluation process that included gap analysis and multi-stage assessments.”
Some of the key initiatives UNB sponsored during 2014 include supporting the Egyptian Ladies Association fundraising dinner, with the proceeds from the event given to children with cancer in Egypt and Arab countries, as well as the sponsoring of the 10th INSME annual meeting and forum, which took place in Abu Dhabi in March under the theme ‘Investing in Innovation: Building a Sustainable Knowledge-based Economy’.
The bank even worked with Burjeel Hospital and hosted a special lecture for UNB staff to raise awareness about breast cancer and organised ‘The Pink Bake Sale’, where UNB employees baked and sold homemade sweets to raise funds for breast cancer initiatives and charities.
UNB’s strategies have always focused on three key areas: providing best customer service, nurturing its employees development, and being innovative while maintaining financial solidity and growing shareholder value. These three areas are aligned with the bank’s mission objectives, helping the organisation thrive. The Abu Dhabi Economic Vision 2030 sets targets outlining the intended strategy for economic development, identifying key resources to be developed and core policy reforms to be implemented. And the bank remains committed to continue to contribute and support the growth of the UAE economy in its journey to make it one of the best countries in the world.
