ABU DHABI/DUBAI: When British banker Michael Tomalin took the top job at National Bank of Abu Dhabi in 1999, the lender had about $9bn in assets — tiny by global standards — and its operations were largely confined to the oil-rich emirate of Abu Dhabi.
Today, NBAD has a presence in 14 countries and assets of about $100bn, and is heavily involved in international businesses such as loan syndications, private banking for wealthy clients, and advising on mergers.
Such change is being repeated across the wealthy oil exporting countries of the Gulf as powerful economic trends combine to strengthen the region’s local banks while humbling their foreign rivals.
It amounts to a shift in the banking industry’s balance of power, which looks set to continue in coming years; NBAD, for example, has said it plans to have a presence in 41 countries across the Middle East, Africa and Asia by 2021, and sees international operations contributing 40 percent of its operating earnings by that time.
“Perceptions have changed over the years. The market recognises we are now a bank with the balance sheet muscle and the intellectual capacity to compete with global banks on level terms,” Tomalin, who retires as chief executive this month, said in an interview.
Operating income at the 32 largest banks in the six-nation Gulf Cooperation Council jumped 74 percent between 2006 and 2012, according to a study by the Boston Consulting Group. Meanwhile, income at their international peers fell 9 percent.
GCC banks such as NBAD are still much smaller than the world’s largest institutions, which each have over $2 trillion of assets, but the gap is narrowing. Assets in the GCC banking sector, two-thirds of them held by the 20 biggest local banks, increased 11 percent in 2012 to $1.47 trillion, estimated QNB Economics in Qatar.
One reason for the Gulf banks’ success is the strength of their home economies, which have ridden out the global financial crisis of the past five years more smoothly than many economists expected, thanks to heavy spending by governments.
High oil prices have given local banks access to huge pools of funds which they can use to expand their balance sheets and make foreign acquisitions.
The fact that most of the top Gulf banks, including NBAD, are largely state-owned has probably helped them, by ensuring financial security and in some cases, access to business. Expansion of the banks fits in with the national policy of most Gulf countries.
reuters
