BANKING BOOM

U.A.E.-based bank Mashreq saw its profits hit $1 billion in 2022, leading a booming year for the country’s banks. Group CEO, Ahmed Abdelaal, is looking to tech and talent for future growth.

BY LAYAN ABO SHKIER

With the collapse of the US-based Silicon Valley Bank and Signature Bank at the beginning of 2023, the year did not seem too promising for the global banking sector. However, it looks like MENA-based banks, especially those in the GCC, are doing relatively well, unlike their Western counterparts. According to a report by Moody’s published in March 2023, broad franchises and sovereign footprint are helping make GCC lenders immune to the financial unrest in the U.S.

“When we see evidentiary pressure happening globally, then disruption is bound to impact you wherever you are, but this is where the fundamentals of your economy come to play. Being in this part of the world today is a privilege,” says Ahmed Abdelaal, Group CEO of U.A.E.-based Mashreq.

According to the banking veteran, who draws on over 30 years of industry experience, the support of the region’s governments, the strong fundamentals of the economy, and the investor-friendly and welcoming environment are among the factors that are minimizing the impact of the global financial turmoil and are helping entities like Mashreq to grow further.

Many of the most valuable Dubai-based banks ended 2022 on a good note. Emirates NBD, the second most valuable bank in the U.A.E. as of February 2023, saw its profits surge by 39.8% in 2022 compared to 2021, while Dubai Islamic Bank saw a 26% hike in its net profits. However, Mashreq has boomed significantly, posting a 252% surge in net profits in 2022 to hit $1 billion compared to $292.9 million in 2021.

Mashreq’s chairman AbdulAziz Al Ghurair called 2022 “a transformative year” when announcing its financial results. And this year, it seems to be hitting the ground early, posting a net profit of $438 million Q1, a 163% hike compared to Q1 2022. Earlier this year, the bank was the sixth most valuable bank in the U.A.E., and the nineteenth in MENA, with a market value of $7.2 billion as of February 28, 2023, and operations in the GCC, North Africa, Asia, the U.K., the

U.S., India, Pakistan, Hong Kong, and mainland China. Last year was also full of major milestones for Mashreq. In February 2022, it invested an undisclosed amount in NymCard, a U.A.E.-based Banking-as-aService (Baas) provider. A month later, in March, it launched NEOPAY, a new subsidiary to consolidate all of its digital payments business, which processes POS and e-commerce annual volumes of over $22 billion of annualized volume across retail, government, and hospitality. In 2022, Mashreq also invested $10 million in U.A.E.-based Fintech startup Cashew, integrating it into NEOPAY to expand its buy-now-pay-later offering. Fintech has a promising future in the region. “We estimate that MENAP fintech revenue could increase almost threefold, from $1.5 billion in 2022 to an amount between $3.5 billion and $4.5 billion in 2025, which would boost Fintech’s share of financial services revenue from less than 1% to approximately 2% to 2.5%,” says Sheinal Jayantilal, Partner at McKinsey & Company.

Mashreq is not alone in investing in Fintech. Investor funding in the Middle East, North Africa, and Pakistan (MENAP) increased by 36% annually between 2017 and 2022, according to MAGNiTT. However, Mashreq’s approach to collaboration rather than traditional joint ventures and mergers/acquisitions stands out. According to McKinsey & Company, less than 50% of financial institutions in MENAP are partnering with a Fintech startup compared to 85% globally.

In July 2022, Mashreq launched a $300 million Additional Tier 1 offering, which attracted orders of more than $500 million. And in August 2022, it launched a non-banking business services platform called Mashreq Business Banking Value Added Services to support SMEs. The platform currently allows users to receive discounts and offers from 12 SMEs, such as Emirates HR, Letswork, Bayzat, and Wannago, among others.

Most recently, in January 2023, Mashreq received a no-objection certificate to establish its digital banking operations, under the digital regulatory framework issued by the State Bank of Pakistan, as part of its expansion plans. Sustainability is also a core focus of Mashreq. It facilitated more than $15.5 billion of sustainable finance between January 2021 and December 2022, including wastewater treatment projects worth $1.36 billion, and it was the only bank from the region to be an official supporter of COP27, which was held in Egypt in November 2022.

