#187 - September 2016

IN ASSOCIATION WITH

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SEPTEMBER 2016 | ISSUE 187

Onwards and upwards

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Hisham AlRayes, CEO, GFH Financial Group

10 Keeping up with constant change

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38 Sophistication in investments

42 Reaching the masses

Dubai Technology and Media Free Zone Authority

Onwards and upwards Hisham AlRayes, CEO, GFH Financial Group

“The MENA region reflects a lot of challenges, yet at the same time, I like to see them as opportunities.”

50 Staying relevant

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CONTENTS

SEPTEMBER 2016 | ISSUE 187

Editor’s Letter

E

10

18 6

32

News analysis Market movements: ECM, DCM and M&As

8

News bites

THE MARKETS 10 Keeping up with constant change 14 A vision for Saudi Arabia’s future COVER INTERVIEW 18 Onwards and upwards COUNTRY FOCUS 24 Exploring Palestine FAMILY OFFICES 26 The Middle East backdrop RETAIL BANKING 32 Beyond digital SUSTAINABLE INVESTMENTS 38 Sophistication in investments

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Onwards and upwards Hisham AlRayes, CEO, GFH Financial

10

GCC bond markets akin to Latin America

24

44

the gatekeepers Financial centres: of untapped opportunities

Balancing the scales

Zone Authority

Get the next issue ofEast Banker Middle before it is published.

Full details at: m www.bankerme.co

48

and Media Free

Saudi Fransi

ATM Channel Payments Roundtable

Peter England, CEO of RAKBANK

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Dubai Technology

Saudi Fransi

BankerMENA

nes, Group CEO of Banque Patrice Couveg

10

Expected headwinds for GCC banks

28

Challenging times ahead for Turkey

46

Creating opportunity in adversity

52

Servicing a massive labour market

Dubai Technology and Media Free Zone Authority

Group CEO of Banque

Editor

Achievemenet of a lifetim

“The MENA region reflects a lot of challenges, yet the same time, I like at them as opportun to see ities.”

Onwards and upwards

Hisham AlRayes, 10 Keeping up with

constant change

38 Sophistica tion

in investments

42 Reaching the masses

Get the next issue Banker MiddleofEast before it is published.

Full details at: www.bankerme.com

50 Staying relevant

Get the next issue of Banker Middle East before it is published.

CPI Financial

Full details at: www.bankerme.com Follow us on Twitter: @bankermena

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CEO, GFH Financ ial Group

Zone Authority

Group

Couvegnes, a lifetime Patrice

“From my experience over the years, if you get the service right, the sales will come.”

and Media Free

Balancing the scales Peter England, CEO of RAKBANK

Achievement of

is in a unique “I believe that BSF on the new position to leverage Saudi economic context.”

Braving uncertainties market in the Lebanese

| ISSUE 187

ISSUE 185 JUNE 2016 |

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Nabilah Annuar

SEPTEMBER 2016

JULY-AUGUST 2016 | ISSUE 186

Dubai Technology

ven as the summer lull continues, the financial sector hardly rests. Over the past month we’ve seen an array of activities taking place—several corporate finance deals, debt capital market transactions, as well as M&As. In the last few weeks, we’re slowly seeing the subtle effects of Brexit. Although there is no significant impact on this region, the UK is starting to see a flurry of exits from its market.

Apart from that we’ve also witnessed the commencement of the G20 summit earlier this month. The highlights of the meeting included the elimination of excessive banking secrecy; the coordination of policy measures amongst members (monetary, fiscal and structural reform) to boost economic growth; a financially inclusive economic policy by member states; and the feasibility of green financing.

This issue takes a look at current trends developing across the region, encompassing concerns also discussed in G20 summit. In the first section of the magazine we take a look at the implementation on Basel III, as well as Saudi Arabia’s National Transformation Plan.

Our cover story this month (page 12) visits Bahrain, with an insight into GFH Financial Group’s trajectory, its growth pipeline and its future direction.

Our features deliberate on the Palestinian banking system, family offices across the region, the future of retail banking and sustainable investments.

The In Depth section this month brings exclusive interviews with Mashreq Egypt, National Bank of Fujairah and Verifone. Also tackled in this edition are issues surrounding social media presence and human capital.

Loaded with invaluable insights into financial developments in the Arab world, as usual we wish you a productive read.

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CONTENTS

SEPTEMBER 2016 | ISSUE 187

IN DEPTH 42 Reaching the masses 44 Taking a piece of the pie 46 Creating a cashless economy TECH FOCUS 50 Staying relevant 52 Brand consistency and social media

42

46

PERSONALITY 60 Khalid Elgibali, Division President, Middle East and North Africa, Mastercard

LAST WORD 62 Mohamed Abdellatif, Senior Executive Officer, Head of UBP Middle East

60

58 Log on to www.cpifinancial.net for news, polls, events, analysis, blogs, features, commentary and more.

Caring for your career

Looking for a new position in financial services in the Middle East?

Checkt CPI Financial’s Jobs page

ou

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Chairman SALEH AL AKRABI Chief Executive Officer ROBIN AMLÔT robin@cpifinancial.net Tel: +971 4 391 4681

HUMAN CAPITAL 54 The big screen COMPANY PROFILE 58 Jordan Commercial Bank

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Managing Editor GEORGINA ENZER georgina@cpifinancial.net Tel: +971 4 391 3728

Sales Director OMER HUSSAIN omer@cpifinancial.net Tel: +971 4 391 5419 EDITORIAL editorial@cpifinancial.net

ADVERTISING sales@cpifinancial.net

Editor Banker Middle East NABILAH ANNUAR nabilah.annuar@cpifinancial.net Tel: +971 4 375 2527

Sales Director JON DESPRES jon@cpifinancial.net Tel: +971 4 433 5321

Editors SARAH OWERMOHLE sarah@cpifinancial.net Tel: +971 4 391 3726

Business Development NIKHIL NIDHAN nikhil@cpifinancial.net Tel: +971 4 391 3717

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DANIEL BATEMAN daniel@cpifinancial.net Tel: +971 4 375 2526

JESSICA COMBES jessica@cpifinancial.net Tel: +971 4 364 2024

MOHAMED MAKSOUD mohamed@cpifinancial.net Tel: +971 4 433 5320

London Bureau ISLA MACFARLANE isla@cpifinancial.net Tel: +44 7875 429476

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Contract Publishing Editor SARAH SPENDIFF sarah.spendiff@cpifinancial.net Tel: +971 4 391 3729

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Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net Tel: +971 4 391 3719

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Market movements: ECM, DCM and M&As

Photo credit: razihusin/shutterstock.com

NEWS ANALYSIS

The first half of 2016, although sluggish, saw its fair share of interesting deals

T

he first half of 2016 witnessed quite a fair share of interesting deals. The global economic slowdown has inevitably affected both inward and outward investments in the region. According to data from Thomson Reuters (TR), the value of M&A transactions involving Middle Eastern entities that were announced accounted to $18.7 billion in the first half, a decline of 29 per cent compared to the corresponding period last year and was the slowest first six months for deal making in the region since 2014.

Outbound M&A activity was reported to have fallen 22 per cent from the first half of 2015 to reach $9.2 billion, the lowest first half total since 2014. Overseas acquisitions from Saudi Arabia accounted for 42 per cent of Middle Eastern outbound M&A activity, while acquisitions by companies based in Qatar and the UAE accounted for 31 per cent and 11 per cent, respectively.

Domestic and regional M&A activities decreased 22 per cent year-on-year to $6.1 billion, while inbound M&A fell 76 per cent to $809.8 million, a seven-

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year low. It appears to be a consensus amongst major research firms that technology was the most active sector, accounting for 22 per cent of Middle Eastern M&A involvement. “Improving business sentiment and investor confidence is expected to see an uptick in domestic M&A activity during second half of 2016 especially in consumption-led sectors in key markets such as Saudi Arabia and the UAE,� stated Anil Menon, MENA M&A and Equity Capital Markets Leader at EY. The largest deal was the $3.5 billion investment in US-based Uber Technologies by Saudi Arabia’s Public Investment Fund. In the UAE, the market was abuzz with the news of the merger between First Gulf Bank and National Bank of Abu Dhabi as well as Mubadala with International Petroleum Investment Company. Many are in anticipation to see how these two mergers materialise and its impact on Abu Dhabi, as the emirate tries to consolidate its assets.

Debt capital market (DCM) issuances in the Middle East reached $32.9 billion in the first six months of the year, a 45 per cent increase compared to the

value raised during the first half of 2015 and the strongest first half for DCM issuances since records began in 1980, reported TR. Qatar was found to be the most active country in the region accounting for 41 per cent of overall activity, followed by UAE and Oman. International Islamic debt issuance on the other hand increased 10 per cent year-on-year to reach $19.4 billion during the first half of 2016, also the largest first half for issuance since records began.

Middle Eastern equity and equityrelated issuances totalled at $1.1 billion during the first half of the year, an 80 per cent decline from the same period last year and was the slowest opening six-month period for equity capital markets (ECM) issuances since 2004.

There were six initial public offerings, raising $379.7 million, accounting for 35 per cent of first half activity in the region. Follow-on offerings accounted for the remaining 65 per cent of activity.

Dubai Parks & Resorts raised $456.9 million in a follow-on offering in May, the largest equity offering in the region during the first half.

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11/07/2016 11:42

NEWS

BITES

Brexit: No impact in Dubai, as a financial centre CFA Institute, in a global survey of 2000 professionals (with 50 per cent of respondents based in the EMEA region) found that majority professionals in the UAE (71 per cent) believe that Brexit will not impact Dubai’s competitiveness as a global financial centre.

In terms of the relative attractiveness of international financial centres, Frankfurt and Dublin are thought most likely to emerge as ‘winners’ from Brexit, with 69 per cent and 62 per cent of respondents picking them as likely beneficiaries. Most expect little change in the status of financial centres outside the EU, with 82 per cent of respondents expect London to be a loser as a consequence of Brexit.

Wealth in the MEA set to reach $11.8 trillion in five years The Boston Consulting Group in a recent report has revealed that over the next five years, wealth in the Middle East and Africa (MEA) region is set to reach $11.8 trillion, with the UAE, Saudi Arabia, and Kuwait contributing 22.7 per cent of that sum.

Witnessing a robust growth of 10.2 per cent in 2015, UAE’s the growth of private wealth was driven primarily by cash and deposits. UAE is set to show solid growth in the next five years, with the wealth breakdown anticipated to be 19.2 per cent in equities, 12.1 per cent in cash and deposits, and 4.8 per cent in bonds.

UAE draft law on bankruptcy approved The UAE cabinet has approved the country’s draft law on bankruptcy.

The law provides a method for struggling companies to restructure, something which hadn’t previously been possible in the UAE. It contributes in strengthening the financial, economic and legislative system in the UAE, through putting in place a separate law to avoid bankruptcy cases, including financial restructuring, composition procedures, restructuring debts and liquidation funds. Companies and individuals are now able to restructure their debt while avoiding bankruptcy liquidation.

RATINGS REVIEW Entity Abu Dhabi

Bahrain Egypt

Lebanon

LT IDR/LT Rtg (FC) AA BB+

ST IDR/ST Rtg (FC) F1+

B

B-

B

LT IDR/LT Rtg (LC) AA

B B

BB+

ST IDR/ST Rtg (LC) F1+

ST IDR/ST Rtg (LC) AA+

B

B

B

B

B-

B

Kuwait

AA

F1+

AA

F1+

Turkey

BBB-

F3

BBB-

F3

F1+

AA

Ras Al Khaimah

Saudi Arabia Qatar

A

AA-

AA

F1

F1+

KEY

UR

Positive Negative Evolving Stable

Under Review

A

AA-

OUTLOOK

BBB+

B-

AA+

F1

AA+

F1+

AA+

F1+

BBB

AA+

WATCH

Oil-exporting GCC sovereigns to remain pressured in the medium-term Moody’s expects oil prices to remain low, moving within a $40-$60 per barrel range over the medium-term. While it revised upwards its near-term estimated prices for oil ($40/b in 2016 and $45/b in 2017), Moody’s medium-term expectation of ‘lower for longer’ oil prices remains unchanged. The ratings agency expect GCC countries to continue to face economic, fiscal and external challenges.

Moody’s notes that the GCC countries will face some near-term relief from higher oil prices, with narrower fiscal and current account deficits than it previously expected. However, short-term relief could slow the reform momentum in some GCC countries. Institutional strength will determine which countries will be able and willing to forge ahead with tough medium term reforms.

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Middle East witnessing deteriorating credit S&P in a recent report found that the overall sovereign creditworthiness in the MENA has continued to deteriorate in 2016. Covering 13 sovereigns in the region—Abu Dhabi, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Ras Al Khaimah, Saudi Arabia, and Sharjah, the average MENA sovereign rating is now close to ‘BBB’, one notch lower than in mid-2015.

