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Asia Polls and Awards

Finance in the Middle East Awards 2016

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It has been another testing year for banks in the Middle East. A strengthening dollar abroad, pallid economic growth at home and political instability still flaring around the region have hampered expansion plans and put a squeeze on profits. But some banks have weathered this storm well and have proven once again how resilient the Middle Eastern banking market really is. To recognise the outstanding performances of these institutions, Asiamoney is pleased to announce the winners of our awards for best banks in the Middle East 2016.


Arab Bank

Serving the Arab diaspora since the 1930s, Arab Bank is the most regionally focused financial institution in the Middle East. The bank now has 600 branches across five continents, including a presence in Singapore and Australia. This makes it the largest Arabian banking entity, and the one that is the most deeply embedded in the region’s financial markets.

Having a pan-regional banking group has not been an easy proposition for the last few years, due to the political instability, and the fall in hydrocarbon prices. And yet Arab Bank has managed to maintain its tradition of sustainable growth, through hard times and

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Arab Bank is the standout in the Middle East

good. The bank’s latest results reported that net profit after tax and provisions for the period ending September 2016 came in at $617.9m, a little more than the $615.1m in the same period last year. Loans and advances grew by 3% to $24.4bn against $23.6bn in the third quarter of 2015. Customer deposits grew by 2% to reach $35.5bn compared to $34.8bn for the same period last year. Both loans and customer deposits grew by 5% and 4%, respectively. The bank also recorded a loan-to-deposit ratio of 69% and a coverage ratio of 108% for the value of collateral held against NPLs.

It is this ability to manage the bank effectively through difficult times, while balancing the needs of customers, and shareholders, that makes Arab Bank the best bank in the Middle East.

In its home market of Jordan, the bank has a commanding presence with 119 branches and more than 3,800 employees. It is the largest listed company on the Amman Stock Exchange, representing around 25% of the total market capitalisation. It is the largest trade finance provider in the country, it has an extensive cash management product suite and channel offerings, and it has an extensive corporate loan book for its blue chip Jordanian and international clients.


Ahli United Bank

Ahli United Bank (AUB) is the market leading bank in Bahrain, with profits almost three times those of its nearest competitor. It increased full year profits in 2015 1.3% over those in 2014. And in the first half of 2016, it further increased them 8.2% over the equivalent period last year.

Like all banks in the region, it has been operating in a difficult environment over the last few years. As a result it has adopted a strategy of balance sheet sweating as opposed to rapid growth of its asset base, which has only increased 1.6% year-on-year. Moreover, its NPL rate has declined to a level of 1.8%, while its provision coverage has increased to 182% — both extremely conservative numbers and testament to its prudence.

The bank has undertaken an international expansion over the past year, with the opening of a subsidiary bank in Dubai. Through this bank, it offers the full range of banking products and services — corporate and private banking, trade finance, wealth management and treasury products — to clients based all over the Middle East. It has also further cemented its position in the bancassurance markets, through the acquisition of the remaining 50% it did not already own of Legal & General Gulf. It has now renamed this Al Hilal Life.

The strongest signal of its financial strength is that the credit rating agencies — S&P, Fitch and Capital Intelligence — all give the bank a higher rating than the sovereign. This is extremely rare and is a testament to the bank’s regional and diversified business model.


Commercial International Bank

It has been a turbulent year for Egypt’s banks, with interest rates being hiked by the central bank to defend the value of the pound, only to be followed by a sharp devaluation and the establishment of control-free FX trading. There has been a shortage of

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CIB withstood volatility in the Egyptian pound

international currency to add to the economic woes that the country faces. And yet within all this Commercial International Bank has produced third quarter results that show it has had an outstanding year. It has recorded a record net income of E£4.46bn, ($247m) up 24% from the previous nine-month period last year, from revenues of E£8.2bn, up 10% year-on-year. This has given it a return on average equity of 33.3% and a return on average assets of 3.07%.

Its balance sheet remains strong, despite the difficult environment, with 95% of its funding coming from customer deposits. Its liquidity ratios for local currency and foreign currency are both more than double the central bank requirements. Its total capital ratio was 13.9%, of which 92% was tier one capital.

