BANK OF BEIRUT:TAKING BANK OF BEIRUT:TAKING

Transcription

Banker
FEBRUARY 2015 | ISSUE 170
Banker
www.cpifinancial.net
MIDDLE EAST
BANK OF BEIRUT: TAKING A LEADING POSITION IN LEBANON’S GROWTH Selim Sfeir, Chairman of Bank of Beirut
PLUS:
INVESTOR RELATIONS
BOP: Resilience and
hard work paves the way
OUTLOOK
WEF 2015
COUNTRY FOCUS
No abrupt policy changes
ISLAMIC BANKING
Islamic Finance in 2015
BANK OF BEIRUT: TAKING
A LEADING POSITION IN
LEBANON’S GROWTH
Selim Sfeir, Chairman of Bank of Beirut
Dubai Technology and Media Free Zone Authority
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contents
FEATURES
8
40
42
COVER INTERVIEW
8
Bank of Beirut: Taking a leading position
in Lebanon’s growth
Chairman Selim Sfeir talks of his 2015 plans
ASSET MANAGEMENT
28 Daman Investments goes to IPO
Chairman and Founder Shehab Gargash of Daman
Investments explains the company’s objectives in
launching the IPO
OUTLOOK
30 WEF 2015
The New Global Context – Davos in perspective
Dominic Amlôt reports on the main debates
MARKETING
36 Touchpoint Excellence improves customer retention
Chris Taylor of Locus Consulting discusses how to meet
customer needs
ISLAMIC FINANCE
40 Islamic finance in 2015
CEO at Emirates Islamic Jamal Ghalaita offers a
commentary on Islamic banking’s global relevance
RETAIL BANKING
42 Mashreq: Leadership, innovation and customer
EDITOR’S LETTER
D
uring February 2015, David Petrie, Head of Corporate
Finance at ICAEW’s conference said, “There is no doubt
capital markets were affected by the oil price correction, but
this should be short-lived as underlying investment in the
sector continues and non-oil businesses remain attractive investment
targets. There may be a vested interest for GCC oil producers if oil
prices trend down even further – this is resulting in shut downs and
other commercial inefficiencies in those parts of the world where
production costs are much higher, at over $100 per barrel.”
Panellists agreed first that what matters most is governments’ ability
and willingness to spend in non-oil sectors. GCC governments’ spending is
high, at least for the medium term, with plenty of reserves to support their
spending plans if needed. Second that the oil price correction provided
investment opportunities in other sectors such as petrochemicals, trading,
light manufacturing, aviation and logistics, and renewable energy.
Alexander Gross, Director at Merrill DataSite, commented that oil’s
lower prices could drive energy companies to dispose of more non-core
assets in order to shore up their main business leading to an increase
in M&As, including possible takeover bids for more ‘debt-laden’ oil &
gas companies. Speakers agreed that the oil price could go down to
$35 per barrel by July 2015, but is expected to rise again to its normal
price between $65 to $75 per barrel further agreeing that certain IPOs
may be delayed in the short term, as liquidity in the market is tight and
investors are hesitant, but this will improve with market sentiment and
as the oil sector recovers.
This issue, Chairman of Bank of Beirut discusses his strategic plan
for 2015 (pg.8); Chairman Gargash discusses Daman Investment’s IPO
objectives (pg. 28); SWIFT spotlights Middle East Regional Conference
agenda (pg 26); CEO Jamal Ghalaita discusses Islamic banking’s global
relevance (pg.40); analyst Raza Agha summarises KSA succession after
King Abdullah’s passing (pg.12) and Hashim Shawa, CEO of Bank of
Palestine (BOP) discusses a new branch launch at the DIFC and his
approach to expanding BOP’s business segments and presence in overseas
markets (p.46).
Finally, On-Line Highlights and The Markets offer this month’s roundup of banking sector movements.
service key to success
Farhad Irani, EVP and Head of Retail banking at Mashreq talks
about his division’s rise in becoming a service innovator
50 Top trends for 2015
Robin Amlôt speaks to David Horton, Head of Innovation,
Synechron about top trends in retail banking in 2015
CORPORATE GOVERNANCE
56 Winds of change
Omar Selim, CEO at Arabesque comments on the need
for corporates to invest in firming up their corporate
governance frameworks
ZOYA MALIK
Editor
http://www.cpifinancial.net/blog/author/79/zoya-malik
©2015 CPI Financial. All rights reserved. No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from the editor.
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contents
REGULAR SECTIONS
12
ON-LINE HIGHLIGHTS
FINANCIAL CENTRES
6
38 Setting standards others follow
Top banking stories from around the world
COUNTRY FOCUS: KSA
INVESTOR RELATIONS
15 Saudi Arabia’s 2015 fiscal budget
Analyst Raza Agha looks at KSA’s succession plan
Jadwa Investments comments on the budget
16 Regulation of CREs in KSA
Anum Saleem of Eversheds highlights
proposed regulations for credit rating
agencies in KSA to impact the market
PRODUCT AWARDS NOMINATIONS 2015: KSA
20 Saudi Hollandi Bank
22 Digital Trends Report 2014
46
Representatives from Jersey tell of its offshore
benefits for MENA investors
12 No abrupt policy changes
20
EVENT
46 BOP: Resilience and hard work paves the way
Hashim Shawa, CEO of Bank of Palestine tells of the
objectives of its new branch in DIFC and creating
opportunities for the bank’s global investor community
ISLAMIC BANKING
60 PwC “voice of the customer” survey
There is a huge perception gap in what customers want
THE MARKETS
62 China to enter currency war
Nour Al-Hammoury of ADS Securities tells of recent
global shocks from PBoC measures and rates cuts
26 SWIFT Middle East Regional Conference –
64 Blom Mena Index
OPINIONATED MAN
driving economic growth
SWIFT is hosting MERC 2015 in Jordan
PAYMENTS
66 Robin Amlôt highlights retail banks' loyalty
schemes to captivate and retain customers
33 Money makes the world go round
Banker
DECEMBER 2014
| ISSUE 168
Banker
TAKING A LEADING
IN EXECUTING STRATEGY
POSITION IN LEBANON’S
CEO of Ajman Bank
IN
Mohamed Amiri,
CEO of Ajman Bank
of Bank of Beirut
BALANCING RISK
TEGY
EXECUTING STRA
GROWTH Selim
Sfeir, Chairman
Mohamed Amiri,
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for success
Fee Income:
profitability
lever for driving
| ISSUE 170
BANK OF BEIRUT:
BALANCING RISK
CFO FOCUS
THE MARKETS
long road to recovery
MENT
BUSINESS MANAGE
a strategic
FEBRUARY 2015
MIDDLE EAS
T
| ISSUE 170
| ISSUE 168
PLUS:
QATAR
COUNTRY REPORT: Project
Diar Dushanbe
Breadth of vision
FEBRUARY 2015
DECEMBER 2014
T
MIDDLE EAS
Euro zone plots
Banker
Banker
56
Saad ElKhadem of IDC MEA looks at the
future of payment technology
PLUS:
INVESTOR RELATION
S
BOP: Resilience
hard work paves and
the
way
OUTLOOK
WEF 2015
COUNTRY FOCUS
No abrupt policy
changes
ISLAMIC BANKING
Islamic Finance
in 2015
BANK OF BEIRUT
: TAKING
A LEADING
OSITION
LEBANON’S P
GROW IN
TH
Selim Sfeir, Chairm
an of Bank of Beirut
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ONLINE
HIGHLIGHTS
Visit www.cpifinancial.net to read all these stories and more news, features, blogs and videos.
FROM OUR BLOGS
Addressing the core principles of Islam?
At the World Islamic Economic Forum last year I had the pleasure and privilege
of sitting and chatting with Dato’ Dr. Abdul Halim Bin Ismail, winner of the
2014 Royal Award for Islamic Finance. More than 20 years ago, he had been
responsible for establishing and leading Malaysia’s first Islamic bank….Robin Amlôt
Riding the commodities rollercoaster
With increased international volatility, Sub Saharan Africa (SSA) could be facing a
tough year ahead….Sarah Owermohle
IN THE NEWS
Mashreq opens E Cube branch
In line with the bank’s network expansion strategy,
Mashreq announced the opening of its E Cube
Retail Concept which offers customers speedy,
smart banking and interactivity with the latest
technology led devices. Shaker Zainal, Regional
Guests at branch opening
Head of Distribution said, “The opening in Karama
is a key achievement and underlines the Bank’s expansion strategy is on track.
We continue to show our commitment towards extending our technology and
innovations to the area, in view of maximizing the customer experience.”
Mashreq Gold, the priority banking division of the Bank, will also be available in
the branch offering customers wealth management and priority support.