International market volatility— reflecting weaker demand from China, uncertainty stemming from Brexit, and the potential for a change in stance from key monetary authorities on global liquidity—could deter issuers from Eurobond placements for some time. Additionally, deposit growth in GCC domestic banking systems has slowed dramatically from doubledigit growth over 2012-2014 as hydrocarbon-related public-sector entities are the main depositors.

S&P expects Bahrain’s net debt position to increase almost six-fold between 2014 and 2019, Oman’s net asset position to decline by almost 90 per cent and Saudi Arabia’s by 35 per cent over the same period.

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THE MARKETS

Keeping up with constant change Luke Ellyard, Partner, Financial Services at KPMG UAE, provides an insight into the effects of implementing Basel III

I

n 2015, the Central Bank of the UAE (CBUAE) published qualitative and quantitative liquidity management requirements for UAE banks. This is the first part of Basel III that has been addressed by the Central Bank, although other regulations around the capital requirements and leverage ratio are expected to be rolled out in draft form for consultation by the banks during 2016. In summary, these should be: New capital reforms—that will increase the quality and level of required capital and build buffers outside stress periods that can be drawn upon if losses are incurred.

Internationally, a full implementation is planned in the run up to 1 January 2019. The CBUAE has not yet published requirements or a timeline for UAE banks but is most likely to follow the international timeline.

A leverage ratio—that will restrict leverage across the banking sector. Leverage is measured by dividing tier 1 capital by the bank’s average total consolidated assets (the sum of the exposures of all assets and non-balance sheet items).

Luke Ellyard

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According to the international timetable, final calibration should be completed by 2017. The CBUAE has not yet published requirements or a timeline for UAE banks.

Additional requirements for (domestic) systemically important financial institutions (D-SIFIs)— applicable to banks that have an important impact on the domestic financial system and economy. We understand the CBUAE is currently working on criteria to identify these institutions but has not yet announced the D-SIFIs for the UAE. In their recently released Annual Report 2015 the Central Bank stated that “2016 will see the issuance of some important new regulations as well as continued progress on finalising regulations with the intention to consult on and issue these regulations in 2017.”

Specifically they commented that, “In 2015 Q3, the Central Bank developed an implementation programme to begin the engagement process with banks towards implementing the new Basel III capital requirements for banks operating in the UAE from 2016 onwards.”

In relation to the recently released liquidity regulation, the banks have the option to either apply the UAE specific ratios or the Basel III ratios.

However, in order to apply the Basel III ratios the Central Bank’s approval is required after a ‘readiness assessment’ covering both the quantitative and qualitative liquidity risk management aspects and a few banks are likely to be going through this process during 2016. The implementation of the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) is not mandatory, however, it is highly recommended for banks with a (planned) international reach.

In order to implement the new qualitative requirements and comply with minimum required level, cont. on page 12

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THE MARKETS

cont. from page 10

banks must have a deep economic understanding of their internal liquidity risks. Only then can requirements be applied accurately and in accordance with a bank’s size, type, complexity— and the risks inherent in its business activities. This deep understanding is also necessary for the LCR and NSFR, which go far beyond the detail and complexity of current liquidity reporting.

Therefore, the goal of each and every UAE bank during 2016 should be to quickly identify key issues in the setup of its current liquidity management practises and in the compilation of quantitative regulatory measures and to determine development needs in a timely and structured way.

In relation to the expected draft Basel III capital requirements for the UAE, it is important to note that generally the banks in the UAE operate at levels significantly higher than international norms and it is likely that the banks will be able to comply without difficulty with the Basel III capital requirements.

The average capital adequacy ratio for the top 10 UAE banks is of

18

%

—well above the regulatory minimum of

12

%

The Annual Report 2015 also highlighted that “having done a significant amount of preparation work in 2015 the move forward to meet Basel III Standards will significantly enhance the quality of banks’ core capital as well as banks’

The biggest challenge banks face, both globally and in the UAE, is the ever changing regulatory environment…which is putting significant pressure on banks’ operating models, from a revenue and cost perspective.

– Luke Ellyard, Partner, Financial Services at KPMG UAE Even with the current challenging economic environment in 2015, the published financial information showed the average capital adequacy ratio of 18 per cent for the top 10 UAE banks remained well above the regulatory minimum of 12 per cent. In addition the banks have little exposure towards complex securitisation and derivative structures on which Basel III is looking to enhance risk coverage.

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holding of liquid assets”. It further stated that, “overall, the banking sector in the UAE, based on indicators in 2015, remains well capitalised with the average capital adequacy ratio largely exceeding the CBUAE minimum requirement of 12 per cent.”

In relation to the expected draft capital requirements, the Central Bank notes, “Capital adequacy is a key pillar for ensuring the safety and soundness of banks.

The Central Bank currently requires all banks operating in the UAE to comply with the Basel II standardised approach in assessing their regulatory capital adequacy.” In the Banking Supervision Department, the Central Bank has “a team dedicated to ensuring that banks are assessing, planning and reporting their capital requirement in strict accordance with the Basel committee rules.”

In KPMG’s recent UAE Banking Perspectives 2016, the firm noted that the biggest challenge banks face, both globally and in the UAE, is the ever changing regulatory environment.

Basel III is a main component of this, putting significant pressure on banks’ operating models, from a revenue and cost perspective. However, KPMG believes that these new regulatory requirements for UAE banks will mean new challenges but also new opportunities. The banks that most efficiently and effectively embrace these reforms will be better prepared and placed in the long term.

One of the key challenges to implementation is that Basel III is only one part of the puzzle. Basel III is only one element of a fundamental restructuring of the approach to risk and regulation. Each area of change—governance, supervision, market structure of derivatives and customer treatment to name a few— has a separate consultation, debate and implementation phase.

Specifically with regards to the liquidity requirements released in 2015, the main challenges banks face include the set-up of control and governance frameworks, the availability of the required data in existing systems, the organisational and operational structure, documentation and the principle of proportionality, i.e. implementation of regulatory requirements considering the bank’s size, type, complexity and business activities.

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14/09/2016 16:36

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1

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THE MARKETS

A vision for Saudi Arabia’s future Mark Mobius, Executive Chairman of Templeton Emerging Markets Group provides a commentary on the feasibility of Vision 2030

I

n Saudi Arabia, it was clear that one of the biggest issues—if not the biggest issue—in the news was oil prices and their impact on the economy. When oil prices began to decline from their peaks in 2014, Saudi Arabia’s financial health began to face great pressure. Rating agencies downgraded the country’s debt ratings because of the negative impact of the continued low-oil-price environment on its fiscal and external balances.

VISION 2030

This spring, Saudi Deputy Crown Prince Mohammed bin Salman announced the ‘Vision 2030’ plan to end Saudi Arabia’s ‘addiction’ to oil in as little as four years’ time. This marks a very ambitious attempt which is unprecedented in the country’s history.

His idea is to rapidly develop the private sector and service industries so that Saudi Arabia could ‘live without oil’ by 2030. The new programme recognises these historical issues and includes the establishment of an office for the administration of projects.

Goals within Vision 2030 include raising the private sector contribution to the economy from 45 to 60 per cent and cutting unemployment from 12 per cent to seven per cent within

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Mark Mobius

the next 14 years. Some wonder if the scope of the transformation envisaged is possible in a country that has become accustomed to the state providing cradle-to-grave services. With half the state budget reserved for public-sector salaries, shifting even part of the wage bill to the private sector would ease fiscal pressure, but these newly created independent businesses might well choose to cut bloated staff levels, creating sources of unrest.

MARKET REFORMS = WIDER ACCESS

As global investors, of course market reforms are of keen interest to us, and the Saudi Arabian Capital Market Authority has agreed to change some of the rules for foreign investment as part of its efforts to open the country’s capital market under the economic diversification plan. In the past, foreigners were not allowed to make direct investments in the market and had to use Saudi proxies (P-notes) to make investments. Then the door was opened slightly in a QFI (Qualified Foreign Investor) programme, which allows a foreign investor to invest as long as he had assets of at least $1 billion (cut from the original $5 billion).

Also, the prior foreign ownership limit of five per cent of the shares outstanding in a single company will be raised to 10 per cent, which should also encourage wider foreign participation.

One reform includes changing the trade settlement cycle from T+0 to T+2, which means trades (T) that currently must be settled the same day (0) could be settled in two days. Same-day settlement is next to impossible for foreign investors who need to work through custodial banks that hold the securities on their behalf, so this reform should help encourage wider participation. Another reform involves elimination of cash prefunding requirements, which again is disadvantageous for foreign investors who cannot have money tied up in the country waiting for a trade to take place. A further planned change is the introduction of proper delivery versus payment (DVP). Currently, delivery does not take place simultaneously with payment and vice versa, which is quite risky if one of the parties to the deal fails to deliver.

These are certainly positive developments, in our view, and are in line with what has been a gradual market opening. They also set a clearer cont. on page 16

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05/09/2016 09:13

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11/07/2016 09:53

THE MARKETS

cont. from page 14

roadmap to an eventual inclusion in the important MSCI Emerging Markets Index, which in itself will likely be transformative for the index and the emerging-market universe given the large size of the Saudi stock market— one of the world’s largest with a market capitalisation of more than $380 billion. Liquidity is an important factor, and while average daily liquidity of Saudi shares is already high, if more shares are listed, we think the stock exchange would be even more attractive to foreign investors.

Thus, there was considerable excitement upon the announcement of the possible sale of shares in a state oil producer, one of the world’s largest oil companies, as part of the broader economic transformation outlined in Vision 2030. While Prince Mohammed has stated there would likely to be less than five per cent of the company

Tadawul is one of the world’s largest stock market with a market capitalisation of more than

$380 bn

provider to a regulator by spinning off its hospital operating assets. The stateowned flour mill and grain storage company has also been identified as a possible IPO candidate.

Some Saudi officials have expressed reservations about privatising state assets in a low-oil-price era when valuations are likely to be well below what they would have been when oil topped $100 a barrel. Others

Some wonder if the scope of the transformation envisaged is possible in a country that has become accustomed to the state providing cradle-to-grave services.

– Mark Mobius, Executive Chairman of Templeton Emerging Markets Group sold (as early as 2017), the listings, which would be in multiple markets including the Tadawul exchange, could be the world’s largest publicly traded firm and also could generate a short-term cash windfall in excess of Saudi Arabia’s projected 2016 budget deficit of $87 billion.

This has spurred hope of other privatisations, since Prince Mohammed said the government was “in the process of determining additional sectors” that are suitable, including state-run hospitals that would be placed in a holding company and “put forward for an initial public offering (IPO)” as part of a plan to transform the health ministry from a health care

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fear privatisation could encourage crony capitalism, with state-owned champions sold off on the cheap to large investors. Prince Mohammed has quashed such concerns, saying that the IPOs would help distribute wealth and that state companies had over the past decade been listed with cheap valuations to allow Saudis to buy shares, which may rise after the listing.

In this way, the listings aren’t limited to only the wealthiest citizens—more people can take part in them.

OTHER ISSUES

Of course, there are some problems in the Saudi economy that the Vision alone may not be able to solve.

In an effort to control the fiscal deficit, government ministries have been ordered to cut at least five per cent of spending, and delays in payments to firms have created cash-flow problems for the companies as well as worker disturbances, in a country where demonstrations are not allowed. The issue of foreign workers is an important one as well, since foreign workers in Saudi Arabia are estimated to represent between 20 to 30 per cent of the entire population. However, part of the Vision is a ‘Green Card’ system, which aims to address issues with expatriate workers— so the government is certainly aware of these problems and trying to solve at least some of them.

Another issue surrounding the Saudi market is the myriad lawsuits and litigation between property owners and their tenants. The government plans to establish an electronic system to track all property leases in order to identify rent defaulters and have a unified single contract and electronic payment system. This is only part of a reform initiative to make dramatic changes in land ownership, particularly in the major cities where large tracts of land were left idle while there was an on-going housing shortage. Wealthy businessmen and the many members of the royal families hold land without developing it since there is no a penalty for keeping it undeveloped. But now there are plans to introduce a property tax to encourage development of the vacant land, which hopefully would result in more housing for more of the population.

Change does seem to be coming in Saudi Arabia, a country with some interesting paradoxes. It’s our view that Saudi Arabia holds many interesting opportunities for investors, and if its expansive vision proves successful, it could cause economic growth to expand in many different directions—with or without high-flying oil prices.

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14/09/2016 16:38

The integration with internal and external systems and networks is invariably the key obstacle in any payment transformation project.