To the bank’s credit it looks as if its management predicted how the macro and regulatory environment would play out and it has planned accordingly. But the bank has also been client facing during this period of turmoil, and total institutional banking loans were up 5% to E£52.5bn. In the local capital markets, the bank’s brokerage won a 9% market share of trading, while its investment bank completed four transactions this year.


National Bank of Kuwait

National Bank of Kuwait is the oldest indigenous bank in both Kuwait itself and the wider Gulf region. And 64 years after its incorporation, it remains the largest bank in Kuwait, and the leader by some distance in terms of the services it offers its corporate clients.

It presence in East Asia extends from offices in Singapore and in Shanghai. It has regional coverage throughout the Middle East and global banking centres in London, New York, Paris and Geneva.

The bank is a trusted partner to many blue chip clients including the national oil company for whom NBK does all its banking. It also banks some three quarters of the foreign companies that work in Kuwait. It also has a dominant position in the trade finance market.

Its investment banking subsidiary NBK Capital, is the leading DCM player in the country, helping to arrange some $14.6bn of debt for companies since 2005. In the ECM arena, it is also a leading player, even though dealflow has been limited this year. And in M&A it is a trusted adviser to regional blue chip companies when they are looking to divest businesses or acquire new ones.

Due to the adverse operating environment that many banks in the region are facing, NBK has used the past year to shore up its balance sheet, increasing its capitalisation (tier one and two) to 17.2% from 15.7%. It has slowed its new loan growth from around 14% to 4% and increasing its provisions from 300% to 371%. Its NPL ratio has fallen to 1.22% from 1.41%.


Bank Audi

Bank Audi continues to be a source of strength and stability in a country and a region that has faced years of turbulence. Its ability to grow its franchise, while minimising risks and producing excellent profits is a source of considerable pride for the group.

Lebanon produces excellent banks and bankers, but Bank Audi stands out for the sheer professionalism and internationalism of its operations. Indeed, activity outside of Lebanon counts for some 45% of its total assets driven largely by its operations in 10 different Middle Eastern countries as well as Europe.

Within the country, the bank’s franchise is the broadest of any of the banks, with diverse operations across corporate, investment, commercial, retail and private banking via 200 separate products and services. All this adds up to an impressive array of financials.

A total $350m in profits were generated in the first nine months of 2016, a 15% increase on the equivalent period in the previous year. This profit was generated from $45bn of assets and $37bn of customers’ deposits. Indeed, this deposit to asset ratio of 82%, marks it out as a leader where the regional average is around 70%.

It also has excellent liquidity due to its primary liquidity representing around 55% of customers’ deposits. All this has not come through excessive risk taking. With strong collateral and provisioning, the bank has a 3.2% NPL ratio, almost half the average NPL ratio for banks around the world. Having in-built resilience to the adverse trends that can affect banks in the region is the hallmark of Bank Audi’s success.


Attijariwafa Bank

Attijariwafa Bank is Morocco’s leading financial institution and a major player in the wider African banking market. The bank has 3,376 branches across 23 countries. In Morocco, it is deeply embedded in the country’s financial life, not least by being controlled by the investment vehicle of the Moroccan Royal family, SNI.

It excels in several areas for its corporate clients including foreign exchange, derivatives, trading, loan structuring and placement syndication. It has specialist subsidiaries in the M&A, brokerage, asset management and private equity businesses. The brokerage has 30% market share on the Casablanca Stock Exchange. The private equity arm has set up three sectoral funds, while the asset management business Wafa Gestion, is a clear market leader with 75 separate funds sold to both institutional, retail and corporate clients.

It is by far the most international of Morocco’s banks with subsidiaries throughout Africa (Tunisia, Senegal, Burkina Faso, Guinea Bissau, Mali, Mauritania, Côte d'Ivoire, Congo, Gabon, Cameroon, Togo and Niger) and Europe, as well as rep offices in Dubai, Riyadh, London and Shanghai.