Emirates Islamic unveils next generation ATMs
Emirates Islamic launched the next generation Automated Teller
Machine in line with the bank’s strategy to drive customer
satisfaction and loyalty, as well as to introduce innovative solutions
to the market. Empowered by CxBanking, an omni-channel
platform designed by NCR Corporation, the new touch-screen
ATM interface is designed based on how consumers use their
smartphones and tablets. The menus are icon based and users can
Next generation ATM
swipe and scroll across the screen, offering an intuitive experience
with easy-to-use functionality. Commenting on the initiative, Faisal Aqil, Deputy CEO Consumer Wealth Management, Emirates Islamic said, “Today, bank customers transact
increasingly via digital channels such as ATM, mobile, online and phone banking.
Emirates Islamic is one of the early adopters to ‘digitising’ banking services to improve
customer experience and service quality, while simultaneously increasing efficiency.”
Gemalto acquires SafeNet
During January 2015, Gemalto announced the final closing of the
acquisition of SafeNet, after approval by the relevant regulatory
and antitrust authorities. SafeNet will be integrated with Gemalto
Payment & Identity segment and its contribution mainly consists of
Platforms & Services activities. “The acquisition of SafeNet enables
Gemalto’s CEO,
us to further accelerate the deployment of strong security solutions
Olivier Piou
in the Enterprise and Cloud security sectors. It makes our joint
portfolio of technologies and sales-reach unrivaled in the digital security market”,
said Olivier Piou, Gemalto’s CEO. “I warmly welcome the new teams joining
Gemalto and we look forward to working closely together.
6
page 6 online highlights.indd 6
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5/1/13
11:30 AM
5/1/13 12:53 PM
COVER
INTERVIEW
Bank of Beirut: Taking
a leading position in
Lebanon’s growth
Selim Sfeir, Chairman of Bank
of Beirut discusses his 2015
strategic growth plans for the
bank with Zoya Malik
K
Selim Sfeir, Chairman of Bank of Beirut
8
page 8-10 Cover BoB Selim Sfeir.indd 8
indly tell us of the bank’s performance
over 2014.
“At the end of September 2014, based on the
latest publicly available data, Bank of Beirut
continued recording strong performance. Our bank ranked
1st in Trade Finance, Asset Quality and Equity to Asset Ratio
Capitalization. We were also in the top three banks for Profit,
Equity and ROAA.
“Progress across the first three quarters of 2014 reflected
our commitment to quality growth across all main financial
indicators. Total assets grew by 9.69 per cent or $1.322
billion to reach $14.965 billion. A diversified, stable funding
base extended our liquidity. In 2014, total liquid assets to
total liabilities stood at 80.67 per cent up from 79.52 per
cent the previous year. Net non-performing loans over total
assets at 0.22 per cent earned Bank of Beirut the premier
position in loan quality ratios among our peers.
“Consolidated equity expanded by $376 million to $1.678
billion, an increase of 26.88 per cent compared to 2013
year-end. Over the first three quarters of 2014 we reported
the highest capitalization levels in our peer group, with an
equity to asset ratio of 12.24 per cent. Capital adequacy
stood at 14.19 per cent, far exceeding the requisite 11.5
24/02/2015 16:17
Feytroun Branch, Lebanon
per cent under Basel III. All this was achieved with notable
improvements in overall performance. Bank of Beirut’s
Cost to Income ratio stood at an enviable 43.26 per cent,
producing an ROAA of 1.23 per cent and a return on average
common equity of 16.42 per cent.
“2015 should continue to demonstrate our leadership
position and increasing market share, further extending a
growth story which is the best in Lebanon.”
Please tell us of the growth segments for the bank?
“Bank of Beirut is genuinely customer-centric, rather than
product-driven, and this differentiates our growth. To supply
customer demand, we expanded our branch network with
much needed “proximity services” to underbanked areas.
“Recurring growth will be the result of truly effective
solutions. We understand the specific needs of Premium,
Gold and Silver clients, offering each segment’s solutions,
adapted to their requirements. These are attractive retail
deposits and loans, tailored insurance through Beirut
Brokers and Beirut Life subsidiaries, “Best in Class” card
solutions and competitive personal, auto and mortgage
lines. Bank of Beirut’s flexible housing loans for example,
offer by far the best value in Lebanon. We are developing a
differentiated package for small to medium size enterprises
across industry sectors.
“Leveraging Bank of Beirut’s online technology presents
our retail customers with an “on the go” suite of capabilities
plus a “click to call” smart branch option, available anytime
day or night. At Bank of Beirut it is - and has always been
- about the customer.”
What investment will you make in online/mobile
banking this year? What are the critical touch points
that are being developed here?
“We are continuously investing in, and developing, our
online repertoire in order to anticipate and align ourselves
with the evolving needs of an increasingly sophisticated
customer base.
“Bank of Beirut corporate customers can access a
complete financial toolkit for wire transfers, bill payments,
opening and amending letters of credit, letters of guarantee,
import fee remittances and even employee payroll.
“Our personal banking portal helps customers manage
cash flow 24X7, check balances, transfer funds between
accounts within the bank, and wire transfer locally or
internationally.
cont. overleaf
9
24/02/2015 16:17
COVER
INTERVIEW
cont. from pg9
Sydney Branch
“Keeping pace with the digital economy, Bank of Beirut’s
presence expanded across virtually all key social platforms Facebook, Twitter, LinkedIn, YouTube, including an enhanced
blog to connect with stakeholders. These initiatives provide
an additional window of transparency into our operations
and businesses while heightening awareness of evolving
products and services.”
What are your new product and service launches
for 2015?
“One product in our pipeline is a new and unique offering
and a first in Lebanon. Bank of Beirut customers will
soon be able to set and monitor their financial objectives,
determining how much they want to save in order to
achieve their goals and dreams. Goals and dreams might
include a housing loan down-payment, educational degree
programmes, special project financing, or an exotic trip
and better planning for a comfortable retirement for all age
profiles. Bank of Beirut services are designed to help our
customers achieve their goals and dreams. “We are also developing an exciting new deposit
gathering campaign. Bank of Beirut plans to offer best in
market interest rates for locked deposits while still allowing
exceptional withdrawals and even additional deposits up to
an agreed threshold. We are excited about, and look forward
to launching these products which will appeal to an everwidening customer base.”
How do you envisage the bank’s expansion over 2015?
“We will implement our growth strategy within stable
Grade-A international markets supporting large or affluent
10
Oman Branch
Lebanese populations. And we will continue expansion
into specific underserved communities, where we exert
competitive advantage, including especially trade finance.
“Increasing trade ties between the Middle East and
Australia will be a focus in 2015. Against a background of
liberalisation in the Middle East, Australia’s leadership has
demonstrated a serious commitment to build and create
valuable relationships in the region. With a solid stronghold
in Australia through our wholly owned subsidiary Bank
of Sydney, we are poised for growth across a spectrum
of opportunities.
“How that growth will come to encompass the broader
Asian markets remains to be seen. We have identified
similar opportunities in the African region.
“Our investment and partnership criteria require a strong
Lebanese connection, a stable economic outlook, a solid
judicial infrastructure and a navigable political environment.
“The key will be to identify and convert the very best
long-term opportunities in a risk-managed way, to the
maximum benefit of our stakeholders.”
2015 should continue to
demonstrate our leadership
position and increasing market
share, further extending a
growth story which is the best
in Lebanon
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10/13/14 2:05 PM
COUNTRY REPORT:
KSA
No abrupt
policy changes
Analyst Raza Agha of VTB Capital offers
an outlook on succession in KSA after the
recent passing of King Abdullah
K
ing Abdullah of Saudi
Arabia, the world’s oldest
ruling monarch, died early
on 23 January 2015 after a
month-long illness. He had been Saudi
Arabia’s de facto ruler since 1995,
when the then-King, Fahd, suffered
an incapacitating stroke; Abdullah
formally ascended the throne in 2005.
As expected, Crown Prince Salman
has become Regent, while the Abdullah-
appointed Deputy Crown Prince Muqrin
has become the new Crown Prince. In one
of his first appointments, King Salman has
appointed Prince Mohammed bin Nayef
as deputy crown prince, effectively the
crown prince in waiting. The appointment
is significant, as it implies that the postMuqrin (the current crown prince) rule
will pass to the second generation of the
Saudi royal family for the first time since
the country’s founding in 1932.
Deputy Crown Prince Mohammed
is the son of Prince Nayef, a crown
prince under King Abdullah, who died
in office in 2012. Succession in Saudi
Arabia has not been vertical in the way
many monarchies are, but horizontal
between the sons of King Abdulaziz
al Saud, the founding monarch of
the Third Saudi State, present day
Saudi Arabia. However, Mohammed
bin Nayef’s elevation to the position of
deputy crown prince is not surprising,
given his appointment as interior
minister in 2012 by King Abdullah, a
position traditionally reserved for the
crown prince in waiting.