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31/08/2016 08:34

COVER INTERVIEW

Onwards and upwards Hisham AlRayes, Chief Executive Officer of GFH Financial Group discusses the investment bank’s direction and pipeline moving into 2017, amidst challenging macroeconomic conditions

18 page 18-22 Cover Interview.indd 18

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05/09/2016 09:14

D

escribe GFH Bahrain’s growth trajectory over the past year.

GFH has been able to post resilient results over the last 12 months, augmented by its change in strategy from a pure investment bank to a fully integrated financial group. The Group now has core business operations in commercial banking, asset management, private equity and real estate development.

GFH reported strong results for the first six months of the year ended 30 June 2016 with a consolidated total income of $83.4 million with a 25 per cent increase from 2015 and a consolidated profit of $18.0 million for the period, an increase of 32 per cent from a consolidated profit of $13.7 million for the first half of 2015. Net profit attributable to shareholders for the first six months of 2016 was $11.5 million, which represented a 250 per cent increase from the $3.3 million net profit reported in the first half of 2015.

All business lines of the Group have shown increased performance levels in 2015 and 2016 with commercial banking maintaining a strong increase in profits, real estate development posting profits of $48 million in the first half of 2016 and strong levels of fee generation in private equity and asset management.

Within commercial banking, our subsidiary Khaleeji Commercial Bank (KHCB) saw strong performance continuing, with first half profit before impairment increasing from $13.5 million in the first six months of 2015 to $15.3 million in the first six months of 2016, an increase of 13 per cent. KHCB continued its impressive growth in financing assets, which have grown 25 per cent year-on-year to $1.2 billion. KHCB also posted the highest growth rate in net profit vis-à-vis Bahrain-based Islamic banking peers.

Financial institutions need to create international linkage directly or through partnerships, attracting more liquidity, mitigating geopolitical risk and income concentration.

– Hisham AlRayes The Group also posted strong income levels of $46 million in its real estate development business line through property sales. In addition, GFH will launch its Harbour Row development project in Q3 2016, which will be a mixeduse project within Bahrain Financial Harbour comprising of unique high quality residential units and lively retail elements.

GFH reported a consolidated total income

83.4 million

$

in the first half of 2016 Net profit attributable to shareholders in the first half represented a

250

%

increase from the corresponding period in 2015

Meanwhile, the Dubailand project, an upscale mixed-use development within close proximity to Sheikh Mohammed Bin Zayed Road in UAE, is expected to launch in Q4 2016.

As we develop and execute on our projects, we expect the real estate department to contribute to significant profitability for GFH. Finally, GFH has also targeted recoveries and collection from legal cases and other receivables. The Group was awarded judgements on legal cases during 2015 and 2016 in excess of $150 million, and the focus now is on collection of these judgments. During the first half of 2016, recoveries to the Group from various counterparties resulted in an income of $10 million.

What are GFH’s biggest achievements in the last five years?

GFH has been able to reposition itself strategically over the past few years, and the Group is now primed to take its rightful position amongst the leading financial groups across the GCC. The biggest achievements over the past cycle have been, first, transforming and repositioning its business model from a pure investment bank heavily reliant on the cyclicality of investment banking income to a financial group with core business lines across commercial banking, asset management, private equity and real estate development.

The medium term aim for the Group is to have each business line contributing $25 million to $30 million of profitability by 2019, thereby reducing the Group’s historical reliance on investment banking income solely. cont. overleaf

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19 05/09/2016 09:14

COVER INTERVIEW

cont. from page 19

Secondly is the reduction of overall financing liabilities from more than $1 billion in 2008 to a current figure of $105 million and an overall debt to equity ratio of 15 per cent only, which will remain a testament to GFH’s creditworthiness and very good relationship with its financing syndicates.

Third is the elimination of accumulated losses during 2015 via reduction in share capital, which will place the Group in a position to resume dividend distribution. And lastly is market reaffirmation of the change in strategy and rebranding, which has seen GFH’s stock price rally almost 95 per cent year to date, with the market cap of GFH currently at approximately $600 million.

What challenges do you anticipate moving into 2017?

The asset management and private equity (investment banking) business lines at GFH are reliant on the investment placement activities, which will be correlated to the liquidity available within the wider capital markets and to GFH’s high net worth individuals. Given low oil prices and the overall structural shift within the GCC economies, we might see liquidity tighten and therefore impact our investment banking income. However, the group is mitigating that risk by increasing contribution from other business lines such as commercial banking, real estate and financial services.

Given low oil prices and the overall structural shift within the GCC economies, we might see liquidity tighten and therefore impact our investment banking income and hence expect higher contribution from other business lines and commercial banking.

– Hisham AlRayes, Hisham AlRayes, Chief Executive Officer of GFH Financial Group Following real estate acquisitions in US and potentially the UK, what other plans does the company have in the pipeline? Will these be funded by the $200 million Sukuk GFH plans to issue?

GFH’s impending Sukuk issuance will be intended for repayment of existing financing, as well as acquisition of strategic yielding assets. Some will also be used from our GCC developments and treasury operations.

The group focuses primarily on three asset classes within its asset management and private equity business lines being education, healthcare and retail (shopping malls) both within the GCC region and the US/UK. Those sectors have proven consistently that they can withstand a downturn in

Going into 2017, AlRayes is looking at inorganic growth by way of acquiring other financial institutions. cont. on page 22

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COVER INTERVIEW

cont. from page 20

the economic cycle and continue to distribute high yields.

Due to their defensive nature, we consider consumer driven sectors (such as education, healthcare and retail) to be resilient through both upturns and downturns in the wider economy. GFH is hopeful it will be able to complete on a few transactions in the education, retail and healthcare sectors in the second half of this year.

GFH and Abu Dhabi Financial Group intends to set up an Islamic financial institution on the Abu Dhabi Global Market. What led to the inception of this venture and how would this complement GFH’s current portfolio?

GFH historically developed a niche for itself by creating start-up financial institutions in the GCC region and beyond, which includes Qinvest, First Energy Bank and Khaleeji Commercial Bank. Alongside one of our key shareholders, Abu Dhabi Financial Group (ADFG), we have identified the opportunity to create an Islamic financial institution on the Abu Dhabi Global Market (ADGM), focused on commercial and investment banking, to take advantage of the strong legal framework and regulations in place on the ADGM.

The political and economic situation in the MENA region reflects a lot of challenges, yet at the same time, I like to see them as an opportunities to acquire and undertake transactions at attractive values vis-à-vis three to five years back.

– Hisham AlRayes, Hisham AlRayes, Chief Executive Officer of GFH Financial Group We believe in the medium term that the ADGM platform will be one of the most successful financial hubs in the region, especially given the support of the Abu Dhabi government, semi government funds and investment companies.

Simultaneously, the ADGM is unique in the sense that they are working on providing opportunities for licenced entities to list on ADGM focused platform or via the Abu Dhabi Stock Exchange (ADX), which is likely to provide companies on the ADGM and their shareholders high returns.

GFH is currently a ‘BB’ rated institution. What are GFH’s plans to elevate the company’s international ratings?

The Group is currently rated by both Fitch and Capital Intelligence. GFH has ‘B’ rating from Fitch and ‘BB’ from

22 page 18-22 Cover Interview.indd 22

GFH’s stock price rallied almost

95

%

year to date

The market cap of GFH is approximately

600 million

$

Capital Intelligence. It must be noted that rating agencies stopped rating the Group back in 2008, and the process of reintroducing a credit rating for GFH has been something commendable. As the Group establishes a track record of delivering sustainable returns to shareholders of quality nature, we are confident that the rating of GFH will improve.

However, rating is restricted by sovereign ratings and general regional liquidity crunch.

Looking forward, how do you envision GFH’s growth over the next few years?

Besides the organic growth that GFH has been focusing on in the past few years, the Group is looking at means of inorganic growth by way of acquiring other financial institutions to enhance return to shareholders, access new markets and diversify income contribution. In addition, being listed in one of the most important market in the region (Dubai Financial Market), and with important shareholders like ADFG, we see many opportunities in the market for GFH and its shareholders.

The political and economic situation in the MENA region reflects a lot of challenges, yet at the same time, I like to see them as an opportunities to acquire and undertake transactions at attractive values vis-à-vis three to five years back. The region is still at the development phase and there are still tremendous sectors that need to grow to serve housing, utilities, education and healthcare needs.

There is a big role for the financial institutions to play here, not only from financing or investment prospective, but also in terms of experience contribution and diligence, serving those demands and assisting building better communities. However, financial institutions need to create international linkage directly or through partnerships, attracting more liquidity, mitigating geopolitical risk and income concentration.

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COUNTRY FOCUS

Exploring Palestine Ahmad HajHasan, CEO, The National Bank, Palestine, provides an insight into the Palestinian banking sector, its challenges and the way forward

T

he banking sector in Palestine is a solid market and maintains significant growth rates despite the political circumstances. Over the past year, credit facilities grew by 19.1 per cent while customers’ deposits grew by eight per cent, assets grew by 7.5 per cent, and these percentages are significantly high compared to other countries. There are 16 banks operating in Palestine, amongst which only seven are Palestinian banks while the rest are Arab banks. This makes the Palestinian banking sector a crowded market for a relatively small country.

Given the demographics of 4.81 million in population with a total deposits amount of around $10 billion, this has paved the way for strong competition and innovation amongst banks to increase their market share.

Over the past few years, the Palestinian banking sector has not faced any crisis or bankruptcy, even during the international financial crisis. There were however, some weak banks that merged or went through liquidation without any loss for depositors.

Following the increase of minimum paid up capital for banks in the country, (which was conducted in two phases by the Palestine Monetary Authority (PMA)—$50 million in the first phase and $75 million in the second) many banks have merged together creating a more solid banking system.

24 page 24-25 Country Focus.indd 24

Ahmad HajHasan

CHALLENGES

The Palestinian economic landscape has its exclusive challenges due to the Israeli occupation which has created numerous restrictions on movement and limitations on export and import.

In addition to Israel controlling the borders, it also controls natural resources which results to constraints on land use—65 per cent of the West Bank is an occupied territory and Palestinians are not allowed to make full use of it economically. These factors make the Palestinian economy work significantly below its capacity.

Despite these headwinds, the Palestinian economic activity has received a boost in the first quarter of this year marking 4.2 per cent rate in the West Bank due to private consumption, and 21 per cent in Gaza from reconstruction funds, according to the IMF. The banking sector in Palestine is relatively new, officially established in 1994, after the formation of the Palestinian National Authority. At that time there were two Jordanian banks with limited capacities, as well as one Palestinian bank whose activity was only restricted to the Gaza Strip.

The Palestinian banking sector has greatly developed since 1994, and it is now one of the most stable types of investment in Palestine. The PMA exercises significant initiatives to ensure the development of this sector and formulates strict regulations to keep it solid and sound. Many M&A transactions have taken place in the past few years, leaving only the strong banks to operate in the market.

However, the Palestinian market is still very crowded with banks compared to its relatively small size, which demands greater effort and innovation to compete.

MOVING FORWARD

As mentioned earlier, the Palestinian banking sector is relatively new. Therefore many untapped opportunities exist in various sectors

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18/09/2016 15:03

such as microfinance, SMEs, investment banking and ‘plastic money’. These sectors are still underserved due to a general focus on corporate and retail sectors which form most of the lump sum of banks’ revenues in Palestine.

Banks in Palestine need to focus on improving their banking services by exploiting the benefits of technological revolution and investing more in digital channels that will enhance the banking process for clients and reduce queues in branches. Additionally I recommend that the PMA enhance and develop the Palestinian payment system infrastructure to support growth, efficiency and innovation.

It is also important to develop an automated settlement and clearing system, to increase competencies in the Palestinian banking market. I also recommend adopting a more advanced approach for capital adequacy ratio requirements in accordance with Basel II requirements.

Palestine’s financial industry is solid, and there are still many untapped opportunities for banks. I think we will see the Palestinian banking industry prosper over the next few years, given the fact that banks are now stronger and more solid due to the mergers and acquisitions that took place. In addition, Palestinian banks are taking a step forward by opening new branches and representative offices in the Arab countries to serve the Palestinian community there, which will have a very positive influence over these banks and the banking industry in general.

Local banks will continue increasing their share in the Palestinian market, due to the innovative services and solutions they offer, as well as being more responsive to the market needs and less bureaucratic in procedures, in addition to the important fact that local banks were able to gain Palestinians trust and build a sound image locally and globally.

TNB’s growth

The National Bank (TNB) is currently the second largest bank in Palestine, in terms of paid up capital (a total of $75 million) and the third largest bank in Palestine in terms of assets (marked at $820 million). TNB also has a solid capital adequacy ratio of 17.51 per cent, which is higher than local and international standards. In the past year, TNB has been able to increase and maintain high growth rates—customer deposits grew by 30 per cent, $538.6 million up from $413.9 million in the previous year. Assets have also increased by 20.67 per cent, at $820 million compared to $679 million a year earlier.