It has enjoyed a strong year financially. In the first half, it reported net profit of MD2.49bn ($260m), a 7.9% increase over the same period last year. Its consolidated loan book rose 3.8% to MD264.2bn while its total deposits rose by 5.1% to MD393.6bn. At the same time, it has strengthened its balance sheet through MD1.4bn of extra provisions for the year. Despite this growth and prudence, the bank also manages a return on equity of 15.5%.


Bank Muscat

Bank Muscat is the Sultanate of Oman’s leading commercial bank due to its 35% market share of both loans and deposits. The strength of its franchise is perhaps best seen in the resilience of its balance sheet. Over the past year its deposits have grown by nearly 12% while its loan and other receivables have increased by 8%. It has also seen a 6.5% increase in equity. This strength is matched by its operating figures which show net operating profits after tax increasing by 7.5% to $455m.

This operating success has continued into this fiscal year, with strong quarterly results announced in September, despite the strains on the Omani economy because of the fall in oil prices.

Bank Muscat has the leading equity, debt and asset management franchises in the country, allowing it to take a leading role in the country’s growing capital markets. The bank is also the most internationally minded bank in Oman. It has branches in Saudi Arabia and Kuwait, as well as representative offices in Singapore and Dubai.

Moreover, the bank’s well regarded SME banking business — al-Wathbah — directly supports thousands of small business, especially in the construction, industry, trading, tourism, real estate and services, sectors. The al-Wathbah Business Women’s Forum also helps to promote female participation in the economy through a network of services and connections.


Bank of Palestine

With 66 branches throughout the West Bank and Gaza, assets of almost $4bn and 1,600 employees serving around 780,000 customers, the Bank of Palestine is the largest banking institution in the Palestinian Territories of the West Bank and Gaza.

It is a bank that thrives despite the adverse conditions in which it operates. Now in the third generation of management by the Shawa family, the bank brings the best in global banking to an underbanked population.

It has a strong relationship with the World Bank Group’s private sector arm IFC, which is not only a major shareholder, but has also helped the Bank of Palestine to institute a stringent risk management and governance structure.

The new systematic risk management structure is becoming an integral way in which the bank is being run. The bank’s financial performance has been strong over the past year. In the last quarter for instance, revenues were $127m, leading to profits after tax of $38.2m. These figures are 23% and 18% higher than the same period last year, respectively. Perhaps most impressively, over the past year, the bank has increased its total assets by 55% from $2.76bn to $4.25bn.

Listed on the Palestine Exchange, the bank now makes up 15% of the overall market capitalisation. In terms of its banking services for corporates, it mainly banks SMEs, smaller contractors, and those firms who require some trade finance support. It also participates in larger project loans as well, when they materialise.


Qatar National Bank

Qatar is one of the most outwardly focused countries in the Middle East and so its best bank should be one that is similarly internationally minded. Qatar National Bank (QNB) is the leading bank in Qatar. And it is increasingly seen as a regional

QNB: regional powerhouse

powerhouse, not just a national champion. This transition was further cemented this year when the bank bought Finansbank, one of the biggest banks in Turkey. That acquisition comes after a few years of regional expansion, including the acquisition of QNB Alahli in Egypt and other acquisitions in Jordan, UAE, Tunisia, Libya and Iraq. Over the last two years, the bank has also expanded its footprint in Asia with the opening of representative offices in Vietnam and Myanmar.

All this expansion shows strongly in its numbers. In the nine months up to September 2016, the group booked $2.7bn of profit, an increase of 11% over the same period the year before. Total assets, however, increased by 37% to reach $196bn. Of this total, loans and advances grew by 38% to reach $139bn.

This kind of balance sheet strength is extremely attractive to clients operating regionally, especially corporates looking for investment banking services from QNB Capital, the group’s full service investment banking subsidiary. It also has a leading brokerage operation in QNB Financial Services, and a rapidly growing asset management arm.

QNB Asset Management manages the high performance Watani Funds 1 and 2, that have delivered some 63% and 55% returns since their inception. This year it has also added a UCITS platform, allowing European and Asian investors to access regional and frontier products.