Despite the rapid changes in the
power dynamics of Saudi Arabia over
the last few years, we do not expect any
significant near-term policy changes
from the Kingdom. Even with Saudi
Arabia being an absolute monarchy,
policies are most often the result of
intensive deliberation and consensusbuilding within the Saudi royal family
and, at times, even beyond. Hence, King
Salman is unlikely to want to make any
quick departures from existing Saudi
policies, as they might be resisted by the
broader family, which will probably want
to project unity and continuity at such a
time. Any quick changes could also
be resisted because of health concerns
surrounding King Salman, thought to
be 79 years of age. Saudi officials have
categorically and consistently denied
rumours of his ill health.
Policy-wise, the new king will likely
himself be averse to any drastic changes.
Although in Saudi Arabia’s inner power
circle for decades, King Salman was
a relatively new crown prince (since
2012) under a king who was until a few
months ago very active in managing the
country. He will prefer to wait before
putting his own mark on the Kingdom’s
policies. It is, then, not surprising that
the new king has already pledged to
continue existing policies. This is also
cont. on pg14
12
page 12-14 Country Report VTB Capital.indd 12
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COUNTRY REPORT:
KSA
cont. from pg12
indicated in the fact that no major
unexpected cabinet changes have been
announced. Important for oil markets,
Ali al-Naimi will continue as oil minister,
per the Saudi Press Agency.
ECONOMY
While markets can hence expect
continuity from Saudi Arabia in the near
term, the transition comes at a time of
significant challenges for the Kingdom.
To its north, in Iraq, the militant Islamic
State of Iraq and the Levant (ISIL)
continues to control vast swathes of the
country; to its south, Yemen continues
to be in crisis, with Shiah rebels taking
control of the capital, forcing the
resignation of the Government; while in
the East, antigovernment protests have
continued in Shiah-majority-Sunniruled Bahrain. Further, across the Red
Sea, Saudi Arabia has been providing
significant financial support to a postMursi Egypt, in addition to Jordan and
Morocco, the only non-Gulf monarchies
in the MENA region.
Saudi Arabia also continues to face
challenges in its relations with Iran.
Improvement in the latter’s ties with
the West has strained the Saudi-US
relationship. Iran is seen as a threat to
the region’s Sunni monarchies, given
its alleged role in sponsoring/arming
Shiah groups in Lebanon, Iraq, Syria,
Kuwait, Bahrain and perhaps even in
Saudi Arabia’s own Eastern province,
home to much of the Saudi oil industry.
Domestically, one of the key
questions for the new monarch will be
whether to continue with the glacial
pace of social reforms instituted by
the former Regent. King Salman is
thought to be more conservative
than his predecessor, but also has a
reputation of being a consensus builder
in the royal family. The King’s alleged
conservatism will perhaps be balanced
by the new Crown Prince Muqrin, who
is thought to be less conservative than
14
page 12-14 Country Report VTB Capital.indd 14
the king. Additionally, the appointment
of Prince Mohammed bin Nayef as the
deputy crown prince is perhaps also a
counterweight to the king’s reputation
as a consensus builder within the
extended royal family.
Prince Mohammed is considered
a security hawk with a reputation
of cracking down hard on terrorism
and dissent.
More broadly on the domestic front,
the new Saudi monarch faces rising
social pressures, with a population of 30
million (2014, IMF), some 60 per cent of
prices and oil production assumed in the
budget. Despite the fact total spending is
envisaged to be some 22 per cent lower
than preliminary outcomes for 2014, the
actual deficit will likely be higher than
in the budget, as realised spending is
likely to be higher than budgeted.
Since the Arab Spring in 2011, Saudi
spending has averaged some 22 per
cent higher than budgeted amounts,
reflecting concerted efforts to prevent
contagion to Saudi Arabia. If this holds
true in 2015, with oil prices at $50/bbl
and oil production unchanged, Saudi
Any quick changes could also be
resisted because of health concerns
surrounding King Salman, thought to
be 79 years of age
which is below the age of 30 (U.S. Census
Bureau), and is growing at a brisk pace
of over three per cent, expanding the
labour force by 4.75 per cent every year
over the last decade. Saudi nationals
face an unemployment rate of 11.5 per
cent, while youth unemployment is over
30 per cent — even with low labour force
participation rates of around 50 per cent.
The bulk of the local Saudi work force is
employed by the state, although recent
indigenisation measures to increase
Saudi employment in the private sector
are showing some results.
The above mentioned regional and
domestic challenges come when oil
prices, Saudi Arabia’s principal source
of revenues, have collapsed to levels
not seen since the global financial crisis.
Spending to ease social pressures have
pushed Saudi fiscal breakeven oil prices
to over $100/bbl. Resultantly, Saudi
Arabia’s 2015 budget projects a deficit
of SAR 145 billion, just under $40
billion; preliminary 2014 data shows
a deficit of $14.4 billion. No official
statement has been provided on the oil
Arabia would likely post a deficit of
approximately 9.2 per cent of GDP ($67
billion or so). On the financing side,
Saudi Arabia has $742.5 billion in
foreign assets, with the Saudi Arabian
Monetary Agency (SAMA), another
$539.9 billion in government deposits
with the domestic banking system, and
a public debt ratio of 1.6 per cent of
GDP (2015 budget statement), giving it
plenty of options.
As is clear above, the transition
in Saudi Arabia comes at a time of
significant challenges for the Kingdom.
However, the Saudi sovereign assets
and the nature of government (absolute
monarchy) will ensure that no financial
issues will distract the new king in
ensuring the smooth continuity
of existing policies. Managing the
upheavals in Saudi Arabia’s neighbours
and preventing blowback will be a
challenge to the Kingdom itself and
domestic social policy will need to
be managed carefully in the face of a
fast-growing, young and increasingly
well-educated population.
26/02/2015 15:35
COUNTRY REPORT:
KSA
Saudi Arabia’s 2015
fiscal budget
Jadwa Investment summarises KSA’s fiscal
budget for December 2014 – December 2015
T
he Government’s budget
for the 2015 fiscal year
(31 December 2014 to
30 December 2015) was
endorsed by the Council of Ministers
on December 25. It was another
expansionary budget with spending
maintained at a very high level which
will play a vital role in supporting the
economy. The highlights are:
budget. It continues to highlight the
government’s intention to stimulate
the economy. We estimate that the
allocation to investment spending
remains elevated at SAR278
billion which will support healthy
economic growth and provide
encouragement and opportunities
for the private sector at a time of
global and regional uncertainty.
n For the first time since 2011, a fiscal
deficit is projected, based on revenues
of SAR715 billion and expenditures
of SAR860 billion. Education and
healthcare remain the focus of
government spending, accounting for
43.8 per cent of total spending. The
deficit will be financed comfortably
using Saudi Arabian Monetary
Agency’s huge stock of net foreign
assets, which totaled $736 billion
at the end of November. Domestic
debt was cut to a long-term low of
SAR44.2 billion in 2014, equivalent
to only 1.6 per cent of GDP.
n The budgetary performance in 2014
came up at the very low end of
our expectations with a deficit of
SR54 billion despite comfortable
year-to-date level in both oil prices
($99.5 per barrel for Brent) and oil
exports (7.1 million barrel per day).
This first fiscal deficit since 2009
was mainly due to both falling
revenues and rising expenditures.
Total revenues slipped by over nine
per cent compared to the previous
year, yet remained above the SAR1
trillion mark for the fourth year
in a row. The growth in the fiscal
expenditures, at 12.7 per cent, was
the highest in the last three years,
exceeding the SAR1 trillion mark
for the first time.
n Preliminary economic data shows
that 2014 was a healthy year for the
economy with real GDP growth of
3.59 per cent. Non-oil private sector
maintained strong growth, at 5.7 per
cent year-on-year, with growth of
construction, non-oil manufacturing,
transport and communications
sectors above five per cent year-onyear. Elevated oil export revenues
maintained a double digit current
account surplus at 14.1 per cent of
GDP or $106.4 billion.
We estimate a price of $56 per barrel
for Saudi export crude (around $60 per
barrel for Brent) and production of 9.6
million barrels per day are consistent
with the revenue projections contained
in the budget. We expect both revenues
and expenditures in 2015 to be above
the budgeted level and forecast a
budget deficit of SAR157.4 billion (six
per cent of GDP) based on oil price of
$79 per barrel for Brent.
n Despite the global environment
of lower oil prices, the Kingdom
maintains its counter-cyclical
economic policy in the 2015 fiscal
page 15 Country Report KSA Jadwa Investments.indd 15
15
26/02/2015 15:38
COUNTRY REPORT:
KSA
Regulation of credit
rating agencies in KSA
Anum Saleem, Senior Associate at Eversheds, Riyadh spoke to Zoya
Malik about the benefits of proposed regulations on KSA credit
agencies to operate in the market and the impact on lending for BFIs
W
hat restrictions are
there in issuing credit
ratings currently?
“Currently, Credit Rating
Agencies (CRAs) are not regulated in KSA
due to lack of local physical presence.