Credit facilities portfolio also grew by 34.54 per cent accounting at $401 million, up from $298 million at the end of 2014. We are delighted with these remarkable results and look forward to continuing this performance, a success which would not have been achieved without the public’s trust in TNB. One of the major goals for TNB this year is to grow our market share and secure a position as one of Palestine’s three largest banks. To meet this vision, TNB is planning to implement the upgraded core banking system Temenos T24 by the end of this year, which will help the bank meet the development of its operations and support its ambitious plans from a unique and technologically advanced platform. On the other hand, TNB is planning to open four new branches in dynamic areas in the West Bank this year, to expand our clients’ base, in addition to reaching out to clients through new innovative digital channels. TNB plans to be the first bank in Palestine to develop a specialised savings account for women and is planning to develop more specialised products to meet the financial needs for each segment.

Source: The National Bank, Palestine

TNB-Bank al Etihad partnership

Early last year TNB and Bank al Etihad signed an M&A transaction. This led to TNB’s acquisition of Etihad’s operations in Palestine, and in return Etihad owning a 10 per cent stake in TNB along with one seat on TNB’s board. This transaction also resulted in the increase in TNB’s paid up capital to $75 million—making TNB the second largest Palestinian bank in terms of paid up capital.

The transaction is the first of its kind in the Palestinian banking sector involving the acquisition of a Jordanian bank’s operations in the country by Palestinian bank; taking into consideration the fact that Jordanian banks hold a significant share of the banking sector.

Furthermore, this transaction also allowed TNB to increase its portfolio and market share in addition to growing the bank’s clients’ base. The strategic partnership built with Bank al Etihad opened a regional extension for TNB in Jordan, making Etihad TNB’s correspondent bank there, opening new investment opportunities in Jordan as a new market. This will help us achieve further growth and meet our aspirations. TNB is very honoured to have a well-known Arab banker like Isam Salfiti, Chairman of Bank al Etihad on board, who has decades of experience in our closest market.

Source: The National Bank, Palestine

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25 18/09/2016 15:03

FAMILY OFFICES

The Middle East backdrop Market players discuss the development of family offices in the region and the way forward

F

amily offices are typically set up for investment management purposes. A recent EY report pointed out that the main reason behind this is the ability of family offices to provide governance and management structures that can deal with the complexities of a family’s wealth transparency, helping the family avoid future conflicts.

“Family offices are often split into single family offices and multi-family offices. A single family office is an entity that is dedicated to the providing of services to a single family. Multi-family offices provide services to several families. In its simplest form the family office functions as the primary screening team. The office screens documents and processes before outsourcing to an expert. In general, these teams consist of low-paid, stretched, and badly motivated expat generalists from the Levant. The most successful family offices employ their own experts who are capable of providing full advisory and management services efficiently,” explained Ifzal Akhtar, Solicitor at QualitySolicitors Parkinson Wright who has spent several years working with HNW Saudi Arabian families.

“Earlier development of family offices in the Middle East relates, to a large extent, to that of banking activities of Middle Eastern wealthy families. Until late 70s and early 80s, the banking and therefore, investmentcentric family office activities for the UHNW segment were conducted mainly

26 page 26-30 Family Offices.indd 26

Patricia Woo, of counsel at Squire Patton Boggs

from London while the interface with the family would usually be in Dubai.

Gradually, family offices and private banking activities gained prevalence in the Middle East especially for structuring and implementation of Shari’ah-compliant banking products/ services and investment trusts,” added Patricia Woo, of counsel at Squire Patton Boggs.

She pointed out that a key driver for the receptivity towards family offices is the increasingly stringent and regulated banking environment, resulting in families seeking an

alternative, neutral platform in the form of family offices to serve their best interest. A large number of ‘family offices’ are not under a separate entity or entity which qualifies as single family office in the strictest sense.

Family office activities happen as part of the family business or through such service providers as accountants, lawyers and fiduciary firms. Institutionalised family offices, therefore, are just the tip of an iceberg in terms of the actual volume of ‘family office’ activities taking place in the region. cont. on page 28

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08/09/2016 17:05

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28/08/2016 11:05

FAMILY OFFICES

cont. from page 26

Furthermore, Middle East family offices are not just for Middle East families. UHNW families from other countries, such as Russia, also set up their family offices in the Middle East. De facto ‘multi-family offices’ on the other hand, exist in form of consultants/agencies, helping families to source investment opportunities.

They however might not call themselves ‘family office’ as in the rest of the world.

CHALLENGES

FUNCTIONALITY

A family office enables the management of wealth and assets that may be jointly owned by several families under one roof, keeping operating costs low and centralise management.

Sophisticated family offices that have clear structures and experts on the advisory board can be efficient in cost and profitability and extend their services to include financial planning, tax, philanthropic, strategic, as well as training and succession p lanning services.

“Most family offices are either investment-centric, which make money for the family, or service-centric, which take care of succession planning and other services. For traditional Middle

Ifzal Akhtar, Solicitor at QualitySolicitors Parkinson Wright

Distribution pattern and nuptial arrangements are in place, but family offices would be required for management and implementation,” explained Woo. Traditional Middle East family offices tend to aim for stable return and stick with familiar markets and take longer than their counterparts in the other

Traditionally, UK, US and Switzerland are popular locations for investment by family offices—private investments are usually more popular. MENA family offices have shown keen interest in such sectors as hospitality, commercial real estate, manufacturing, health care and education.

– Patricia Woo, of counsel at Squire Patton Boggs Eastern families, the ratio of servicecentric family offices to investmentcentric family office has been observed to be around 2:1. The demand for service-centric family offices stems from the complexity of family composition, with multiple spouses and a relatively large number of children.

28 page 26-30 Family Offices.indd 28

parts of the world to make investment decisions unless partnering with trusted advisors with long-standing working relationships; while younger generations educated in the West are more likely to pursue alpha seeking investments. They are more ready to adopt the high risk/high return model.

There are several issues affecting family offices in the region. According to Akhtar, they encompassed several things—increased scrutiny, trust fallout, economic pressures and volatility.

Family offices were previously ignored when it came to public scrutiny.

“Confidentiality has been one of the top reasons for having a single family office. However, the level of protection is diminishing when disclosure requirements are stepped up. GCC family offices are affected like everyone else. The trend is to reassess the need for restructuring and adopting structures in mid-shore jurisdictions such as Hong Kong and Singapore to manage the extent of disclosure. For overseas multifamily offices operating in the Middle East, the customary practises, regulatory and enforcement environment could be challenging. They would want a higher level of certainty,” highlighted Woo. “The Panama papers affair have exposed some family offices and in turn some of the family offices were unable to cope with the intense scrutiny. My experience of some family offices in Saudi Arabia are that some of these are not equipped to effectively deal with scrutiny. Some of the offices lack the processes and ability to deal with scrutiny which consequently damages reputation and financial loss,” said Akhtar.

Family offices are generally based on trust. As a result it is not uncommon for family members to operate successful offices without any agreement in place between the members. The risk involved in the absence of contracts may result in disputes between family members which may become complex and protracted, carrying cost consequences and reputational risks.

Furthermore, external pressures contributing to a deteriorating GCC economy will affect how family offices operate. Adverse effects such as cutting cont. on page 30

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FAMILY OFFICES

cont. from page 28

advisory team members may affect the efficiency of the family offices.

These firms will also need a nimble investment footprint to ensure capital and investment strategy is not severely affected by economic headwinds.

Another challenge for family offices is also the protection of its investment portfolio against heightened volatility on equity markets.

PROSPECTS

“Traditionally, UK, US and Switzerland are popular locations for investment by family offices—private investments are usually more popular. MENA family offices have shown keen interest in such sectors as hospitality, commercial real estate, manufacturing, health care and education,” explained Woo.

Until the late

70s 80s and

the banking activities for the UHNWI segment were conducted mainly from London while the interface with the family would usually be in Dubai.

further turbulence with a weakened pound and therefore creating further opportunities. Family offices that are actively seeking to invest in the UK must begin their investment planning now.

The concept of putting everything into a family office box may be a relatively new concept to the Middle East but it is growing in popularity. For a family office to be efficient in its investment stratagem and succession planning its structure must be robust.

– Ifzal Akhtar, Solicitor at QualitySolicitors Parkinson Wright Following Brexit, the weaker British pound is seen as an opportunity for family offices in dollar pegged economies like the GCC. A weak pound sterling means greater buying power for GCC investors. According Akhtar, there is evidence that family offices are already taking advantage of the Brexit situation with agents actively seeking deals for GCC family offices.

In a span of four days following the Brexit result, UK assets became 12 more affordable. Testament to this is the sale of the Grosvenor Hotel by Sahara to potential buyers from Qatar and Saudi Arabia.

Akhtar said, “I predict that upon the triggering of the Article 50 of the Lisbon Treaty the UK economy will experience

30 page 26-30 Family Offices.indd 30

The election of Donald Trump in the USA may also create opportunities in the USA. His election may cause economic turbulence and some investors withdrawing investment from the USA. It will be interesting to see how the dollar reacts to news of a Trump election.”

Asia on the other hand, is a less popular destination according to Woo. However, financial centres like Hong Kong can offer financial and fiduciary services that are at par in terms of service level with London, Paris and Geneva, which are popular among Middle East family offices.

“Most Asian investment-centric family offices whose strategy is not capital preservation aim to achieve

double-digit post-tax IRR and some that adopt corporate debt investment strategies are targeting 25 to 35 per cent. This could provide inspiration to MENA family offices. Asian market is where high growth is likely. Stable return is also offered in markets that are slightly more mature and through investing in investment-grade fixed income instruments,” said Woo.

LOOKING AHEAD

“The concept of putting everything into a family office box may be a relatively new concept to the Middle East but it is growing in popularity.

For a family office to be efficient in its investment stratagem and succession planning its structure must be robust.

This is important for the stability of the family office. A fragile structure based only upon family loyalty threatens to destroy everything that has been achieved by the founders,” said Akhtar.

He further recommends family office members is to seek legal, financial, accounting advice in efficient structuring of the family office and the strategic targeting of investments.

“Established investment-centric family offices with many years of history investing in traditional assets and markets would have a higher inclination in expanding to other areas, but the newer ones are still focused in terms of asset classes and geographic location such as local real estate and infrastructure. It is anticipated that when the newer ones mature, they would also diversify,” added Woo. With the Western educated younger generation taking over or driving the family office set up, diversification and alpha seeking activities would surge.

Therefore, comprehensive, valuecentric model of family offices, which delivers functions of both investmentcentric and service-centric family offices is expected to gain popularity in the years to come.

www.bankerme.com

14/09/2016 17:12

CONFIDENTLY

FORWARD The National Bank, Palestine

tnb.ps

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RETAIL BANKING

Beyond digital Mohammed Areff, Vice President at Avaya Middle East, Africa and Turkey, highlights why banks in the Middle East need to do more with their digitisation strategies if they want to meet the challenges of emerging consumer trends

B

Photo credit: razihusin/shutterstock.com

anks today across the region are embracing digital transformation as they rush to offer digital banking services and enhance efficiency. Yet according to Mohammed Areff, Vice President at Avaya Middle East, Africa and Turkey, banks need to remember the key element to any successful digital transformation strategy—meeting their customers’ needs.

DEFINING CHANGE

“Any transformation wave that happens in any industry is always driven by consumers. Therefore if you want to understand what the next transformation wave will be for an industry, then you have to understand what consumers are asking for today and tomorrow,” said Areff.

For the banking industry, according to Areff, what consumers are overwhelmingly looking for is convenience and a superior customer experience. They want the ability to conduct transactions anytime, anywhere, on the device of their choosing, with solutions tailored to their needs. Those lenders that don’t focus on delivering consistent, comprehensive and deeply personalised experiences will miss out on the full benefit of digital transformation.

“Personalisation is going to become the key trend,” Areff said. “Innovation for innovation’s sake makes no sense

32 page 32-36 AVAYA.indd 32

Mohammed Areff, Vice President at Avaya Middle East, Africa and Turkey

because with any new course of action that you consider, the question to ask is, ‘Does it improve the customer’s experience? Does it make his experience personal?’ People do not want to have their time wasted on things that do not improve their experience—for example when pop-ups come up on a mobile banking application, it may be something that they’re not interested in. When digital banking doesn’t build more positive customer experiences it fails.”

VISION

Banks of course have a major advantage over other companies when it comes to establishing what we are interested in: they have detailed knowledge of our spending patterns. Like to do your grocery shopping every Saturday morning? Your bank probably knows.