Abdelaal joined Mashreq in 2017 as head of the corporate and investment banking group, and he assumed his current position in 2019. He previously held several positions at HSBC Bank, ABN AMRO Bank N.V., Arab African International Bank, American Express, and Arab Bank. Since he assumed the leadership of Mashreq, the banking industry and the world has faced numerous challenges, from the U.S.China trade war to the Covid-19 pandemic, to Russia’s invasion of Ukraine, and today’s financial unrest. Equipped with his multigeographical experience, as well as his background with both local and international banks, the Egyptianborn CEO has helped in guiding Mashreq to the safe shores between 2019 and today.

However, the bank’s performance is not only driven by the region’s stability or the CEO’s experience, but also by strategic decisions. “These were centered around our commitment to innovation, investment, regional and global expansions, and most importantly, our readiness to embrace change,” says Abdelaal. He also attributes the group’s success to its employees and people. “Despite the fact that our reliance on AI and technology keeps growing, people will remain the critical ingredient for any success. They are the ones behind innovation. So, for us, having some of the best talents globally, joining the organization, and driving the strategic growth has helped to a great extent.”

But finding the right talent has not been an easy task in a post-pandemic era, where digitization has become essential to every organization. This has created pressure on intellectual talent, according to Abdelaal. Describing it as “one of the most significant challenges,” Abdelaal says that this is a current global issue, where entities seeking to innovate and digitize have a limited pool of talent that covers their needs. “Finding and retaining talents that match your strategic ambitions and understand the cultural aspects of the journeys and the experiences that you are developing is a key challenge that we are facing right now and is being faced by everyone.”

To manage this challenge, Mashreq has introduced several initiatives. In 2021, the bank opened two new centers of excellence in Egypt and Pakistan, leveraging on its pre-existing center in India that was opened in 2012, creating its Mashreq Global Network. Employees in these three locations collaborate with the bank’s teams from the Middle East and global financial hubs to deliver innovative products and digital solutions. “This has given us access to a significant pool of talents in those three important markets,” says Abdelaal.

During the pandemic, Mashreq shifted to a distributed workforce model, where it moved a “significant” number of its employees to those centers of excellence, which now house more than 60% of the bank’s intellectual capacity across all functions and businesses. The CEO says that this model allowed Mashreq to also achieve geographical diversity, by hiring employees from both main cities and rural areas within those countries, offering them the flexibility to work remotely. In 2022, the company also introduced a six-month returning mothers program. “Diversity was another solution that helped us to counterbalance the impact of the significant pressure on talent,” says Abdelaal. Looking ahead, and with 2023 declared the year of sustainability by the President of the U.A.E. Sheikh Mohamed bin Zayed Al Nahyan,

Mashreq is now gearing up to support COP28 in Dubai in November 2023 and aims to increase the amount of sustainable finance that it facilitates to reach $30 billion by 2030. “We view our sustainability efforts as a way to give back to our community and to humanity as a whole,” says Abdelaal. Although the GCC economies are projected to grow at a slower pace of 2.5% in 2023 and 3.2% in 2024, compared to 7.3% in 2022, according to a recent World Bank Gulf Economic Update, Mashreq has a new “Rise Every Day” brand identity to leverage. Announced in September 2022, Mashreq is now shifting its approach to a collaborative, digital-first approach focused on building a banking-as-a-service (BaaS) ecosystem.

“BaaS enables banks to offer a wide range of completely new financial products and services to their customers and end consumers; sometimes using alternative channels like Non-Banking Financial Institutions, who want to embed financial services within their customer and consumer journey’s,” says Arjun Vir

Singh, Head of Financial Services for MENA at Arthur D. Little. The global BaaS market size was valued at $637.40 billion in 2022 and is projected to reach $6.9 trillion by 2030, adds Singh. In the U.A.E., Baas “is poised to experience significant growth due to banks’ appetite to explore innovative business models, leveraging their advanced digital capabilities as well as the emergence of tech companies, including Fintechs, and consumers’ advanced digital proficiency,” says Nader Haddad, Principal with Strategy& Middle East.

“Our banking as a service innovation agenda is so crucial because it revolves around the shift from selling products and services to the creation of experiences,” says Abdelaal. “The challenges we face today are not just about responding to change, but more importantly, about managing changes in priorities.

“Challenges are just temporary obstacles. With the right resources, the right team, and the right mindset, we can overcome any adversity we encounter.”