CRAs currently undertake their work
by asking their analysts to make short
visits to the company location, gather
information and send it back to the
regional/central back office, located in
Anum Saleem, Senior Associate at
Eversheds, Riyadh
16
page 16-18 Legal Credit rating agencies.indd 16
Dubai/London or the US for processing.
This method of operating gives rise to
two main problems.
“The first is a lack of local analysts. It
is common knowledge that credit rating
is an independent evaluation of the credit
worthiness of a debtor and represents
the CRA’s evaluation of qualitative and
quantitative information for a company;
including non-public information
obtained by its analysts. Quite often,
the credit ratings are based on the
CRA’s judgment and local experience
in determining what public and private
information should be considered in
giving a rating to a particular company
or government rather than precise
mathematical formulas. Therefore, the
CRAs, which are not based locally, face
challenges in understanding the business
culture in the Saudi market. For instance,
family businesses and succession of
management are considered key issues
in KSA for determining the future of
companies. This depends largely on
the customs and local culture rather
than dry numbers. So, understanding
the local culture is a challenge faced
by the CRAs in the Saudi market due
to the differences in the societies and
cultures where the CRAs usually operate
while coming up with an accurate
credit rating.
“In addition, the business culture
prevailing in the private sector in the
Saudi markets, is such that family
businesses might be more willing
to disclose information and discuss
internal business issues with one team
from a credit rating agency rather than
tens of lenders, investors, or banks.
“The second is the fact that a lack
of physical presence practically reduces
the accountability of the CRAs and the
individual analysts because any disputes
arising between the parties are invariably
referred to judicial/arbitral authorities
in the home country of the CRAs or
in London, which is often considered
problematic and financially tedious for
the local companies being rated.”
Can an independent rating be issued
on a Saudi corporate currently?
“Yes. There is no legal prohibition
on a Saudi corporate to obtain an
independent rating currently. In fact
more and more companies are opting
for independent public disclosures to
attract investors.
24/02/2015 16:18
Credit scores can facilitate financing
“This is due to an increased exposure
of local businesses on international
markets and a trend in the private sector
to seek alternative ways of financing
away from traditional bank loans. So,
since the start of the millennium, the
number of Initial Public Offerings [IPOs]
in the GCC markets, including the Saudi
market, has increased dramatically
from four IPOs in 2001 to the peak
of 59 IPOs valued at $15,517 million
in 2006, before the number of IPOs
declined to 25 IPOs valued at $11,642
million in 2008.
“The activity, however, picked up in
2014 when companies in KSA raised
$7.1 billion from the equity market
with the six billion dollar NCB IPO
accounting for bulk of the activity.
There is additional activity on the
market, prominent amongst them, the
news about Fawaz Alhokair Group
planning to raise two billion dollars
from the IPO of its Arabian Centres
malls unit, surpassing a similar sale by
rival Dubai operator Emaar Properties
earlier this year in UAE.”
What are the Saudi authorities
proposing with regards to
credit agencies?
“The purpose of the Regulations,
proposed by CMA, is to regulate and
monitor the conduct of rating activities
in the Kingdom and to specify the
procedures and conditions for
obtaining an authorisation to conduct
rating activities. After 1 September
2015, no person will be able to carry
out rating activities in KSA unless
authorised by CMA. The Regulations
broadly set out the requirements for
the CRAs to obtain authorisation and
its maintenance, conduct of business
by such CRAs and system and controls
needed to be employed by them for
this purpose.”
Would an encouraging regulatory
nudge for credit ratings help Saudi
banks identify more corporates to
lend to or fixed income investors
to consider a wider range
of corporate bonds and sukuk
compared to the current situation?
“Since a credit rating is an independent
evaluation of the credit worthiness of
a debtor, it will certainly help Saudi
banks identify more corporate entities
to lend to. Regulation and monitoring
of the CRAs will help make such reports
more reliable enabling the lenders to
attach more weight to these reports.”
cont. overleaf
17
26/02/2015 15:39
COUNTRY REPORT:
KSA
cont. from pg17
Can you point to precedents
elsewhere where the introduction
of credit ratings has led to a step
change in bank lending and debt
capital markets activity? How do
Saudi banks and investors deal with
credit risk assessment currently?
“The US, UK or the European market
could be quoted as examples where
the introduction of credit ratings led
to a step change in bank lending and
debt capital markets activity. However,
the 2007 financial crisis also called for
some strict regulations on the CRAs.
The CRAs managed to avoid being
regulated in the Sarbanes-Oxley law
despite criticism of their slowness
in downgrading Enron, which lost
its investment-grade rating only days
before it filed for bankruptcy in 2001.
“Again, the CRAs should not have
been able to escape additional regulation
after the 2007 financial crisis as they gave
AAA ratings to numerous securitisations
that later defaulted, calling into question
Credit scores help banks lower interest
rates on loans
few businesses have more obvious
conflicts of interest than those that
involve the issuing of ‘objective’ and
‘independent’ reports and opinions
about companies that pay for those
reports and opinions.
“The Saudi banks and investors
have so far dealt with credit risk
assessment internally either through
their inhouse resources or through
outsourced agencies. Both have faced
issues of different nature.”
However, the increased demand in this
sector is only going to push the supply up
their competence, if not their integrity.
The crisis highlighted the innate conflict
of interest involved in rating those that
pay for the rating.
“If the opinions are to be worth
paying for, those issuing them have to
have some credibility. But too much
independence can also be fatal to
a business. Those who pay for an
opinion are not going to hire someone
known to be excessively tough.
“The Dodd-Frank law required more
regulation, but that has gone slowly.
Only now are some rules regarding
the agencies about to be adopted by
the S.E.C., and regulators have found
that some of the obvious solutions
simply won’t work. The issue is that
18
How would new regulations affect
your business in terms of new
opportunities? Can you describe
the size and scope of your current
business in Saudi and how this
might evolve?
“The Regulations will be beneficial
for both the CRAs and the private
businessmen. The first and immediate
benefit will be to have access to more
funds from the international financial
markets
International
investors
or lenders have little or limited
information on the creditworthiness
of the borrowers, based in KSA, except
for the creditworthiness level conveyed
by the credit rating and the reports
published by the rating agencies. These
funds might be used by governments
or public companies for infrastructure
projects or by the private sector to
cover the sunk cost of a project or to
finance expansion of operations. Other
benefits will include lower borrowing
costs for debt issuers and lower default
risk faced by investors resulting from
pricing the risk premium accurately
i.e. the financial asset price in which
borrowers with lower probability of
default get cheaper prices than those
with higher probability of default.
“Regulated CRAs will help in
establishing international partnerships
and increasing foreign direct investment
because the credit rating process takes
into account the macroeconomic factors
beside other corporate specific factors
while sovereign credit rating gives a
clear picture on the macroeconomic
health and prospects for doing business.”
Do you see Saudi, in time,
developing as a centre for listing
traded debt and sukuk instruments
for non-Saudi corporates, given
the abundant pool of liquid
investor capital in Saudi?
“I certainly see an opportunity there.
Although, Dubai is likely to pose a
tough challenge for Riyadh to become a
centre for listing traded debt and Sukuk
instruments, Saudi has an opportunity
owing to its sheer economic size. An
important challenge for the CRAs, as
mentioned above, however will be to
build local capacity and attract local
professionals who understand the local
culture and would add value to the
current understanding the CRAs have
about the Saudi market. Historically,
the supply of local professionals
who could perform well in financial
analysis, risk management, and credit
rating has been limited.
“However, the increased demand in
this sector is only going to push the
supply up.”
26/02/2015 15:40
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bleed guide.indd 1
10/19/14 5:16 PM
PRODUCT AWARDS
NOMINATIONS 2015: KSA
KSA
Saudi Hollandi Bank (SHB)
Best Mobile Banking Service
Best Home Finance
Best Personal Loan
Ali Imran, Head of Retail at Saudi Hollandi
Bank, discusses the attributes of SHB’s
nominations at Product Awards KSA 2015
Sami AlRowaithy, Head of e-Business
and Channel Management
S
HB’s
Mobile
Banking
application offers customers
a convenient way to perform
their essential daily banking
transactions on the go, with a secure
log in method to access their devices
through a five digit passcode. This
application has succeeded in attracting
19 per cent of the bank’s customers and
18 per cent of total bank transactions,
and is anticipated to continue and
increasing in 2015, with the expected
launch of its second generation in
20
page 20 nominations KSA.indd 20
Bander M. Al-Samman,
Head of Retail Assets
Q2 2015. This upgraded application
is intended to drive innovation in
Saudi Arabia by availing a fullyfledged solution with different designs
for smartphones and tablets that
will include rich services, customer
notification, a new design, an enhanced
user experience, and features such as
Dateline and proximity marketing.
Dateline is a service where the customer
can view three sections on one page.