What banks are now realising is that they can leverage that knowledge of our spending patterns to deliver better service. Instead of just providing you with a credit card that allows you to cont. on page 34

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RETAIL BANKING

cont. from page 32

pay for those groceries, why not team up with the supermarket and provide you with offers and promotions you might be interested in. Taking it one stage further, if your bank knows you like to stop for a meal on the way home, why not alert you to new restaurant openings in the area.

Banks are re-engineering themselves as next-generation service providers, extending their relationship with customers beyond basic financial transactions to help in every area of their customers’ lives. By cross-selling services and offerings from other companies, banks can provide real value

Photo credit: Florante Magsakay/CPI Financial

What I’m talking about is utopia. It is an extremely high level of service. And for banks to reach this high level of service they have to be extremely intimate with their customers.

– Mohammed Areff, Vice President at Avaya Middle East, Africa and Turkey to consumers, making interactions more engaging and personal – and more lucrative for the bank as well.

“Every organisation – regardless of what industry they are in – is competing for greater wallet share from their customers,” Areff said. “Banks aren’t just competing for customers with other banks; they are also competing for the services they offer to those customers.”

One of the key drivers of personalisation in every industry is the mobile phone. This holds especially true in the Middle East, which has a predominantly young, tech-savvy population and some of the highest mobile penetration rates of anywhere in the world. Banks here are accordingly increasingly focusing

34 page 32-36 AVAYA.indd 34

on delivering mobile solutions to their customers. However, while banks are deploying mobile applications today, they are often just for simple financial transactions, when they could be used for much more, providing customers with truly memorable experiences, and consequentially becoming a key part of banks’ customer retention strategies.

So for instance, a bank could have one mobile application that can be used for whatever the customer chooses—

booking show tickets, hiring a car, or any number of other, similar transactions.

This way, instead of going through 10 different apps, a customer only needs to go to one and channel out from there – which means the bank keeps their attention for longer.

“What I’m talking about is utopia. It is an extremely high level of service. And for banks to reach this high level of service they have to be extremely intimate with their customers,” Areff said. cont. on page 36

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RETAIL BANKING

cont. from page 34

The focal point of contact for every customer to a bank or a service provider is based around the contact centre—this can incorporate voice contact, text, video, online, or even interactions through, say, a kiosk in a mall. Using omni-channel customer experience technology, banks can track a customer’s activity on any channel and register it as part of the customer journey. Based on insights contained in this data, contact centre teams can proactively anticipate a customer’s intentions and instead of greeting them with a generic recorded IVR message, can generate a personalised opener.

What’s more, even before the customer looks for help, smart apps can reach out while the customer is active online or on their banking app, using proactive chat or even offering video interaction.

“I regard the contact centre as an operational customer relationship manager; it is the point to receive all raw data about what the customer wants and needs. The bank needs to have a way to capture all this information and use it to find ways and means to enhance its services to the customers,” said Areff

CHALLENGES

Of course, moving to such an ideal scenario involves considerable challenges.

The main issue in moving towards this concept is the bank’s infrastructure. A bank needs to work with multiple other service providers to deliver the type of integrated offering that can fulfil customers’ everyday needs. Banks with ICT systems and infrastructures based on open standards and capable of interacting with other systems would find it easier to make such a transition. If a bank has a closed system, then it is obviously going to be a lot more difficult.

According to Areff, while there is currently a fair mixture of both open and closed infrastructure systems in the Middle East’s banking market,

36 page 32-36 AVAYA.indd 36

the industry is going to have to work towards adopting open technology standards if it wants to benefit. A bank with proprietary protocols in their system will not be able to interact with other vendors – which will mean that they will miss out not only on being able to offer these types of personalised services, but will also lose mindshare and their customer base to those banks that can.

“The other challenges are intangible—a lot has got to be driven by leadership,” said Areff. “It takes visionary leadership to realise that this is coming up in the future and be prepared for it when it comes. The organisation that takes the lead in this will be able to grasp a bigger market share compared to those who follow. I think visionary leadership is extremely important to be able to drive such an initiative.”

banks by local banks, and between local banks themselves. While acquisition can be a rapid way of growing your customer base, banks here in the region then face challenges in retaining that customer base.

Banks that fail to extend their service offerings are likely to find themselves struggling in future.

Banks today cater to high net worth individuals (HNWIs) by offering a range of personalised services, tailored to their needs. The approach that Areff is advocating would allow banks to offer similar levels of service to all their customers. The contact centre becomes a relationship manager, ensuring that a customer’s desires are being fulfilled, in the same way that a human relationship manager caters to the needs of a HNWI.

It takes visionary leadership to realise that this is coming up in the future and be prepared for it when it comes. The organisation that takes the lead in this will be able to grasp a bigger market share compared to those who follow. I think visionary leadership is extremely important to be able to drive such an initiative.

– Mohammed Areff, Vice President at Avaya Middle East, Africa and Turkey “Additionally, what could help is the culture of banks—inculcating constant innovation in a bank’s culture would assist in this progress as once a bank commences such initiatives they enter into unchartered territory and would need a degree of innovation and dynamism to power through,” he highlighted.

Ultimately for banks, it is about retaining customers. Looking at banks across the region, especially in the UAE, these institutions have been far more aggressive compared with their peers in other regions throughout the years.

Acquisition has been a key strategy for growth, with acquisition of regional

Achieving all this is going to require greater levels of automation, so that banks can anticipate the needs of all their customers. Artificial intelligence is going to become mainstream in the customer experience, along with other technologies, such as biometrics as the de facto authentication solution, according to Areff.

“The ultimate utopia for any individual is that place where I am wellknown, and my needs are anticipated and serviced to the level I desire, while giving me the best value,” Areff said.

“The industry that will gain the biggest wallet share is the one that has it all in one place.”

www.bankerme.com

15/09/2016 08:51

11th Islamic Business & Finance

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SUSTAINABLE INVESTMENT

Sophistication in investments Jane Welsh, Senior Investment Consultant, and Adam Gillett, Sustainability Specialist at Willis Towers Watson discusses the lagging ESG investment habit in the Middle East

S

ustainable investment and environmental, social and governance (ESG) issues are hot topics for investors around the world, but at the same time there is still a lot of confusion among both asset owners and asset managers about what it all means. In a recent survey of asset managers by Willis Towers Watson, their main reasons for the lack of traction around sustainable investment were: asset-owner time horizon, confusion over the terms and a lack of clarity around trustee fiduciary duty in this respect i.e. how they should consider broader societal impacts alongside purely financial factors in making investment decisions. Through our Thinking Ahead Institute, we are working with leading asset owners and asset managers across the globe to explore how we can address these issues. And as they are resolved, sustainable investment is likely to become part of the way we all invest.

Increasingly, asset owners are aware that, in order to generate efficient and reliable long-term returns, they need to consider both the risks and the opportunities created by some global trends including the shift to a lowcarbon economy, an ageing population and increasing resource scarcity.

Ignoring these trends risks unpleasant surprises and missed upside.

Middle Eastern investors are all too aware of these long-term themes. For example Saudi Arabia’s Vision 2030 sets

38

Jane Welsh

Adam Gillett

out how it plans to diversify its economy, invest for the long term and move away from dependency on oil and gas. Many Middle Eastern institutions already consider the impact their investment strategies have on their local economies, and as they increase their investments outside their home markets, they will be assessing both the risks and the opportunities presented by ESG issues.

And they will expect their internal and external asset managers to be able to help them.

It is fair to say that the region is broadly lagged compared to its global peers in the field of sustainability and ESG investing, where Australasia and pockets of Europe and North America have been leading the way.

There is no reason why Middle Eastern investors cannot catch up, and in fact, it could be seen as an imperative that they do in order to be competitive in the global pursuit of sustainable investment returns.

Leading practitioners have tackled the topic of sustainability and ESG systematically, concentrating initially on ensuring it is clearly articulated in the institution’s mission and beliefs.

A fundamental sense of responsibility to members and wider society often forms the basis for a well-considered approach to sustainable investing, and this is a concept that resonates strongly with many Middle Eastern investors.

Following a well-articulated mission, the next step in developing a sustainable

www.bankerme.com

page 38-39 Sustainable Investment.indd 38

05/09/2016 09:17

investment strategy for an asset owner is establishing and codifying investment beliefs. These beliefs can include the view that, as long-term investors, they are well-placed to find ways to benefit from an ageing population, from a world economy shifting to low carbon and from growing resource scarcity.

Investors sharing this belief may want to make targeted investments in areas like green energy, environmentally-sound real estate or invest in listed equity portfolios skewed to companies that will benefit from the long-term trends.

Furthermore, a sense that ESG factors can have material impact on their risk and return profiles and need to be factored into all investment decisions. Investors with these beliefs may want to ensure that their asset managers are integrating ESG thinking into their investment processes.

Additionally, an awareness that effective stewardship through voting and engagement can ensure that companies are well managed for the long term. Investors with this belief will want to ensure that their asset managers have strong voting and engagement processes but may also wish to employ an engagement overlay manager to ensure that their voice is heard in the boardrooms of the companies in which they invest.

So how should Middle Eastern asset owners go about developing their beliefs in this area? We would suggest that beliefs around sustainable investment are developed alongside wider investment beliefs around diversity, risk management and active versus passive management. One way to tease out different perspectives is to survey the members of the board ahead of a face-toface meeting; differences of opinion can then be aired and resolved. This process is rarely completed in a single session and it can take a number of meetings to arrive at a set of beliefs that all the board members can sign up to. This process of settlement is vital to ensuring that

Survey by Willis Towers Watson QUESTIONS: What needs to change for sustainable investment go mainstream?

Vote for the top three 1. Asset owner’s time horizons lengthen 2. Greater clarity over what sustainable investment means 3. Corporates take a bigger interest in this aspect of their pension funds 4. Beneficiaries gain a greater voice in investment strategy 5. Consultants encourage asset owners to do more 6. Cost involved come down 7. Trustee fiduciary duty in this area is clarified 8. More product from asset managers Source: Willis Towers Watson

the beliefs are sincerely adopted and can be effectively embedded with an organisation. It can also be necessary to revisit beliefs periodically to ensure that everyone is still comfortable with them, and that they remain accurate and relevant to the fund.

Some asset owners have signed up to United Nations’ Principles for Responsible Investment (UNPRI) as a way of signalling their intent to raise their game.

This can provide a useful framework for thinking about how to incorporate ESG into their investment arrangements.

Other investors may sign up to local stewardship codes to emphasise their commitment to be effective owners.

Some investors will look to see how their arrangements compare with those of their peers. Highlighting differences can be a very helpful way to start a discussion on future policy. International bodies and collaborative investor groups provide an excellent channel for learning, sharing practises, leveraging experience, and raising the collective standard of sustainable investing.

So how should Middle Eastern asset management firms respond? The asset management community has an important role in helping the asset owners implement their beliefs. Asset managers need to be able to demonstrate how they are factoring ESG issues into

their investment decisions and how they are acting as good stewards of the companies or assets they are investing in through engagement and voting policies.

Increasingly, for both active and passive asset managers, sustainable investment credentials will be an important part of the selection criteria used by asset owners in selecting new firms and new strategies. Their processes therefore need to extend beyond tick-box exercises, and involve careful consideration of the nuances and subtleties of this topic.

Sustainable investing and ESG provide a real opportunity for asset managers to differentiate themselves and help cement long-term, mutually beneficial engaged partnerships with asset owners.

Time to act? Sustainable investment is undoubtedly a priority issue facing investors. It is a difficult subject, but this should not be seen as an excuse for inaction, but rather as an opportunity for asset owners and asset managers alike. Sustainability and ESG will have important long-term impacts on risk and return, but they are also vital levers in each institution’s mission, purpose and unique context. The whole of the investment industry needs to rise to challenge of sustainability, and the increasing pressure from members, sponsors, regulators and industry bodies suggests the time to act is now.

www.bankerme.com

page 38-39 Sustainable Investment.indd 39

39 05/09/2016 09:17

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IN-DEPTH

Reaching the masses Banker Middle East sits down with Shaker Zainal, Head of Retail at Mashreq Egypt, to discuss his strategic vision for Mashreq’s promising Egyptian arm

E

mbarking on a journey with a goal to penetrate all layers of the Egyptian market, Mashreq Egypt has orchestrated a plan, capitalising on its strengths, bringing the bank to each customer’s doorstep.

With a population of approximately 94 million, Egypt’s banked population makes up about only 17 per cent of the entire population—an alarmingly low percentage for a large nation.

Tell us about Mashreq’s presence in the Egyptian market.

