11 minute read
Shaping the Future
Dr. Adnan Chilwan Group CEO, Dubai Islamic Bank, talks with MEA Finance, describing how DIB has successfully navigated the pitfalls of recent times, gone on to launch a new digital banking service driven by a new ethos, and explains how Islamic Finance is more closely in sync with today’s changing values
In 2021, DIB enjoyed an impressive 39% growth in net profits. What was behind this result?
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Amidst the headwinds that the global economies are still facing, DIB has remained resilient with a remarkable 39% growth in profitability. This solid performance demonstrates the robustness of our strategy which allowed us to deliver results despite the prevailing economic conditions. Right across the business, DIB performed well in 2021 not just in terms of increased activity, but also through the application of strict cost controls and cash management. Those included lower impairment charges and a sustained reduction in
operating expenses. We have basically built a leaner, agile and overall efficient organization that is ready to capitalize on any opportunity with maximum insulation from environmental hurdles.
We ended the year with a strong growth in net profit of AED 4.4 billion – up from AED 3.1 billion in 2020. This solid performance is also due in part to the Bank’s ability to manage its cost and book new underwriting of over AED 36 billion despite a still challenging year– this has been fundamental to our ability to create value for all our stakeholders.
Overall, DIB’s earnings and its healthy balance sheet are indicative of the power of the Bank’s repositioned and well-diversified business, which saw a significant rebound in earnings per share, return on equity, return on assets and capital ratios. Our strong growth in our international operations has also contributed to our overall performance.
Allowing for the different post COVID-19 conditions of 2021, will DIB equal or exceed its previous yearly performance in 2022?
We enter the year 2022 with a new 5-year strategy that will propel the bank to strengthen and grow the business over the period. Building on the progress that we have made, DIB will transition into a more sustainable business model and create further capacity to generate stronger returns for our shareholders whilst simultaneously ensuring a superior banking experience for all our customers.
The Bank’s stable performance in 2021, particularly compared to other banks in the UAE and the wider region, bodes well for our ability to create value in 2022. Whilst there are numerous dynamics at play in today’s market – not least the challenge of inflation and subsequent rate rises in other world markets – the Bank is well placed to pursue new opportunities in 2022 as we leverage an improving local economic climate to deliver solid returns to all our valued shareholders.
Our success in entrenching our position as a market leader in Islamic
Dr. Adnan Chilwan, Group CEO, Dubai Islamic Bank
financing and capital markets in 2021 is a great example of how far we have come – and how well prepared we are for growth. In 2021 we achieved nearly $25 billion in combined deal value and were appointed in more than 20 Sukuk and syndicated financing transactions for supranational, sovereigns, quasi-sovereigns, corporates and financial institutions. We have also been consistently amongst the top-ranked banks on the Bloomberg league tables.
I think it is also important for DIB to continue to focus on diversification, which served us well in 2021. Our well-diversified strategy of resource deployment,
with stronger earnings contributions from each of our business lines, demonstrates that we have operational resilience structurally and strategically built-in, giving us the bandwidth to withstand future challenges whilst remaining profitable.
Can you tell us your key plans for the coming twelve months?
Our future vision is a commitment to aligning our operations with that of the UAE by embarking on a new journey, with a renewed purpose and revamped positioning – #ReadyForTheNew.
This new approach sets out a strategy for how we engage with both internal and external stakeholders. #ReadyForTheNew means placing human capital and the interests of our customers at the centre of every decision we make as a business – a kind of banking that proactively and ahead of time innovates solutions to meet the real-time needs of our colleagues and those we serve in the community.
Practically, this means ensuring the Bank’s customer services and digital solutions are aligned with the vast opportunities inherent within the digital economy, supporting entrepreneurialism, SME development and financial inclusion.
This latter point is particularly important and a powerful strategic driver because financial inclusion is the key to unlocking social mobility. What we must do (indeed every bank has a responsibility to do) is create inclusive opportunities for social mobility. This outlook filters through what #ReadyForTheNew means, representing a shift in DIB’s operations to proactively seek social impact; and that is of course part and parcel of our approach to entrenching environment, social and governance principles in what we do.
Environmental, Social and Governance principles are fundamental to the Bank’s approach to sustainable business operations, an integral part of our longterm strategy to create and unlock further value for us as well as the
industry we operate in. An ESG roadmap is in place now for the bank to embark on strengthening DIB’s capabilities as amongst the leading sustainable financial institutions in the country and strengthen alignment with the global sustainable development goals. Today, our vision, purpose and values are fully aligned with the bank’s sustainability journey ensuring that our people remain committed to delivering on the promise of sustainable economic growth and prosperity.
We recognize of course that as the digital economy matures, we will be bringing greater numbers of developers, industry partners and nonfinancial services providers into the DIB ecosystem – this is the nature of Banking as a Service – but that comes with risk. When we collaborate and co-create, we inevitably share data across platforms. So as DIB’s digital capabilities mature, so too will its work to combat cybercrime, including across the digitized trade finance ecosystem, which is accelerating at pace.
That is why we kicked off 2022 as we mean to go on, by joining the UAE’s first commercialized trade and trade finance blockchain platform, UAE Trade Connect, as a Partner Bank. The platform protects against double financing and fraud on pre-sales invoices and helps in handling multiple types of trade-related documents that are inspected, validated, and tested for authenticity. The benefits that UAE Trade Connect delivers will not only serve to protect DIB customers and the wider banking system but enhance trade around the world. As such it acts as an enabling technology that has the capacity to make trade financing more accessible, affordable and equitable.