In terms of Personal Finance, SHB
is one of the leading players in this
segment in KSA, demonstrating an
impressive growth of over 20 per cent
in 2014. Saudi Hollandi offers the
highest loan amount coupled with the
lowest rate in the Kingdom, making
this a most desirable and affordable
product in the market. For customers’
convenience, Saudi Hollandi also offers
six months deferred payment plans.
Keeping in mind the recent success
and demand for personal finance in
the market, SHB will continue its
focus by expanding this product,
offering in remote cities as well. In
addition to this, SHB will concentrate
on developing home-grown talent to
take this product forward. In 2015,
we are working on launching some
exciting new variants for personal
finance which will make financing
more affordable and convenient.
SHB offers Shari’ah-compliant home
finance. Whether customers wish to buy
their dream home, aspire to own land
or a residential building for investment,
we offer them the right solution and
flexibility to meet their needs. SHB home
finance has shown exceptional growth
of over 40 per cent in 2014 from 2013,
by continuously striving to provide the
best products to meet customer needs.
In line with this, SHB has launched
product variants such as the combo loan
giving customers flexibility over their
finances while arranging their home
finance. In 2015, SHB we will continue
with new innovations, keeping a
customer-centric approach in providing
our consumers the best possible
financial solutions.
24/02/2015 16:18
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238899
bleed guide.indd 1
24/02/2015 13:44
TECHNOLOGY
The year for
reflection:
Digital Trends
Report 2014
T
he first dedicated Digital
Trends Report 2014 launched
in the Middle East comprises
of eight key trends for
the region when it comes to digital
communications highlighting what
organisations, brands and technophiles
should be looking forward to in 2015.
Countless new technologies and
developments in the digital world
have shifted the nature of how many
industries in the region communicate
with target audiences. It’s time for
Middle Eastern companies to be aware
of how digital communications have
evolved over the past few years, how it
has impacted their industries and how
to benefit from them - as outlined in
this Digital Trends 2014 report.
Credit: littlewhale
Active and Hotwire spotlight the first
Digital Trends Report for the Middle East
The eight digital trends for 2014 are:
1. Politics finds its Voice –We’re
taking it back to 2011, back to
where we were getting started with
social media. As the younger Arab
generation comes of age politically,
and the region continues its transition
from autocracy and dynasty to
representative government, the
impact of social media will have
permanent political impact, perhaps
more than in any other region;
2. Social media in school – Whose
responsibility is it to educate
children on the pros and cons? Is it
down to parents, teachers, charities
or someone else? And should social
media education be added to the
curriculum? These are all questions
we expect to be raised more and
more in 2014 and beyond;
3. Cultural Sensitivity – Communications
in the Middle Eastern region is a
different ballgame from the Western
one, how do we express our opinions
or communicate on social media
without breaking the law or common
courtesy? This chapter highlights
what the rules and protocols are
cont. on pg24
22
page 22-24 Filler Digital Trends.indd 22
26/02/2015 15:41
bleed guide.indd 1
16/10/2014 14:47
TECHNOLOGY
cont. from pg22
when communicating publicly on
social media and what we as private
users and organisations should be
aware of;
4. Death of anonymity – The concept of
online privacy has been completely
demolished by Edward Snowden,
former contractor for the NSA. How
safe is our personal information
online? What should or shouldn’t
we share? Edward’s revelations
have made us think twice before
posting anything online;
5. Data for the moment – How did
brands leverage Dubai’s bid for
Expo 2020 to their own benefit?
And more importantly, were they
creative while doing so? We look
at how brands should understand
their social data and base their
social media campaigns on that;
6. From customers to consumers – We
will see customer service teams and
community management merging in
2014/2015. Customer service teams
will lose their reputation for starchedcollar-stuffiness, while community
managers will gain authority to act
on behalf not just of the brand, but
also of the organisation.
7. Digitisation of retail – Frictionless
digital technology has the potential
to delete the middleman. We expect
to see retailers move upstream
and become content and product
manufacturers, and downstream to
own the glassware in your pocket
or living room. If they don’t, they
may face a challenging time ahead;
8. But How Much? – The upcoming
year will be a breakthrough year
for campaign measurement and
particularly in the establishment of
standards for measuring social media
focused activity. Partly, this will be
due to the sharing of knowledge and
best practice among social media
marketing professionals.
Fatima
el
Malki,
Digital
Communications Manager at Active,
comments, “We’re very excited to
present our very first Digital Trends
Report 2014 for the Middle East.
Through many interactions and
conversations with our Clients and
fellow specialists in the fields of
communications, public affairs and
technology, we noticed a lack of thought
leadership focused on digital such as
our report. Reading reports and articles
comprising of various percentages on
social media behaviour are educational,
our report however focuses on how to
leverage on these trends as a brand or
communications professional.”
Sawsan Ghanem, editor of the
report and Managing Partner at Active
said, “Digital is literally changing the
way we all look at things, and the way
we behave. The Digital Trends 2014
report is designed to provide a taste,
and an insight into how much of an
impact digital communications has
on society both worldwide and in the
Middle East”
Protestors in Tahrir Square, Cairo, Egypt (Credit: Hang Dinh)
24
page 22-24 Filler Digital Trends.indd 24
26/02/2015 15:43
MGI Banker ME 210x270mm.ai
bleed guide.indd 1
1
12/11/14
11:31 AM
16/02/2015 13:30
EVENT
SWIFT Middle East
Regional Conference driving economic growth
SWIFT is hosting MERC 2015 at the Movenpick
Hotel, Dead Sea, Jordan, 30-31 March 2015
T
he Middle East region has
faced geopolitical headwinds
and industrial unrest in the
last year or so — but this is
not the only story. Good news has come
from the growing resilience and reach
of the region’s banks and the rising
international attraction of its capital
markets. For example, companies raised
almost $18 billion in the Middle East’s
equity markets in 2014 — more than
three times the previous record for a
year — and this bumper 12 months
comes ahead of plans by Saudi Arabia
to open its doors to direct foreign
investment in its $500 billion stock
market. This bodes well for the region’s
economic growth and resilience.
Importantly, the region is positively
developing its economic landscape
beyond oil and energy, and recognising
that economic dynamism will be driven by
entrepreneurs. Young startup companies
are being nurtured by services such as
Jordan’s Oasis500 and Silicon Badia, and
Dubai’s SeedStartup, for example.
“Our industry faces a range of
challenges from geopolitical uncertainty
and cybercrime to the fast-changing
regulatory landscape and new
26
page 26-27 SWIFT.indd 26
competitors. This is the ideal time to
get together to find common solutions,”
comments Christian Sarafidis, Deputy
Chief Executive, EMEA, SWIFT.
Efficient payment systems and
securities markets are a critical element
for any economy and so the theme
for SWIFT’s Middle East Regional
Conference this year is ‘Financial market
infrastructure — driving economic
growth’. The event will bring together
policy makers, industry leaders and key
speakers to discuss the opportunities
presented by the region’s growth and
expansion, and examine the challenges
posed by an increasingly complex
geopolitical and economic environment.
The two-day programme will be a
mix of targeted keynote speeches and
interactive panel sessions featuring
senior speakers and strategic thinkers
from across the industry and the region.
Middle East
Regional
Conference
Jordan
30-31 March 2015
The event will explore the role of
financial infrastructure in underpinning
economic vitality and in facilitating
regional and global trade, and get an
economic viewpoint of Middle East
development. Other sessions will look at
the rising threat of cybercrime and what’s
happening in the financial technology
innovation space across the region. We
will also explore the continued impact
of new global regulations, financial
inclusion and the importance of diversity
in the region.
“Banks in the Middle East are
expanding across the region and beyond.
They are looking for ways to minimise
risk and maximise opportunities. The
Middle East Regional Conference is a
great venue to discuss these and other
issues,” says Sido Bestani, Head of
MENA & Turkey, SWIFT.
The
Middle
East
Regional
Conference will provide a unique
platform for discussion and high-level
networking — and we look forward to
welcoming you to the event where you
can join the dialogue about the future
of our industry in your region.
Registration is now open, so please
go to SWIFT.com for more information
and registration details.
Register now
Finacial market infrastructure:
Driving economic growth.
24/02/2015 16:19
AGENDA
Monday, 30 March 2015
08:00–09:00 Welcome coffee, registration and
Solutions zone open
09:00–10:00 Breakout Session 1 and SWIFT Hub –
Welcome to MERC
SWIFT Hub is a new concept for our EMEA
events. As well as being a great place to meet
up, it will offer a sneak preview of what to
expect from the event, an overview to the
SWIFT work sessions and an introduction to
the SWIFT experts who are present.