Our first Cairo branch opened in 1978 focusing mainly on selective corporate transactions. We began to focus on retail in 2007 and 2008 and opened 10 branches in prime locations in Cairo and Alexandria supported by a full-fledged call centre. Since then our corporate business has been doing very well and our retail arm turned profitable at the beginning of 2015. Branches are key for retail banking so we plan to expand to 15 branches in the coming 12 months with a focus on digital banking, particularly internet and mobile banking. Despite the current market challenges vis-a-vis foreign currency shortfall, effects of a global slowdown, low oil prices and limited foreign investment—we are doing extremely well.

In terms of products, we have quite a few—our ‘Dining Card’ is a market leading product that offers a five per cent

42

Shaker Zainal

cashback offer on dining across Egypt; we have several transactional and saving products that offer different fees structure on transactions and different interest payment options putting the power in the hands of our customers.

We have many lending programmes for individuals as well as our SME customers such as personal loans up to EGP 1 million and small business loans up to EGP 3 million.

In addition to trade and working capital facilities for our big SME customers, insurance is another important need for our customers. We signed with a very reputable name in the field of insurance, Allianz, and

our customers can now enrol in many saving and insurance plans as well as medical, motor and property insurance.

We just launched our famous ‘Mashreq Millionaire’ programme running in the UAE since 1995, giving our customers the chance to win the grand prize of AED 1 million every three months. We are proud to be the first bank to launch a saving scheme in the UAE and we are aiming to replicate this in the Egyptian market. This creates a savings culture in an actively spending market.

We have three main strategic objectives for the coming three years. The first is to focus on the SME segment, which is also aligned with the Central Bank of Egypt’s mandates; and we plan to grow our balance sheet from five to 20 per cent in asset allocation to this strategic segment. Our second critical objective is to focus on our Gold customers, the high-income customers [the middleclass and above]. Thirdly and finally is technological innovation such as digital branches, internet banking, mobile banking, smart branches and customer service as a whole. This is what will differentiate Mashreq from the others.

What are your views of the country’s current economic standing?

There are many initiatives by the government to attract investment including a strong focus on SMEs and on the local economy to promote exports.

www.bankerme.com

page 42-43 In Depth Mashreq Egypt.indd 42

05/09/2016 09:18

The market holds a lot of opportunities for banks as there is quite a large ‘grey’ market, made up of SMEs that are still unbanked. There are approximately 390,000 SMEs in Egypt and they are the engine of growth for GDP as well as exports.

Additionally about 80 per cent of the country’s workforce population is employed in the SME industry.

Therefore by supporting SMEs, the rate of unemployment will reduce and the economy can grow at a faster pace. The SME sector in Egypt requires tremendous support to further assist them in establishing themselves.

There is also a need to educate these businesses on the benefits of banking, attracting them into the system. I think these things will take time but all the indicators right now are positive as the market is improving gradually. There are also initiatives on growing the agriculture and industrial sectors.

Currently we have an exciting proposition coming up, which is to create a solution for Egyptian expats living in the UAE, facilitating inward remittances to Egypt, encouraging savings, and providing better liability products. For example, we’ve recently launched the ‘Mashreq Millionaire’ campaign, a draw to win AED 1 million.

This is targeted towards the middle to lower income bracket.

What are the hurdles of this North African market?

There are several challenges facing Egypt—first is the foreign currency shortage and the restrictions surrounding it; and second is the challenges affecting the ability for SMEs to join the corporate world.

There should be more support from the government for SMEs making it easy for them to establish and grow, although this has improved over the past 12 months. Another challenging issue is attracting talent into the banking sector.

Egypt has a population of

94 million Egypt’s banked population makes up about only

17% of the entire population There are approximately

390,000 SMEs in Egypt

80%

of the country’s workforce population is employed in the SME sector

Presently in the Egyptian market, there is a talent shortage and quite often we search abroad to fill up the various positions we have available.

In addition to these challenges, the level of customer service in Egypt’s banking sector is lagging and we as banks must in our capacity aim to bring a major shift to digital and quick/quality service. Mashreq is positioning itself as a market leader in this area. Studies have also shown that customer service is an important element in gaining more market share. Particularly in a country with a large population and a busy capital, being able to provide alternative channels for customers

via telephone, internet, ATMs and CCDMs will positively assist and accelerate the growth of a bank.

Customer service and technology always goes hand in hand. Furthermore, the global trend is not to open more branches, but to leverage on alternative channels—particularly in the 21st century where internet and social media is an important medium of communication. We aim to provide our customers as many channels as possible for them to connect with the bank.

For instance, we are the first bank in Egypt to introduce the ‘Fawry’ service where our customers are able to pay their credit card bills through a national utility payments system available at any outlet such as in supermarkets, pharmacies, etc.

We aim to expand our payment services at Fawry outlets to include other loan and credit payments to the bank. Through Fawry service as well, we plan to extend the service to Egyptian nationals living in the UAE, enabling them to pay their utility bills in Egypt through our online banking platform.

What are your plans to improve the bank’s performance moving forward?

As previously mentioned, for the next three years the bank will focus on the following main areas in the Egyptian market, namely SMEs and Gold customers as well as Technology.

Seventy per cent of the Egyptian population is already on social media.

We therefore intend to ride on these platforms to promote our bank and products. Our marketing strategy is solely digital, focusing on social media platforms and on the internet.

The bank has achieved a double-digit growth in the first six months of 2016.

Moving forward we intend to continue with our healthy growth trajectory, keeping customers at the centre of everything we do—banking technology transformation and execution in line with the strategy shared above.

www.bankerme.com

page 42-43 In Depth Mashreq Egypt.indd 43

43 05/09/2016 09:18

IN-DEPTH

Taking a piece of the pie Vince Cook, CEO, National Bank of Fujairah sheds light on the setting up of NBF Islamic and his views of Islamic finance in the UAE

Vince Cook

44 page 44-45 In Depth.indd 44

N

BF Islamic was a natural— and timely—response to a growing number of requests we were receiving for Shari’ah-compliant banking services, especially from customers in our home emirate of Fujairah. As we reviewed the potential for this offering, we also saw an opportunity to provide Islamic banking services that complement our existing propositions in our core Corporate & Institutional Banking (C&IB) business.

When we launched NBF Islamic at the end of 2014, our first offering was our Shari’ah-compliant suite of retail banking services in Fujairah. The reason for this limited approach was to allow us to test the waters and determine the appetite for our offering, as well as our ability to provide a service that could compete with some of the larger Islamic financiers. We were also very concerned that the integrity of our compliance with the principles of Shari’ah based financing should be of the highest order. Following its launch and the initial encouraging observations of our Shari’ah board, we were pleasantly surprised with the customer response and it’s safe to say that the business has surpassed our initial expectations.

In turn, we launched Shari’ahcompliant corporate banking services last year and have seen huge demand in the market from companies looking to do business with us. Moving ahead, once we have grown our core business and our market share, we may look to expand into areas such as capital markets. Central to these developments will be our focus on ensuring that our Islamic capabilities reflect our organisational strength in fulfilling customer needs quickly and effectively. This includes implementing systems and building processes to support our infrastructure; as well as investing in the ongoing development of our staff and bringing more industry experts on board.

www.bankerme.com

05/09/2016 09:24

PIPELINE

Since it launched, it has been extremely encouraging to see the strong response we have had for our NBF Islamic offering. We were able to break even within the first year of operation, and will most likely have doubled our initial deposit base sometime this year. Similarly, we were able to grow our Islamic balance sheet in quick order to reach AED 1 billion of financing. In fact, if you look at the bank’s first half results, you will see that our operating income growth has primarily been driven by our Islamic banking business.

We have a full suite of Shari’ahcompliant treasury products now and we continue to grow our retail product base.

On a bank-wide level, investment in technology is a priority, and we continue to enhance our digital channels to improve our clients’ banking experience. We have just launched a mobile banking app and are

NBF Islamic is expected to experience an annual growth of

20% It aims to capture

1-2% share of the market

to see our Shari’ah-compliant business grow and eventually reflect the local banking sector as a whole, with a 75:25 split between conventional and Islamic banking.

temporary phenomenon. Nevertheless our expectations of annual growth for NBF Islamic are still around 20 per cent and we believe we will soon be able to capture a two per cent share of the market.

I think that within the UAE, the demand for Islamic banking has been growing for quite some time as more and more customers in the retail and commercial banking segments— many of them non-Muslims—begin to appreciate its viability as an alternative to conventional banking. As a result, we see that there is demand for the transparency and asset-backed financing that Islamic banking provides, along with the tailored service and innovative products that conventional banks are more recognised for today.

We are well positioned to meet both these needs, as we are able to combine our renowned corporate and commercial banking expertise with our Shari’ah-compliant facilities.

Within the UAE, the demand for Islamic banking has been growing for quite some time as more and more customers in the retail and commercial banking segments—many of them non-Muslims—begin to appreciate its viability as an alternative to conventional banking.

– Vince Cook, CEO, National Bank of Fujairah currently upgrading our online banking service for our corporate and business banking customers. This will see the introduction of new features such as corporate cheque printing. All such developments are now accommodating both Shari’ah and conventional customer needs.

At the same time, continuing to improve our customer service levels will be a priority, as it will enable us to develop long-term relationships with clients that will in turn drive our longterm growth. Over time, we would like

OUTLOOK

It is widely known that the UAE’s retail banking landscape is saturated, and even in terms of Shari’ah-compliant financiers, there are a number of well-established banks in this space.

With this in mind, competition will be one of the biggest challenges we face, although we believe that we can differentiate our offering sufficiently to make good headway. In the short term, the current market environment is also likely to impact our growth aspirations, but we see this as a

In particular, we are able to bring our segmented financing approach that has seen us become the ‘Bank for Business’ in the UAE, through which we look to create bespoke financing solutions for clients by combining our expertise across areas like trade finance and treasury. Additionally, the Dubai government’s efforts to become the capital of the global Islamic economy will certainly fuel the demand for Shari’ah-compliant financing services, which is where we believe we can add value.

www.bankerme.com

page 44-45 In Depth.indd 45

45 14/09/2016 17:22

IN-DEPTH

Creating a cashless economy Ozgur Ozvardar, Vice President and General Manager of Verifone MENA, discusses the electronic payments landscape and the role it aims to play in the region

Ozgur Ozvardar

I

n the Middle East, we assume that 70 per cent of payments are still cash-based. However, we foresee that non-cash transactions will experience high speed growth in the coming years.

Verifone has been a major contributor in the evolution of cashless economies. The company has assisted in enhancing the quality of life for people in the Middle East with smart business solutions such as simplifying payment collections, inducing faster transactions,

46 page 46-48 Payments.indd 46

improving hygiene among users, and reducing bacteria-related diseases that are associated with currency handling.

As a leading technology provider, our main aim is to meet all needs and market requirements of our clients.

Our solutions also help governments prevent unrecorded economy and increase public revenue. Smart and secure payment does not only enable merchants to improve efficiency and customer service, but protects the technology investment.

Today, Verifone devices are largely used by the banks, merchants, government bodies, and corporate organisations to spur in-branch transactions such as deposits, transfers, withdrawals, and value-added services such as bill payments, e-voucher, tax payments as well as general payments.

Serving our clients with many innovative solutions, we develop fixed and mobile hardware solutions that are purposedriven and easy to use for both our clients and consumers. We are at the forefront of introducing sleek, innovative and secure terminals that meet market demands now and in the future. The Verifone brand stands for industrial strength and security and our clients look to us to help protect their brand and reputation.

We are moving into an era of cashless, contactless, effortless and secure digital payments. So, will cash ever be replaced?

Perhaps one day. But one thing is certain, wherever there is payments, in whatever format, Verifone will be there helping its partners navigate acceptance and connected services.

For many people in MENA, cash still comes first and over half of the population are still unbanked. By continuing to educate the market and encourage the right environment for e-payment investments, we can increase acceptance availability and capability to include all types of non-cash payments.

Compared to other developed regions, 70 per cent of the Middle East is still a cash-based economy. This is the main barrier. Many ATM transactions are still for cash withdrawals with people using their cards simply to withdraw their salaries from the machines.

That is however changing fast with the increasing use of cards as a safer alternative to cash. We expect an exponential growth as people in the region are eager for new technologies to make their lives easier, adapting easily to change and new ways of doing business. cont. on page 48

www.bankerme.com

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IN-DEPTH

cont. from page 46

Technology and customer demand is driving change in the payments industry; and Verifone is facilitating this change by providing clients with services and solutions that increase options for giving and receiving payments.

Essentially, consumers are setting the pace for mobile and digital payments, as they feel comfortable with the options offered, whether they are using cards or mobile wallets. E-commerce and digital payments are witnessing a doubledigit growth in the region; and while Europe is still ahead in terms of cashless payment adoption, we’ve seen that once tech adoption takes hold in our region, it tends to grow very quickly.