Saudi British Bank

The Kingdom of Saudi Arabia recently announced its National Transformation Programme, which will open the country up for new investment in several new sectors, such as mining, health, renewable energy and education. Some sources suggest that it will bring $267bn of new business opportunities.

For foreign firms looking to establish local banking operations, Saudi British Bank is excellently placed to help them, offering a full range of personal, commercial, corporate, private and Islamic banking; investment, treasury and trade services.

The Saudi British Bank is an associate bank of HSBC, which has a 40% equity stake in the business. With 99 branches based throughout the Kingdom, the bank is perhaps the strongest and best-run banking operation in the country.

For its last full year results, it made Sr4.3bn ($1.1bn) in profit, a 50% jump on its numbers from five years ago. It has seen a similar jump in assets over the same period from Sr138.7bn at the end of 2011, to Sr187.8bn at the end of 2015. The bank has strong credit ratings from the three leading rating agencies (BBB+/A-/Aa3), which testifies to the quality of its asset metrics. It also offers a full suite of Islamic banking products, via the full backing and oversight of an independent sharia committee.


Abu Dhabi Commercial Bank

Abu Dhabi Commercial Bank is a standard bearer for international banking in the UAE. It has a 10.8% market share in loans and

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ADCB is expanding its footprint in the UAE

9.8% market share of deposits. It serves over 690,000 retail clients and approximately 52,000 wholesale clients. Its most recent results show that it has faced a challenging operating environment by building up its financial resilience. For the first nine months of 2016, its net profits were down 16% due to an increase in impairment charges.  However, revenues were up 1%, while costs were down 2%.

It is also in the process of reshaping its flow of business, with non-interest income now comprising 27% of total income. As a result of this, the bank has a return on equity of 16% and a return on assets of 1.66%, both of which are market-leading numbers. Moreover, the bank still has healthy asset quality metrics with a non performing loan ratio of 2.6% and provision coverage ratio of 133.1% as at the end of September.

The bank has a strategic growth plan, that is centred on expanding in the United Arab Emirates, before moving overseas. But it does have a representative office in Singapore, as well as London, and a long established subsidiary in India, serving the needs of Indian nationals working in Abu Dhabi.


Al Baraka Islamic Bank

Al Baraka Islamic Bank is the Bahraini flagship of the Al Baraka Banking Group, which operates throughout the Middle East and North Africa. In Bahrain, the Al Baraka Islamic Bank is the leading Islamic institution, having been at the forefront of the development of the industry since its inception in 1984.

It has pioneered many new products, while also extensively supporting the development of the Islamic banking sector as a whole. These products include the Murabaha, Wakala, Istisna, Diminishing Musharaka, Mudaraba, Salam and Ijarah Muntahia Bittamleek.

The Al Baraka Banking Group has performed strongly this year. In its first half results it reported that total operating income was up 7% to $538m against the first half of last year. Net operating income was up 4%, although total net income was down 5% due to the costs of opening more branches, higher provisions and higher tax charges. The bank’s assets, comprising financing and investments were $19.1bn, while customer accounts totalled $20.4bn.

Islamic banks that do well should be close to their clients, and Al Baraka’s mantra of ‘partners in achievement’, requires the best of international banking technology but also the deepest understanding of Islamic finance products, both of which the bank possesses. Its full suite of corporate and commercial products from Murabaha and Istana to letters of credit and guarantee for trade, are matched by an equally full product line up for individual clients.


Jordan Islamic Bank

Jordan Islamic Bank is the Jordanian Islamic subsidiary of the Al Baraka Group from Bahrain. It is the oldest and largest Islamic bank in the country, having been founded in 1978.

The bank manages to achieve strong growth and customer retention, while at the same time adhering to high standards of shariah compliance and undertaking extensive shariah quality analysis. For instance, the bank has set up an independent shariah oversight function, which strengthens its governance structure. Crucially this has been established separate from the internal audit department.

Despite the difficulties that have beset the Hashemite Kingdom of Jordan over the past year, the bank has grown strongly. It recorded a 19% increase in profits in the first nine months of 2016 over the same period last year. Over the same period, total assets were up by 6.1%, deposits by 6.4% and shareholders’ equity by 6.3%.