10:15–11:15 Opening plenary
Keynote Address: His Excellency
Dr. Ziad Fariz, Governor of Central Bank
of Jordan Panel discussion:
The Middle East in 2015 – Challenges &
Opportunities
The Middle East region has faced geopolitical
headwinds and industrial unrest – but this is
not the only story. Good news has come from
the growing resilience and reach of the region’s
banks and the rising international attraction
of its capital markets. Just as importantly, the
region is positively developing its economic
landscape beyond oil and energy, and recognising
that economic dynamism will be driven by
entrepreneurs. Young startup companies are being
nurtured by services such as Jordan’s Oasis500
and Silicon Badia, and Dubai’s SeedStartup. In this
complex environment, what are the challenges
and opportunities? How is the financial sector
supporting and benefiting from this development?
11:30–12:00 Coffee break
12:00–12:30 Keynote address: Middle East Economic
view: the impact of geopolitics
12:30–3:30Lunch
13:30–14:00 Keynote address: The rising cyber threat
In partnership with the SWIFT Institute
14:00–15:00 Breakout Session 2
15:30–16:30 Panel Session: Payment market
infrastructure – driving economic growth
Interoperable payment market infrastructures
support economic dynamism and enable
greater consumer choice by opening up the
potential for new channels, new services
and new entrants. The financial market
infrastructure project currently being led by
the Central Bank of Jordan is a great example
of the crucial role that financial infrastructure
plays in promoting growth. What projects are
underway across the Middle East region?
page 26-27 SWIFT.indd 27
17:30-18:30 Welcome refreshments sponsored by
the exhibiting partners and Meet the
Partners session
19:30
Gala Dinner
Tuesday, 31 March 2015
08:00–09:00 Welcome coffee and Solutions zone open
09:00–09:30 Discussion: Boosting financial inclusion
in the Middle East
09:30–10:30 Breakout Sessions 3
11:00–12:00 Panel Session:
The impact of global regulations
The rising expectations of global
regulators are having a profound impact
on the way financial institutions look
at their business and manage their
operations. The penalties for mistakes are
so high that it is causing some banks to
withdraw from some markets, business
lines or counterparties. In fact, growing
sanctions lists and global regulations
such as Know Your Customer (KYC) have
the potential to significantly reshape the
financial industry. What has been the
impact, if any, in Middle East markets?
12:00–12:30 Keynote address: Economic update –
Challenges & Opportunities
12:30–13:30Lunch
13:30–14:00 Discussion: Diversity in the Middle East
14:00–15:00 Innotribe Session: Fintech Innovation in
the Middle East
The Middle East region is positively
developing its economic landscape beyond
oil and energy, and recognising that
economic dynamism will be driven by
entrepreneurs. Young startup companies are
being nurtured by services such as Jordan’s
Oasis500 and Silicon Badia, and Dubai’s
SeedStartup, for example. So what does the
startup landscape look like across the region
for financial technology startups? Who are
the major investors and who is incubating
young companies?
16:00–16:30 Breakout Session 4
16:30–17:30 Closing plenary and Corporate Social
Responsibility presentation
27
24/02/2015 16:19
ASSET
MANAGEMENT
Daman
Investments
goes for IPO
As Daman Investments prepares to go to
IPO in Q1 2015, Zoya Malik spoke to its
Chairman and Founder Shehab Gargash
to discuss the company’s objectives in the
market in launching the IPO
W
hat is the motivation
for proceeding with
the IPO?
Are you looking to raise capital
and what will be the use of
these proceeds?
“The objective of the
IPO is two-fold: To realise value
for our investors who have invested
in and supported Daman since
its establishment in 1998, and to
enable Daman to venture into a very
promising future by enabling it to play
a more assertive role as a UAE-based
well capitalized public company.”
“The IPO is based on a capital raise
through the issuance of new shares to
the public. The proceeds shall be used
to support the continued growth of
Daman in the financial services field
along the lines of the four business
lines it has conducted over the past
17 years, namely: Brokerage, asset
management, venture capital and
corporate advisory services.”
Who owns the company now
and what are their intentions for
the IPO?
“Daman is owned by a group of UAE
and GCC investors who have been
investing in the company since its
establishment in 1998. The owners
shall become founders in the “new”
public Daman, and none of them shall
be selling down any of their stake in
the company.”
28
page 28 Daman Investments.indd 28
How do you expect the IPO to
impact the incentives and culture
of the company?
“While becoming a public corporation
has many merits, we are equally aware
that it also demands of us a more
diligent set of obligations. In this
light, Daman embarked as early as
2009 on a comprehensive programme
to prepare itself for conversion to a
Chairman and Founder Shehab Gargash
public corporation through internal
preparedness and the development of
a robust and ambitious business plan.”
How many senior staff have
shares in the company and do
you have a share options scheme
for employees?
“Daman already has an employee
stock option plan in place mainly with
a view to retaining key talent within
the firm. Daman is also looking to
further enhance its ESOP offering in
the future as a public company.”
There are no investment companies
listed on the DFM,why is that?
“The development of the non-bank
financial services sector in the UAE has
lagged the overall development of the
country. This has been a long-standing
reality in the UAE, and in fact was one of
the key reasons for establishing Daman
back in 1998. Since then, the regulatory
environment has markedly improved,
and the financial sector has also become
significantly more populated. These are
all welcome developments. By attaining
our UAE listing as a public financial
services company based in the UAE,
Daman hopes to be a pioneer as we
hope other similar corporations would
also seek to list as public companies
on the UAE exchanges, which would
serve the country’s financial services
sector well.”
24/02/2015 16:20
bleed guide.indd 1
12/7/14 9:03 AM
WEF
2015
Klaus Schwab, Founder and Executive Chairman, WEF at Davos, Switzerland.
(Credit: Mykhaylo Palinchak/Shutterstock)
The New Global
Context – Davos
in perspective
Oil prices led the discussion this year in a
conference characterised by a restrained
optimism, reports Dominic Amlôt
E
stablished in 1971, the World
Economic Forum (WEF) is best
known for its annual meeting
at
Davos,
Switzerland.
Bringing together some 2,500 heads of
government, business and academia, the
WEF discusses the most pressing issues
30
page 30-32 Davos WEF 2015.indd 30
affecting the world today and aims to
positively affect the global agenda.
Titled “The New Global Context”, the
debate this year has been dominated
by four topics: declining oil prices,
regional instability in the Middle East,
the European Central Bank’s stimulus
package and the Swiss Bank’s decision
to abandon attempts to prevent the Swiss
Franc from gaining against the Euro.
Although more pessimistic than last
year, 2015’s WEF was buoyed by the
IMF’s forecast of 3.5 per cent growth
this year. Coupled with an ECB derived
stimulus package and robust growth
in the United States this marks an
important step in growth. On the topic
of the ECB’s decision over quantitative
easing, Benoît Coeuré, a Member of the
Executive Board asserted, “We have
done our part, but the ECB cannot raise
productivity, increase employment or
encourage investment. That requires a
more comprehensive set of reforms.”
Undeniably though, the fall of around
50 per cent in oil prices has been the
prevailing topic. The World Bank has
indicated that this may increase the
annual world economic growth by as
much as 15-20 per cent. In spite of this,
certain countries are still set to lose out.
Lower prices translate into potential future
instability; Iran, Russia and Venezuela are
particularly at risk. Each has a stated
overreliance on high oil prices, without
them it is unlikely that they will be able
to balance their budgets — the price
would have to spring back to over $100
a barrel to reach a ‘fiscal breakeven’.
Worse, neither Iran nor Venezuela has the
necessary financial reserves to endure a
long term decrease in price.
The majority of countries are
importers however, this price change
should therefore be generally positive.
Interviewed shortly before the end of
the conference, Dr Umayya Toukan,
Jordan’s Minister of Finance said, “It is
very good for the economy of Jordan
because the cost of production will
be less … lowering oil price by 60 per
cent should lead to higher incomes and
higher demands.” He cautioned however
that this should not be taken as an
opportunity for complacency, “People
feel that maybe they’re tired of austerity
24/02/2015 16:22
and they consider this as maybe a
break but really that would be wrong.
I think we should use these favourable
circumstances to continue with our
reforms and increase competiveness.”
Of the oil producing nations, Gulf
countries are set to suffer the least,
followed by the Middle East and then
the rest of the world. Understandably this
decision has not been entirely popular,
Oman has voiced criticism of OPEC’s
decision to fight for market share rather
than change production. Moreover it
is predicted that overproduction could
lead to a long term rise in price. Head
of the Italian energy company Eni Spa,
cont. overleaf
EVENT
10 Years of innovation
and education
O
ver the years, the Middle East Retail
Banking Forum and Expo has successfully
brought together banking professionals from
across the region to learn about the latest
innovations within the industry. In April 2015, the event
will be celebrating its 10th anniversary with an expanded
format with new and exciting features that will keep more
than 1,000 industry professionals engaged.
n
A packed two day conference where industry gurus will
present best practice strategies and the latest case studies
across the key topics affecting the industry.
n
A free two day seminar programme where attendees can hear
about the latest solutions to help to improve their businesses.
n
A free online networking tool where likeminded
professionals can network before the event and arrange
to meet during the event.