For the future, you will see more mobility in payment systems. This decade will be the most dynamic and important phase in the history of payments, with the convergence of electronic payments, digital commerce, credit slip analytics and mobility along with contextual marketing, digital advertising, couponing, and social media. Smart phones are now ubiquitous. These smart devices are providing extra value to consumers, and are enabling them to do much more than just make a payment. For mobile pointof-sale (mPOS) solutions to continue to grow, it needs to make life easier and better for consumers and merchants.

Verifone will be right in the middle of this as we provide the tools for merchants and retailers to maximise and leverage the technology-enabled consumer. Our mPOS solutions make life easier and better for consumers and merchants. Our mobile business in the mid-to-large retail segment is growing at a rapid pace.

Our prime focus is to offer multiple solutions to both banking and nonbanking customers. Included among these offerings are our new voucher solutions, as well as bill payment, tax collection, government subsidies programme solutions, and so on.

48 page 46-48 Payments.indd 48

70% of the Middle East is still a cash-based economy

Banks are offering our terminal solutions not only to their large retail customers, but to their customers in the hospitality industry as well as merchants of all sizes in a variety of other industries.

Therefore, I believe that our growth is reflective of other sectors and not simply limited to the retail space.

We recently launched Verifone’s next-generation product line, Verifone Engage. This is the next generation family of payment devices that globally redefines what’s expected of point-ofsale (POS) hardware and software.

It is the result of a new strategy at Verifone to bring unique value to the POS and the consumer experience with intuitive, connected and commerceenabled solutions. We are leveraging the power and performance of our

We witnessed a rapid growth in the number of non-cash transactions in recent years. New technologies in payment systems are welcomed in the region and the adoption rate of new payment instruments is very high. We are expecting this high growth in non-cash transactions to continue in the coming years.

When we consider the huge growth in payment systems in the world, we see a bright future for the industry.

Everywhere in the world we see that the trend is to move from cash to noncash instruments. There are many reasons behind this including security concerns, cost of holding cash, and new technologies facilitating non-cash transactions. With advancement in security technologies such as encryption and biometric authentication, digital payments are attaining optimum reliability and facilitating adoption.

Governments play a central part in enabling societies to move towards cashless transactions. From adapting regulations, to implementing cashless payment options for different government services such as utilities, there is scope for rapid growth when governments are on-board with development.

We are moving into an era of, cashless, contactless, effortless and secure digital payments. So, will cash ever be replaced? Perhaps one day.

– Ozgur Ozvardar, Vice President and General Manager of Verifone MENA open and flexible architecture to bring the interaction between consumers and merchants to a whole new level.

With a two-way conversation that can happen at the counter and anywhere in store, we make the shopping experience more profitable for merchants and more rewarding for consumers. Payments is a dynamic sector and innovation is at the heart. At Verifone, we work hard to innovate and create value for our clients.

Most of the transactions are still cash-based in Middle Eastern countries.

There are significant benefits offered by cashless payment options, such as simplifying payment collections, inducing faster transactions, improving hygiene among users and reducing bacteria-related diseases that are associated with currency handling among others. Cashless transactions improve business transparency and reduces the grave pressure on currency— all things that in the long run will benefit governments in the countries that adopt cashless payment options.

www.bankerme.com

14/09/2016 17:26

Find out why 600 banks chose Find out why 600 banks chose Temenos Core Banking Temenos Core Banking

No.1 No.1 Core banking

Core banking system providers in 2015 system providers in 2015 ¥ ¥ ¥ ¥ ¥ ¥ ¥

Higher return on equity Higher return on equity

Higher return on assets Higher return on assets

31% 31%

36% 36%

Lower Cost / Income Lower Cost / Income

8.6 Points 8.6 Points

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@Temenos

+Temenos

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Core Banking Core Banking Internet Banking InternetBanking Banking Mobile Mobile BusinessBanking Intelligence Business Intelligence Wealth Management Wealth Management Financial Crime Financial Crime

28/08/2016 10:52

TECH FOCUS

Staying relevant Prasanna Venkat Ragavan Jothiraman, Senior Manager— Account Management, Maveric Systems highlights the changing face of automation in times of digital disruption Prasanna Venkat Ragavan Jothiraman

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n the traditional banking setup, technology adoption was always initiated by the bank, the regulator or application vendor, who owned major stakes in the business and were cognisant of its effects. Hence, tech adoptions were well-planned with enough time for implementation and maturation.

In the present digital banking context, changes are precipitated externally and often forced on banks by parties that do not have any direct stake in the banking business; for example, mobile/device manufacturers affecting changes through upgrades in devices, OS, browsers. The challenges posed by these frequent technology changes are more disruptive or influential than even one’s competitors’ moves. Consequently, banks have very little time to adopt to these changes, the mantra being, ‘adapt or perish’.

These changes are also reflected in assurance methodology, where manual testing is no longer of any value. Timeto-market is of utmost importance to banks as it spells the difference between success and failure, which is why testing cycles have drastically reduced and banks are risking go-live without proper testing of the change or regression, often at the cost of business benefits, and without complete knowledge of the risks being undertaken or the stability of the enhancement being implemented.

Consequently, automated testing has become somewhat a necessity than choice in today’s assurance landscape. With the number of tools required for automating

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various components being many, banks often look at adopting five to six different tools each requiring a separate team, with unique skill sets. The costs associated with this approach make it a no-starter with many banks reluctant to commit to the cost.

Also, with the ever-changing technology landscape, there is no guarantee that the tools that have been invested in will be relevant in six months’ time.

To summarise, it can be said that quality assurance (QA) in the digital age does

not depend on one solution/invention or expensive tool investments alone. Maveric Systems have found that given the frequent technology change in the banking landscape, it is far more effective to rely on continuous improvement of existing tools and solutions, expertise in open-source tools, creation of reusable assets, upgrade the assurance team’s technology skills, and of course, willingness to experiment and innovate in order to achieve desired business and technology goals.

The solution The solution to this problem lies not in an entirely new solution or a radical invention, but in an approach that involves collaborating many existing approaches in an innovative and pragmatic manner. If we look at the way transformation projects and digital disruption has shaped the course of assurance in the past decade, we can encapsulate the learnings in the form of the following recommendations to QA experts: 1. Go open-source—adopt and build capabilities around open-source

automation tools to lower costs.

2. Get back to the basics—identify a tool which uses core coding languages like Java or C++ that offer the flexibility to work with an application across different technologies. Not only that, the versatility of Java, C++ will also make the solution, future proof.

3. Go deep—in today’s technology landscape, testing must not be restricted to the front-end only—it is essential to incorporate aggressive testing strategy at the API/Middleware level wherever possible.

4. On cloud—make use of cloud based pay per use tools, platforms and sims to reduce investment on phones and tablets.

5. No compromise on quality—make a commitment to continuous regression instead of compromised or no regression which is the bane of current shortlived quality lifecycles.

6. Skill-based testing—with the reduction in manual testing, it is essential that QA providers and professionals focus on developing talent with different/ varied skill sets with a healthy dose of domain and technical proficiency.

7. Recycle and reuse—with constant innovation and improvisation being fundamental to this approach, it is essential that it is modular and highly reusable right from the beginning.

Source: Maveric Systems

www.bankerme.com

14/09/2016 12:59

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TECH FOCUS

Brand consistency and social media James Pass, Managing Director and Creative Principle at JPd explains the importance of brand consistency for financial institutions in maintaining social media presence

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eing able to offer a consistent brand experience is one of the most difficult challenges for any business. It’s important to ensure that every potential and existing customer receives the great customer experience every time in order to encourage loyalty. A researched and well-thought out brand provides the foundation for this, ensuring every facet of the organisation is aligned in terms of values, visual elements, and positioning.

With so much customer feedback being done via social media, communication between brand and customer has become highly visible to the general public—a potentially scary prospect to marketers if not managed correctly. Nowadays more than 75 per cent of brands use two or more social media channels while more than 80 per cent of people who complain to a brand via Twitter expect a response within an hour. And this trend is set to grow as 38 per cent of firms spent more than 20 per cent of their total advertising budgets on social media channels in 2015, up from 13 per cent the previous year.

Ensuring brand consistency on social media is more important than ever before, especially for the financial and banking industries where the risks are higher. Keeping up with social trends ensures you constantly stay in the eye of your consumer.

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James Pass

Five ways to ensure a company’s online communication is true to its brand values are as below: Review key messages regularly

Does your team know the company values and how they can use them to guide the decision-making process? Do you regularly review your company positioning statement to ensure you are delivering on what you promise? Regularly reviewing your brand document and its key messages and reminding your team of its importance will ensure everyone is on the same page when it comes to customer communication.

Develop a social media content calendar

A social media calendar is a useful and practical tool allowing organisations to be proactive when it comes to digital communication. And when you’re pro-active, you’re prepared which means posts are timely, relevant, and have a strong call to action that is brand-aligned. By taking the time to research and prepare a content calendar, you can also ensure your social media is reflecting the unique selling points of your company. Social media is highly competitive with consumers faced with over 5,000 messages a day so you need to ensure you stand out with the memorable content.

Invest in quality visuals

By 2019, 80 per cent of all Internet traffic will be video-based. Incorporating images into social media content also has more impact with Twitter reporting that images encourage retweets up to 150 per cent while LinkedIn image posts get 98 per cent more comments than those without. But such results can only be generated by visuals that are consistent, high-quality and reflect the brand’s philosophy. This is where a professional photographer is worth his weight in gold, creating a library of visuals that can be used for social media purposes to attract attention and create engagement.

Create a social media guide

A company’s employees is its biggest source of ambassadors. With 2.3 billion active social media users, the chances of your employees using social media to talk about your organisation are high. Make sure they know what is admissible and what isn’t with a social media guide. This should include a list of topics that are acceptable and those that aren’t, such as race, war, religion and so on.

Focus on measuring engagement

When executing social media communication for any business, it’s important to measure success. While a high number of likes can be impressive, this can become redundant if consumers are not engaged with the brand in more meaningful ways.

By creating content that stimulates feedback and conversation—reflected through metrics such as comments, shares, votes and polls—businesses can attract more potential customers. In 2015, the average amount of time spent on social media in the UAE was between four to six hours—that is an incredible opportunity for brands to communicate with their followers and fans in a two-way conversation, to deliver value and solidify brand loyalty.

Source: JPd

www.bankerme.com

14/09/2016 12:59

Villamar is located at Bahrain Financial Harbour on an island in the center of the business district in Manama, the capital of the Kingdom of Bahrain. The development overlooking the seafront of BFH, consists of five elements being three twisted towers, lifestyle apartments with one to five bedrooms, floating sky villas, retail outlets and a quiet boardwalk.

The development has distinctive engineering and architectural designs and features. The main facilities of the project include a health club and spa, swimming pools and other recreational amenities. In addition, the boardwalk will act as a point of attraction to the public as it will host cafes, restaurants, retail outlets with a terraced air-conditioned podium, sea views, spacious car parking, marina and landscaped areas. gfh.com | Invested with insight

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09/06/2016 14:41

HUMAN CAPITAL

The big screen James Randall, Regional Sales Manager—MENA at HireRight, deliberates on employment screening and key takeaways from an exclusive roundtable on human capital

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he financial services industry is at the leading edge of a global trend. With technology connecting people and businesses around the world in real time, incremental changes in one market can have a huge impact in another. Given its role in financing businesses, safeguarding our pensions and savings, and moving money around the world, it is perhaps unsurprising that the financial services industry is often at the forefront of global movements.

The sector is set to undergo significant changes in the recruitment process over the coming years, in what could be a huge opportunity for businesses and candidates alike. The DFSA, along with representatives from many of the recognised banks in the UAE such as, HSBC, ADCB, UBS and Standard Chartered to name a few, joined us at a recent roundtable event in Dubai to discuss the major challenges facing recruiters in the industry, along with the role of employment screening firms in minimising potential liability.

Across the Middle East, there is a degree of uncertainty in local markets which has put pressure on the sector in filling roles with suitable candidates and mitigating the risk of a bad hire.

There is now the added pressure

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James Randall

of regulators formulating stringent guidelines in which to operate. We have noticed that banking and finance industries are being scrutinised in major markets worldwide, and we expect Middle Eastern financial hubs such as Dubai to follow suit. We are seeing regulators increasing their focus on accountability and the performance of individuals.

In a bid to develop best practice, the UAE financial sector has already begun to take steps towards the implementation of a risk management framework, despite already having solid regulatory foundations. This will have wider implications for many international financial organisations present in the country. With the recruitment and screening of individuals already close to a benchmarked standard, much of the essential framework is in place.

Even so, we have yet to clearly see how the local industry will respond to international changes.