Tell us about rabbit, who it is aimed at, how it has performed since launch and what makes it a unique digital banking experience?
At DIB, we pride ourselves in being a truly “Digitally Intelligent Bank” and have always focused our efforts on enhancing money and digital tech with a sprinkling of fun to leave a smile on the face of our adopters.
Our objective is to take this important platform beyond the UAE to the different markets we are operating in. These are huge markets, places like Indonesia, Pakistan and Kenya, with very young populations that will benefit from an accessible funtech platform. It is available through Apple and Android stores and offers current account facilities with a globally accepted debit card, payments and transfers in addition to rewarding customers with loyalty and discounts. Over time and as we roll out to other regions, the platform will grow to offer other financial services.
customer experience. We will continue embracing the latest technological innovations, as we believe in their ability to complement our growth strategy, increase efficiencies in our operations, diversify revenue streams and strengthen our agility in the market. A clear example is the launch of rabbit.
rabbit is a new digitally native brand from DIB, aimed and tailored towards the millennial age and mindset. It’s simple, easy, agile and fun for the connected generation; a fun-filled experience that has never before been witnessed in the region. We call it a “FUNTECH” brand that aims to demystify finance by marrying
Islamic Finance is taking an increasing share of the global banking market, what do you think is driving this growth?
If you drill down to the fundamental purpose of Islamic finance it becomes blatantly obvious that there are synergies between Sharia values and ESG objectives. And now, because consumers of all kinds are demanding responsibility from those they do business with, Sharia principles are delivering what Muslim and non-Muslim consumers want.
Regulatory frameworks on Islamic finance have now been more than ever supportive across major jurisdictions and regions globally including new markets such as Europe and the Far East and Central Asia. The development of these new regulations has further supported the growth of the industry worldwide.
And, whilst it is a statement of fact that the religious foundations might be of less interest to non-Muslims, all of humanity shares the same interest in building a world that is fairer, more inclusive and responsible. You can call it Islamic finance or responsible banking; the point is that more and more people of all cultural and spiritual backgrounds are yearning for a more accountable world of work and greater accountability in how our capital markets operate.
The digital revolution has also created new opportunities for us as a bank which
is why in seven world markets, from Turkey to the Far East and multiple countries in between, DIB is transforming and expanding the Islamic financial services landscape. That is why DIB has specifically worked to extend its operations and enter into new partnerships in other markets over the past year.
Key markets include Turkey, a country that we have been present in since 2005 but that has become significantly more active for us as a Bank over recent years. In 2021 DIB led the syndication for a $2.5 billion five-year Sukuk in the international markets from Turkey’s Ministry of Treasury and Finance. We saw those Islamic bonds draw more than $9.3 billion in orders. And, in September 2021, we acted as joint lead managers and bookrunners for Kuveyt Türk Katilim Bankasi (KTKB) when it returned to the international Sukuk market with a US$350 million Sustainable Basle-III Compliant Tier II Sukuk.
We also have a significant and growing international presence as a torchbearer in promoting Sharia-compliant financial services across a number of markets worldwide.
Does Sharia Finance have an inbuilt edge over conventional banking now that ESG considerations are now inherent to all aspects of the industry?
Let’s be clear; a bank does not have to be Islamic to be responsible. But Sharia finance is inherently structured differently, so we come from a different starting point. As an Islamic bank, we have certain values and ways of doing things that are baked into our DNA. Perhaps the best-understood principle is that
of paying profit. Profit rates change all the time, and we are going to see the impact of such changes this year. Savers and those who have taken out nonfixed interest rate-related financing are more vulnerable.
Those with Sharia products have the security of knowing that whatever happens with rates isn’t going to hurt them. What does this boil down to? Transparency, certainty and a commitment to putting the customer’s interests at the center, and that brings us back to the conversation about DIB’s #ReadyForTheNew strategy.
This is a strategy that I believe reflects DIB’s ultimate goal of making Islamic banking the norm rather than a niche alternative. The strength of our proposition is reflected in the continued recognition we receive around the world. DIB has been named the Best Islamic Bank in various prestigious ceremonies and recognized for its outstanding performance amongst the world’s Islamic Banks, marking it a clear indication of the bank’s leadership position in the Islamic finance sector.
What are the major challenges you foresee for the Islamic Banking industry in 2022 and what is your outlook for the coming years?
The global pandemic has brought the world and the global financial markets to a standstill. Whilst we are now seeing the gradual recovery of global economies, risks still remain with potential new variants and geopolitical instability. We have seen digital players step up their game in this region and offerings on the digital space has significantly increased over the past few years. This coupled with the greater challenge for Islamic banks to keep up with the emergence of fintech while maintaining a business model flexible enough to maneuver within its
Shariah-compliance boundaries has proven to be a significant challenge for the industry.
But I have absolute confidence in the ability of this region to navigate through upcoming challenges. It continues to attract the best and brightest talent from around the globe, encouraging the sharing of new ideas and producing leaders and business-savvy individuals.
After an incredibly active deals market in 2021, which I believe took many by surprise, there will almost certainly be more mergers and acquisitions in 2022 as companies look for opportunities to consolidate, achieve scale and combat inflationary factors that may continue to weigh down the global economy. This growth, enriched by opportunities in fintech, will serve our region’s entrepreneurs, investors and retail customers in ways that have never been seen before.