NEW VENUE, NEW FORMAT,
NEW FEATURES
In keeping with celebrating such a milestone, the 10th
Middle East Retail Banking Forum and Expo has moved to
a larger location in the heart of Dubai’s finance district, at
the impressive Ritz Carlton, DIFC. This move has allowed
the event to expand to a must attend conference that
includes a dedicated exhibition which will host more than
80 international solution providers across retail banking,
payments and financial technologies. More than 1,000
professionals can see, hear and network with some of the
most influential leaders within the industry.
Keeping the audience engaged, the new and improved
event will include:
Don’t miss this celebratory event.
Visit www.retailbanking-expo.com for more
information and to register.
31
24/02/2015 16:22
WEF
2015
cont. from pg31
Claudio Descalzi remarked at Davos that
unless OPEC restores stability, prices
may rise to over $200 per barrel in
several years. Patrick Pouyanne, CEO of
Total S.A. echoed Descalzi’s warning of
overproduction, “There is a natural decline
of five per cent a year from existing fields
around the world. That means by 2030
more than half of the existing global oil
production will disappear. There is an
enormous amount of money that needs
to be invested to get another 50 million
barrels per day of new production.”
Oil aside, the WEF was also home to
much discussion over the future of the
Middle East and the lasting impact of the
Arab spring. Speaking at a private session
of Middle East leaders at the WEF one panel
member commented, “What happened in
the Arab world over the past three years
has been an economic revolt. It is not
about elections, it is about construction.”
Whilst difficult to prove, it does highlight
the crucial and ongoing economic underachievement of some Arab nations. Youth
unemployment currently stands higher in
MENA, than anywhere else in the world.
Dany Farha, Chief Executive Officer of
BECO Capital, a regional venture capital
firm focused on technology investments
in the Arab region, has stated that a
potential solution to this problem is greater
investment in technology. Without this, he
has estimated that currents trends would
place total unemployment at 149.5 million
people by 2050 in the Arab region.
He insists that private and public
sector investment in technology and in
the digitals sector will help to alleviate
the political and social risks of long
term unemployment. At the moment
the Arab region has approximately 35
times less than Europe and 200 times
less than the USA invested in venture
capital per capita per annum — a reality
that Farha judged ‘chilling’.
Among other talking points was the
death of Saudi Arabia’s King Abdullah.
Many of the participants paid direct
32
Winter view of Davos. (Credit: Alexander Chaikin)
tribute. One notable figure was former
Israeli President Shimon Peres, who
remarked that the monarch’s death was
a “real loss for peace in the Middle
East.” Pierre Moscovici, the European
Union’s Commissioner for Economic and
Financial Affairs, described Abdullah
as “a personality of peace and strong
leadership.” Mounir Fakhry Abdel Nour,
the Egyptian trade minister said Abdullah
did a lot to unify the Arabs but that
Saudi Arabia was “in good hands” with
his successor, King Salman bin AbdulAziz Al Saud. Canadian Foreign Minister
John Baird commented Salman will “be
a strong leader not just for the kingdom
but for the region.” King Abdullah II
of Jordan cancelled his appearance on
a session on advancing Middle East
security and peace ahead of the funeral.
Several other Arab dignitaries also exited
the conference prematurely.
The World Economic Forum on the Middle East and North Africa will be
held in Jordan on 21-23 May 2015. Its stated theme this year is “Shaping
a New Strategic Context”, an expected 800 plus government, business
and civil society leaders from more than 50 countries will attend.
24/02/2015 16:22
PAYMENTS
TECHNOLOGY
Money makes the world
go round – the future
of payment technology
Saad ElKhadem, Research
Analyst at IDC MEA points
to emergent payment
technologies making the
customer and vendor
exchange more seamless
and secure
W
Saad ElKhadem, Research Analyst at IDC, MEA
e all love money. We love
having it, and we love
spending it. But when you
think about it, not a whole
lot has changed in the world of payment
technology since the solutions that we now
take for granted first came to the fore.
We all have a bank account where most
of our cash is stored, along with a debit
card that we can use for withdrawing
that cash from ATMs or for making
direct purchases. On top of this, most
of us have at least one credit card, and
some of us many more than that!
The result is an ever-expanding
wallet and ever-increasing vulnerability
to theft; no doubt we’ve all experienced
that sense of pending doom each time
we momentarily mislay our cards.
cont. overleaf
page 33-34 IDC.indd 33
33
24/02/2015 16:23
PAYMENTS
TECHNOLOGY
cont. from pg33
Riding to the rescue are Apple and
MasterCard, with two new technologies
that incorporate fingerprint scanners
in a bid to take payment security to
the next level.
Apple has long strived to dominate
our everyday lives, and its latest
attempt is to replace our wallets with a
solution called Apple Pay. The service
made its debut with the recently
launched iPhone 6 and iPhone 6 Plus,
with plans to also incorporate it into
the Apple Watch in 2015. But how
does it work? Well, first you upload
your credit card details onto your
phone, and then you hit the mall. At
the checkout you simply wave your
phone over an Apple Pay-compatible
payment terminal, select your desired
card, and then place your finger on
the Touch ID sensor. That’s it.
REAL ADVANTAGE
If you’re thinking it would be just
as quick to just pull your card out
and pay with it in the normal way,
you’d probably be right. However,
the real advantage that Apple Pay
brings is security. Apple Pay leverages
a data-security concept known as
‘tokenisation’, and this enables your
card details to be stored on a secure
part of your device. It is for this
reason that the Apple Pay feature is
only available on the latest iPhone
models. With this added layer of
security, merchants never see your
card details and as a result users
are far better protected in the event
of hacking attacks. The service was
initially launched in the U.S., with
220,000 partners jumping on board,
but it’s going to take a whole lot
more of these partnerships before
you can start leaving your wallet at
home altogether.
MasterCard’s own twist on the use
of this technology predictably relates
to the credit card itself, with a built-
34
page 33-34 IDC.indd 34
in fingerprint scanner included on
the plastic. The new card will support
contactless payments, and if that isn’t
available, it can also be used with
standard chip-and-pin systems. When
you come to pay, simply place your
thumb over the sensor, insert the card
or wave it over the machine and the
payment is complete. Your fingerprint
is stored directly on the card and is
not shared with MasterCard. Sounds
intriguing, but you’ll have to wait
until the New Year to get your fingers
on this latest generation of credit
card tech.
TECHNOLOGY
As you can see, the payment landscape
is slowly starting to progress. While
there are still plenty of traditional
magnetic swipe cards in use, more and
more of them now include chip-andpin technology. And more recently,
we have begun to see increased
opportunities for utilising NFC
contactless payment solutions and
even QR codes. However, in order for
shoppers to take full advantage of these
emerging technologies, merchants
will need to provide relevant support
through their point-of-sale (POS)
MasterCard’s own twist on the use of
this technology predictably relates to the
credit card itself, with a built-in fingerprint
scanner included on the plastic
RELEVANT INFORMATION
The next solution, called Coin, does
not include a fingerprint scanner,
but instead strives to take the strain
off your wallet by replacing all your
plastic with one smart card. This
credit-card-sized piece of hardware
features a screen and single button
on the front and is capable of storing
all your relevant card details inside it.
To set the solution up, you must first
insert a dongle into your smartphone.
After swiping each card (and taking
an accompanying photo), the relevant
information is beamed to your Coin
where it is stored and ready for
use. When you come to pay, simply
select the correct card as shown on
the built-in display and hand it over
to the teller for them to swipe in
the normal way. An added security
feature will notify you through your
smartphone if you have left the card
behind. Once again, this product will
be available from next year.
machines. Such upgrades will cost
money, and until they are willing
to take that leap most of these new
payment technologies will experience
limited traction.
In an attempt to make this transition
as painless as possible, the man who
once headed the Google Wallet project
is now pioneering the next generation
of ‘future-proof’ POS hardware.
Available from 2015, Poynt is a POS
machine that can accommodate all
of the above payment methods and
also includes a built-in printer and
two touchscreens.
Next year is now only a matter of
weeks away, and while the technologies
discussed here will make their debuts
elsewhere in the world, you can rest
assured that most of these features and
products will eventually make their
way to the Middle East. Just make
sure that when they do, you’ve saved
up enough money to start spending it
again in a whole new way.
24/02/2015 16:23
bleed guide.indd 1
27/01/2015 08:29
MARKETING
TouchPoint excellence
improves customer
retention
Charles Taylor, Founder and Managing
Director of Locus Consulting, discusses
how to meet customer’s needs
CUSTOMER LOYALTY
IS DEAD, AND THE
FIGURES PROVE IT
Charles Taylor, Founder and Managing
Director of Locus Consulting
A
ggressive, ‘deep-pocket’
competitors are sending
a strong wake-up call
to services companies,
SMEs, and other firms faced with
increasing customer defections. A
focus on excellent service quality at
customer/supplier interactions, known
as TouchPoints has been proven to
reduce defections.