Industry heads present at the roundtable stressed the importance of learning from other regulatory bodies in safeguarding against potential market breakdowns. For example, the FCA in the UK made it clear that they were writing the letter of the law, but will leave the interpretation up to the individual organisations.

Each organisation will then be able to make its own decision about where to draw the line in on the basic minimum standards required for any role.

INTERNATIONAL EMPLOYEE BASE

One of the major talking points from the roundtable was the hiring of employees from overseas. cont. on page 56

www.bankerme.com

05/09/2016 09:26

T H E

Q U E S T

F O R

E X C E L L E N C E

BME PRODUCT AWARDS 2016 KUWAIT

LEBANON

Nominations will be open shortly for the Banker Middle East Product Awards 2016 in both Kuwait and Lebanon.

What has your institution done this year that makes you feel proud? Celebrate your achievements in financial product design, development and marketing by nominating your products in the most prestigious product recognition programme in the MENA region’s financial services sector.

For more information, contact: events@cpifinancial.net Tel: +971 (0)4 391 4682 Fax: +971 (0)4 390 9576 CPI Financial FZ LLC, 1209 Shatha Tower, Dubai Media City, Dubai, United Arab Emirates

VOTING OPENS

2 OCTOBER

VOTING CLOSES

23 OCTOBER

NCED

WINNERS ANNOU

24 OCTOBER

to feature in November BME

www.cpifinancial.net

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HUMAN CAPITAL

cont. from page 54

Employers recognise the importance of having local experts who understand the nuances of the source market. The rapid growth of the financial services sector in Dubai and Abu Dhabi has created an influx of overseas labour, with many financial institutions now being swamped with applications from abroad. It can be problematic for firms, not only to filter these down into a viable candidate list, but also run background checks on prospective candidates who may have worked and lived in multiple geographies.

Employment screening operators have capabilities built into their screening solutions which enable them to secure a wealth of information a recruiter can base a decision upon.

CENTRAL DATABASE

For many financial services companies in the UAE, a personal network is still considered an effective source for rooting out any potential recruitment problems. A functioning persona non grata database that all firms contribute to as mandatory practice would improve this situation. The industry acknowledges that such a system will only be as good as the information fed into it. This, and the lack of a central database holding key information about potential employees, was revealed as a key concern.

Personal financial status and debt default information would also be of great assistance when making vital recruitment decisions. As would a coordinated and mandated way for banks to legally share information about employees’ records. This would assist in coping with fraud and criminal activity, according to many present at the roundtable.

Institutions in the UAE feel they go over and above the local regulatory requirements, but question the value and role of the ‘confirmation of employment’ letter, which offers

56 page 54-56 Human Capital.indd 56

no insight as to a candidate’s past performance. The threat of defamation accusations means little can currently be said, leaving some feeling as if further direction from employment legislation is required.

CULTURAL CHALLENGES

There are also cultural barriers to employment screening here in the region. Many organisations and employees in the Middle East do not understand the concept of employment screening and are, in some cases, unconvinced of the purpose. It is likely to take time before it is fully understood, but in the financial services sector—and with the critical nature of potential risk—this is likely to be sooner rather than later.

use a periodical re-screening process, particularly amongst senior risk takers, with searches conducted for criminal convictions, civil litigation, and adverse media coverage among others. Whilst some higher level managers have been known to be sceptical of re-screening, especially more established employees at executive or director level, it is slowly becoming accepted and even appreciated, considering what is at stake.

IMPORTANCE OF SCREENING

In an industry as quickly evolving as financial services, remaining compliant can be an onerous task. Employment screening can be vital in raising awareness of changing regulations in

Employment screening can be vital in raising awareness of changing regulations in the industry and ensuring the brand is not damaged, or the organisation fined, for breaches of code or indiscretions over conduct.

– James Randall, Regional Sales Manager—MENA at HireRight With finance considered as a prestigious industry to be involved in, and employment screening becoming a necessary component of the recruitment process, recruiters and candidates are quickly realising how fundamental the practice has become. Attendees of the roundtable stressed the urgency in educating employees of the value of screening and the damage that can be done to the reputation and brand if not conducted accurately. As the approach becomes more standardised and the agenda increasingly collaborative, businesses will reduce the number of damaging hires and limit resource waste.

The roundtable also brought to light the subject of re-screening, especially amongst the more senior positions.

Many financial services organisations

the industry and ensuring the brand is not damaged, or the organisation fined, for breaches of code or indiscretions over conduct. Depending on the size of the operation, a fine could be extremely detrimental, but reputational harm could have more fateful consequences to an industry reliant on dependability.

With financial regulators around the world careful to prevent a situation which led to the financial crisis, legislation is slowly being introduced whereby individuals should be held as accountable as the institutions they work for. This means employment screening firms have an even greater role to play in the industry and economy as a whole. The onus now is on these firms to make the long-term decisions needed to protect their industry from mistakes of the past.

www.bankerme.com

05/09/2016 09:26

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COMPANY PROFILE

Jordan Commercial Bank Jordan Commercial Bank highlights its achievements and strategic vision moving forward

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ordan Commercial Bank has been in the business since 1977 under the name Jordan Gulf Bank (JGB). In 2004, JGB was restructured and changed its identity to Jordan Commercial Bank which currently operates a total of 29 branches in Jordan and four branches in Palestine.

Ever since, Jordan Commercial Bank (JCB) has become an established and popular bank in the region offering a wide range of excellent retail and corporate financial services and solutions to clients of all segments and ages.

Jordan Commercial Bank has received several awards. In 2012, the bank received the Best Interactivity Award at the Banking Web Awards Competition held by the Pan Arab Excellence Awards Academy. In 2013, the bank was honoured by the STP Award for Excellent Quality in the delivery of commercial payments and financial institution transfers. In 2015, Jordan Commercial Bank received the Certificate of Conformity: Data Security Standard (PCI DSS) by the Security Standards Council.

We strive to meet our customers’ expectations and fulfil their needs by providing them with the best financial services and cutting-edge banking solutions, customised and highly advanced services and products, in addition to the various high-tech channels such as the vast ATM network, and the latest e-banking services and applications.

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Named as the fastest growing bank in Jordan for BME 100, JCB showed the highest increase in income of all the banks in Jordan.

Our vision is to become one of Jordan’s top leading private financial institutions.

Our qualified employees are the greatest asset in whom we invest the most, working along with a very professional leadership whose management approach

and diversified experience gained over the years in the field of banking reflected positively on our success and prosperity.

Our clients are our top priority, the utmost transparency and credibility is what we offer them.

www.bankerme.com

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PERSONALITY

Khalid Elgibali

Division President, Middle East and North Africa, Mastercard I have been part of the financial and payments sector for the last 18 years, with a number of stints at global blue-chip companies and most recently Mastercard. Prior to that, I have worked in the FMCG sector for almost 14 years with well-known organisations.

Technology and payments are the future. Today, they are already enabling and helping hundreds of millions of customers all around the world to be included in the financial sector and providing them with easy access to safer, simpler and smarter means of making everyday payments. These innovations are helping governments better manage their cash supply and reduce the cost of cash, which can represent over one per cent of GDP in some cases. They are helping banks and merchants better meet the evolving needs of their customers as they transition from the physical to the digital world. Simply put, technology and payments industry is ubiquitous, touches a wide range of stakeholders and impacts their lives and businesses in a positively unique way. It is exciting to be part of such an industry that is not only so pervasive, but more importantly, leading the way in building the railroad and defining what our future will look like.

While this might sound like a cliché, but no day is like another; that is the nature of our industry, and this makes it quite exciting, really. Consider, for example, the simple truth that even today, over 80 per cent of payments in many markets are still made in cash, and the fact that customers are quickly evolving and looking for more convenient, faster and more secure ways to pay. New customer generations, like Gen Y and the millennials, will be the first to grow up in the digital world, with smart phones being a very normal and natural part of their everyday lives.

And these customers are demanding solutions that meet their digital lifestyle and behaviours.

The fact that my role is focused on creating solutions—is what I like most about my job. It is most exhilarating and exciting to come to the office each day knowing that if you dream and strongly believe in something, you can surely make it a reality.

At the moment, I am reading The Prophet by Khalil Gibran. My all-time favourite book is Tuesdays with Morrie by Mitch Albom. One of my most favourite quotes from the book is when Morrie inspiringly says, “So many people walk around with a meaningless life. They seem half-asleep, even when they’re busy doing things they think are important. This is because they’re chasing the wrong things. The way you get meaning into your life is to devote yourself to loving others, devote yourself to your community around you, and devote yourself to creating something that gives you purpose and meaning.” And that is the mantra that I aspire to live by.

I love reading, writing music and playing the guitar. I spend time on these activities religiously and enjoy them even more in the company of my two young boys, Eddie and Figo, who are shaping up to become great guitar players and voracious readers.

The financial market in the region is resilient, as evidenced by how well it has weathered some significant challenges and crises globally, and regionally. Also, this is an industry with great promise, as it dials up its financial inclusion agenda and helps to enable consumers, SMEs, corporates and governments to participate in forging a more prosperous future.

It is widely recognised that global financial stability risks have risen over the recent past. In advanced economies, the outlook has somewhat deteriorated, driven by heightened uncertainty and setbacks to growth and confidence. In emerging markets, declines in oil and commodity prices and slower growth have contributed to keeping risks elevated. Naturally, such developments have tightened financial conditions, reduced risk appetite, raised credit risks and stifled balance sheet repair.

A broad-based policy response is needed to secure financial stability. Advanced economies must accelerate traction and more firmly deal with crisis legacy issues, while emerging markets will need to bolster their resilience to global headwinds.

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www.bankerme.com

14/09/2016 17:27

A track record of long-term growth.

An award-winning reputation.

Since launching in 2006, Gulf Capital has become one of the region’s largest and most successful alternative investment firms. Today, we celebrate 10 years of delivering long-term returns and industry leading results. Our award winning performance has made us the firm of choice for regional and global investors.

Gulf Capital – Celebrating 10 years of achievements and proven results. www.gulfcapital.com

Firm of the Year MENA 2014

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Best SME Credit Fund 2015

Best Private Equity Firm in the Middle East, 2011, 2012, 2013, 2014 and 2015

14/04/2016 12:04

LAST WORD

Mohamed Abdellatif Senior Executive Officer, Head of UBP Middle East On GCC’s development amidst the global financial backdrop What services does the company provide?

Here in DIFC we provide a full range of wealth advisory services for private and institutional clients as per our licence.

Which areas does the company seek to focus on this year?

The company is focusing on expanding its client base through high added value advisory services as well as helping our clients to cruise through the current challenging market conditions and capture the opportunities offered through market volatility.

What does your day to day job entail and what do you like most about your job?

In my role of Senior Executive Officer, I oversee the day to day operations of the office here and it is a very exciting job.

On top of managing the team I’m being fed all the time with new regulatory updates as well as constant market updates.

I also deal with clients all the time and need to be fully updated and equipped to be able to assist and advice clients in their financial decisions. So everyday there is something new to deal with or learn.

What do you think is your greatest success in your career?

I will not exaggerate if I say it was joining UBP. Having had the opportunity to witness such growth in the bank and in the region is chance that doesn’t come every day in someone’s career. The learning curve here is endless and you gain new experience everyday and it is a blessing to be in this position taking the tough environment elsewhere.

What are your hobbies?

Coming from North Africa, we love soccer. It is our passion and mostly it is one common thing that unites a lot of people. I love reading as well, I try to finish two books a month, and I prefer paper books, the ‘old style’.

Who would you like most to have dinner with?

What is your favourite book?

A Brief History of Time by Stephen Hawking; it is a fantastic book. Besides all the mathematical theories and equations, it still opens your mind to a number of indefinite possibilities about the universe we live in.

What do you think is the biggest weakness of the GCC’s banking and finance industry?

Given the fact that there is a lot of dependence on oil, the oil prices are the main catalyst to a lot of challenges in the region.

Having said so, the region is still a strong wealth creation environment so there is always a support to sustain a strong and solid banking environment. Plus the regulatory environment is becoming more firm and strong along with tough competition, which is affecting profitability and that is why we are seeing some consolidations in the industry recently. We ourselves bought two local operations over the last three years.

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Besides my wife, I would love to have dinner with Mohamed A. El-Erian. He recently published a nice book called The Only Game in Town.

What is your outlook on the region’s financial market over the next year?

I believe the trend is on the positive side of the spectrum, I also think we have to see how oil prices stabilise over the next period. We are also still living in a historically low interest rate environment which will have some impact on profit margins for a lot of banks and do not forget that lot of investors are still looking for yield in such an environment which will put those margins under some pressure. Also we are being challenged by other external factors like the Brexit for example.

www.bankerme.com

05/09/2016 09:30

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