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Stepping into a new age of smart customer banking
Mashreq's consumer arm profit is expected to hit the Dh2.5 billion mark in three years
- PUBLISHED: Wed 30 Jul 2014, 10:08 AM UPDATED: Fri 3 Apr 2015, 7:26 PM
Shaker Fareed Abdul Rahman Zainal, mashreq’s head of distribution, says the fundamental outlook for the banking sector is healthy. — Supplied photo
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The fundamental outlook for UAE banks is expected to continue on its trend of improvement in second half of the year, with loan and deposit books growing, profitability improving and troubled assets declining for the sector as a whole, says a senior banker.
Shaker Fareed Abdul Rahman Zainal, head of distribution at mashreq, said soundness indicators of the UAE banking system have further improved this year with strong improvement in capitalisation levels, increase in profitability and further easing of liquidity situation.
“The banking industry is in the best shape as it’s been for the past 10 years. Capital adequacy ratios are good at around 20 per cent, twice the world requirement and non-performing loans (NPLs) have decreased considerably, Zainal told Khaleej Times during an interview.
“With the foreseeable launch of Al Ittihad Credit Bureau, we will see a uniform system of credit analysis for the country’s growing millions of bank customers, which is designed to rein in the personal spending excesses that proved so painful in the financial crisis of the yester years,” he added.
Mashreq is one of the UAE’s leading National Financial institutions and the second oldest. Founded in 1967 as Bank of Oman, the bank has played a pioneering role in the industry, particularly in retail banking. Among its many firsts, it was the first to launch such products as travellers’ cheques, credit cards and ATMs.
Reducing cost
Zainal said the other big feature of the UAE banking industry is the continuing battle to reduce costs in pursuit of healthy cost-income ratios, perhaps the key indicator in the banking industry. That stands at a healthy 35-40 per cent at the moment, and the trend is downwards for the year which is excellent, he said.
Last week, the bank reported a 40 per cent surge in first-half net profit at Dh1.16 billion while its year-on-year cost efficiency ratio improved by 7.4 per cent to 37.2 per cent. The bank’s capital adequacy ratio and tier 1 capital ratio continue to be higher than the regulatory limit and stood at 16.1 per cent and 14.7 per cent, respectively, at the end of June 2014.
“At mashreq, we have evolved — moving away from bank buildings with brick and mortar only. Banking has now become paramount of an institution that takes care of our customers’ needs, where relationships are built and maintained… where we are using technology to serve our customers better…”
While commenting over mashreq’s first-half results, he said the bank has continued to demonstrate its success amidst uncertain banking environment and a global economic slowdown and it is evident with multiple industry awards and recognition over the past 12 months.
“These results build confidence and are usually indicative of the year ahead. We have worked hard to make sure that our performance matches our aspirations and the bank’s true potential,” he said.
Consumer banking profit
Zainal said profit in the bank’s consumer arm is expected to rise to about Dh1 billion ($272 million) in 2014 from Dh450 million last year, and jump to Dh2.5 billion in three years. An increase in credit and debit card payments in the UAE, where Mashreq is both an issuer and a manager of payments, is also helping, along with the growth in wealth management and lending, he said.
“These results are indicative of the strength of the mashreq brand, products, services and its people and I expect financial results to be better than analyst forecasts,” he said.
About the bank’s business growth strategy in short term or medium term, he said the bank aims to support its customers through whatever they may need.
“At Mashreq we aim to hold on to our customers through generations of customers if you will. And we’ve invested specifically in universal reward programmes that allow the customer to get something back along with digitization of branches and product such as Mashreq Max.
“Dubai was created on the back of trade, mashreq was created on the back of trade. You have a whole bunch of countries within the region that have growing trade ties with the UAE. This is what Mashreq leverages.
“We have a presence in over 12 countries at this point in time. Moreover, the prowess that we have in retail banking in the UAE, being the leading retail banking presenter of financial services in this market, we aim to leverage that capability, that skill set, that management team into other neighbouring countries that throw up big retail opportunities.”
Mashreq presence
Zainal said mashreq is one of the UAE’s leading financial institutions with a growing retail presence in the region including Egypt, Qatar, Kuwait and Bahrain.
“We focus on providing our customers access to a wide range of innovative products and services. Our branch network extends across the UAE with one in every two households in the UAE banking with us. We also have customer service centres in key retail locations and one of the largest ATM networks in the country.
“We also have 12 overseas offices in nine countries, including Europe, US, Asia and Africa. We are planning to open six more branches in next two years and mashreq has presence in all seven Emirates in the UAE.”
To a question, he said mashreq has 48 branches and it has a huge customer base. “If we keep increasing our branches to cater with growth, the economies of scale get disrupted. So a win-win situation emerges by catering to emerging and futuristic consumer needs by investing in the digital stream,” he said.
Smart banking
Zainal, an industry veteran of 13-year experience in banking and finance industry, said smart banking in mashreq is usually termed as EQ: engage, experience, and evolve. “Our investments in technology are many fold, but the most notable of them relate to what we’ve done with our branches by creating Smart ECube branches. We have four of them already, and plan to have 10 of them before the first quarter of next year is out.”
In these smart branches, he said customers engage with digital wall screens, where they explore services that the financial institution has to offer by hand gestures. When they walk into the branch, they have access to smart tablets. There’s no paper on the telecounter, the transaction is punched in through tablet, the transaction goes straight to the telecounter where the consumer goes and consumes the transaction.
“If the consumer seeks advice, he walks up to a relationship manager. Microsoft aids smart tables instead of normal wood furniture and the relationship manager actually takes the customer through many simulations. That simulation can be fitted into the customers’ needs in terms of affordability, return, yield, etc,” he explained.
Banking with quality, speed
To a question about banking sector outlook in the UAE, he said: “I think banks will become more customer and retail service oriented. The underlying products are more or less the same. In tomorrow’s world the competition will be won or lost by the quality, speed and effectiveness of the onboarding and after sales customer service.”
He said the second aspect will be the quality and extent of customer lending. There will be no more over lending and fewer customer defaults. Banks will be advisors to customers, in sync with the relationship management through the customers’ lifecycle, he added.
And finally, he said Emiratisation will be increased to more senior levels. “I think you will find more and more senior positions being held and offered to Emiratis who are well connected, experienced and have ability to deliver the required results.”
About major challenges, he said: “Fundamentally, we’ve got changing consumer behaviours. Customers are moving significantly and fast towards digital channels. Funding and liquidity pressures remain in the banking system.”
He said the rising cost of domestic deposits in a competitive market and reduced access to the international debt capital market are also major contributors to the challenge in fueling the banking sector with resources to match the ambitious development plans of the country.
“Finally, a very positive step forward for the UAE is the emergence of the credit bureau in the country,” Zainal concluded.