Increasingly in Islamic banking having a strong branch network is key, and JIB now has 95 throughout the country with plans to increase this to 117. There have been some questions about the concentration of its business with the public sector, after the government instituted its investment drive. But its asset quality metrics have remained firm and its liquidity provisions are strong. 


Boubyan Bank

Under new control by the National Bank of Kuwait, Boubyan Bank has made impressive strides. It has refocused its activities on building its retail banking activities in Kuwait, while at the same time servicing its corporate client base through the provision of new

Boubyan is rebuilding its retail network

and innovative Islamic banking products. As a result, it is growing quickly and now has a 6% market share of deposits, double what it was five years ago. Alongside the growth in deposits — up 20% in the last year — has come an 11% increase in assets and a 13% increase in loans. The growth in volume has also lead to a 13% increase in profits.

The bank’s product offering also shows that Islamic banks can be forward looking and creative. One such innovation is the introduction of the first mobile banking platform that comes with a biometric touch ID support, as well as the first mobile banking platform on the Apple Watch. It has also introduced new products such as health finance, automousawama, overseas Murbaha, education finance and qard hassan. 

It has also greatly expanded its number of branches up to 37, so that it can get as close as possible to its clients. It has also doubled its headcount over the past five years.

By focusing on growing its domestic retail offering, the bank is making amends for some of the global expansion it undertook before the global financial crisis of 2008. Much of this success can be attributed to the work of Adel Abdul Wahab Al-Majed, vice chairman and chief executive officer of the bank, and the excellent team he brought with him from NBK.


Ali Al-Kuwari, Qatar National Bank

The adverse operating conditions that the Middle East has faced this year — geopolitically and economically — caused most banks in the region to hunker down, focus on building up a defensive balance sheet, keep strict controls on costs and try to eke out more revenue from existing customers, rather than acquiring new customers.

But QNB stands out for proceeding — at pace — with its internationalisation policy. For this, the bank can thank the leadership of its CEO Ali Al-Kuwari. At the helm of the bank since 2013, although a member of staff since 1988, he has pushed through a strategy that aims to see some 40% of the bank’s revenues come from its non-Qatar business by next year. Its biggest deal this year was the purchase of Finansbank, Turkey’s fifth largest private sector bank.

His moves continue the global expansion policy set up by his predecessor, Ali Shareef Al Emadi who was promoted to be the Qatari minister of finance, setting up Al-Kuwari’s move into the CEO position.

Al-Kuwari, takes an active role in the running of the bank’s growing international subsidiaries, including being the chairman of QNB Capital (the investment banking advisory arm of QNB Group) and the chairman of QNB Kesawan, a subsidiary in Indonesia. He is vice chairman of NSGB in Egypt and CBI in the UAE. He is also the chairman of MasterCard Advisory Board for the Middle East and Africa and board member at Milaha and Qatar Exchange.


Nemeh Sabbagh, Arab Bank

Nemeh Sabbagh is one of the outstanding bankers of his generation. He has guided Arab Bank through some particularly difficult years through his technical skills, vision and prudence. As a result, the bank is strongly placed at a time when the region seems to be emerging from the twin problems of geopolitical instability and low oil prices.

Sabbagh has been at the helm of Arab Bank since 2010, but before that he ran BankMed in Lebanon and Arab National Bank in Saudia Arabia and spent a total of 19 years with the NBK Group. He cut his banking teeth in the US with First Chicago and then with the World Bank, starting his career in 1974.

Over the last half decade in charge of Arab Bank he has reduced the cost income ratio from 59% to 44%. He has upped the return on equity from 6% to almost 10%, and the return on assets from 1% to 1.6%. He has reduced NPL ratios and maintained a strong level of capital. He has also deftly handled some potentially difficult legal issues in the US, surrounding anti-terrorist finance cases.

Prudent and measured, Sabbagh has made an outstanding contribution to the banking and finance industry of the whole Middle East region over a near 45 year career. 

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