36
page 36-37 Touchpoints Excellence.indd 36
On average, U.S. corporations now lose
half their customers in five years, half
their employees in four, and half their
investors in less than one.
It may prove expensive to retain
customers now, but on average, it costs
companies five times more to get a new
customer than retain an existing one,
importantly quality and price are not the
major factors driving customer defections;
rather, poor service is usually the driving
force behind customer defections.
MARKET LEADERS
RAISE THE BAR
Service-oriented companies around
the world all have things in common.
From the top down, they’re sold on
the importance of service excellence
and customers have demonstrated that
they are willing to pay a premium
to receive excellent service. It’s
important in the hiring and training
process, in the business processes
and systems, and in the design and
implementation of departmental
operations measurements.
SHAPING THE
CUSTOMERS’
EXPECTATIONS
To create a differentiating level of
customer service, management must
understand, and sometimes shape, the
customers’ expectations. The successful
customer retention process starts with
the clear communication of the sales
message, which captures a reliable,
value-added, branded way in which you
intend to supply products and services to
your customers - one as unique to your
company as your corporate identity.
Moments of truth occur when
customers assess the quality of your
service against the expectation shaped
by the sales message.
SERVICE DELIVERY MEETING CUSTOMER
EXPECTATIONS
Once the initial order for service has
been processed, the customer life cycle
commences. The length of the life cycle
is defined by the customer’s satisfaction,
resulting from treatment occurring at a
series of so-called ‘TouchPoints’. Customer
interactions are executed at the level of
marketing and sales, provisioning, billing,
customer care, and maintenance.
24/02/2015 16:23
Figure 1: Measure the right things
n Measure the gap between customers’ value expectations and the company’s level of delivery
n Tie metrics to strategy
Value Expectation
Customer Intimacy
Operational Excellence
Management focus
Relationship-oriented
Process-oriented
Goal-oriented
Metric
Retention
Meeting promises
Share of customer
Customer complaints
High margins
Low cost/transaction
Time and cost
Time to market
Product life cycle
Share of market
Goal
Adding value
Meeting customer
expectations
Cost containment
Level of customer acceptance
Product Leadership
Figure 2: Customer retention is the key to profitable growth
Year One
Example - a typical telecommunications reseller with
• 2% monthly customer disconnects,
• 35-40% gross margins, and
• 7% net income
Customer Life Cycle
Price premium
Referrals
Effective a 10 per cent reduction in disconnects (to 1.8% /
monthly) will improve net profit by almost 30%
Cost savings
Revenue growth
Lifetime Value*
Estimated value of a residential customer is $5,600
Estimated value of a business is $33,000
* The value of long distance service over a lifetime with an
assumption of 155 pretaxed profit
Source: TRECOM Sample Customer Study
Customers expect service providers to
respond to the uniqueness of each special
situation. These interactions blur into one
overall impression of service quality - an
impression, unfortunately, calibrated by
the last time something went wrong.
MEASURE THE
RIGHT THINGS
Customers are the only true judge of
service quality. Only they can determine if
you are providing TouchPoint Excellence.
In order to consistently meet
the expectation of your customers,
proper measurements must be put in
place, and tied to the right things.
All too often, companies implement
measurements which drive behaviour
counter to their publicly stated strategy.
Figure 1 depicts some metrics which
drive employee behaviour toward goals
consistent with differing customer
value expectations.
What’s the Payoff?
Figure 2 is a picture of customer
profitability as measured over the total
customer life cycle. Starting in year
page 36-37 Touchpoints Excellence.indd 37
Base profit
Annual Customer Profit
1
2
3
4
5
Years
Acquisition cost
6
7
1, we note negative profitability, due
to the initial acquisition cost. As we
move forward in time, cumulative
monthly margins of the overall
product basket will yield a profitable
account. With a 10 per cent reduction
in customer disconnects, a company
around the world can realise net
profit improvements in the range of
30 per cent.
Service leaders grow twice as fast
as their competition. Capitalising on
this phenomenon:
n
invoking subsequent years’ price
increases;
n
introduction of new products and
services additions; and
n
referrals resulting from satisfied
customers further add to the
profit levels.
How do you achieve TouchPoint
Excellence?
1) Know your customers’ expectations
2)Internalise your customers’ value
expectations
Although many companies listen well,
their executive offices are jammed with
customer surveys and correspondence
on which no one has acted.
Effective listening will tell you what
customers define as poor, good, and
superior service levels, at each of your
TouchPoints. This gives you the foundation
to establish appropriate measurement
benchmarks, as described in Figure 1.
Identify
the
largest
gaps/
3)
opportunities between company
delivery systems and your
customers’ value expectations
Once you begin to list what needs to
be fixed, you are faced with the classic
managers’ Process Reengineering dilemma
- how can I suffer the redeployment of
critical resources to fix the defects?
Since fixing every single system defect
would be expensive and time-consuming,
smart companies concentrate on the 20
per cent of defect categories that account
for 80 per cent of the defects.
4)Focus on the biggest opportunity, first
5)Model the new process or system
fix, recognising industry best
practices (benchmarking)
Benchmarking can be done against
direct competitors, industry functional
leaders, other similar internal operations,
and generic processes.
6) Implement the change
7) Measure the benefits
8) Course correct, as necessary
9) Repeat steps 4-9
Charles Taylor is Founder and Managing Director of Locus Consulting, a
global management consulting and financial services firm, which focuses on
operational improvements. During his career, Mr. Taylor has held a number
of Board seats and executive positions namely as CFO and Director of
Monte Carlo Sat, Executive VP and CFO of an EU-based media content
production and distribution company and CFO of AT&T International.
37
24/02/2015 16:23
FINANCIAL
CENTRES
Setting
standards
others follow
On a recent visit to the Gulf, Jersey Senator
Philip Ozouf and Richard Corrigan, Deputy
CEO, Jersey Finance, told Robin Amlôt what
makes Jersey the right offshore centre for
Middle East money
J
ersey is a leader particularly
in terms of trusts. It was the
first jurisdiction in the world
to incorporate trust law and
make further revisions according to
various different court judgments and
market demands. It has been copied
around the world, which is flattering
but also indicates competitive nature
of market. We like to think of ourselves
as the originators of the modern day
finance centre trust,” explained Senator
Ozouf, who was Treasury Minister in
the Jersey Council of Ministers from
December 2008 to December 2014. Prior
to that, he held the post of Economic
Development Minister from 2005.
“The financial sector is the largest
part of the Jersey economy. The island
has a population of about 100,000 and
we have 13,000 professionals working in
financial services, so the sector is similar
in size to the DIFC! Jersey has carved out
a highly-respected, well-regarded niche
38
page 38-39 Jersey Finance.indd 38
in financial services starting about 50
years ago. Today we are constitutionally
a Crown dependency, not a nation
state but we have complete devolved
responsibility for laws and taxes.
“We have an appropriate standard
of regulation in order to protect the
island’s interests. We regularly feature
in the top division of jurisdictions in
terms of regulatory approach. We are
a premium, significant player. We have
developed over the last 15 years or so
a more international outlook in terms
of the financial centre, with the Middle
East being an increasing part of that.
“Jersey offers a diversified range of
sectors, banks, trusts, funds, and other
corporate structures, Jersey company
law constantly being updated. As a
small jurisdiction we have to play to
our strengths, be fast moving, more
nimble and quick off the mark in
delivering what financial structuring
requires. If there’s a new provision
Richard Corrigan, Deputy CEO,
Jersey Finance
about a particular type of company law
or some way of dividing up different
cells within a company, I have done lots
of legislation through our parliament
to keep our law up to date. It’s worth
noting that a number of FTSE 100
companies are Jersey entities.
“We
have
historically
good
relationships with the UK; we are a capital
warehouse, we attract deposits, cash and
other investments into Jersey and then
they are getting ‘upstreamed’ into London
and other markets. We act as a sort of
turntable and conduit for the fast moving
world of globalisation. We provide a
friction-free, well-regarded, politically
stable and judicially certain1 environment.
“Jersey court rulings are taken
as models for the way trust law is
interpreted. Even in issues such as
tax information exchange we have
had some landmark rulings which are
regarded as case studies by the OECD
and others.”
26/02/2015 15:44
Senator Philip Ozouf, States of Jersey
What’s the importance of the
Middle East to Jersey?
“Jersey had a ‘good’ crisis. We came
out of it [the global financial crisis]
with public finances in a better state
than going in! We have an economic
model which is a highly productive,
high value, low-footprint, service-based
economy without the burden of either
imprudent financial regulation and an
imprudent spending. Jersey has a stable
and affordable tax system. We do not
tax capital; we tax the services which
we provide, for example banks are
taxed at 10 per cent.
“We regard the Middle East as a
growing market. I first came here as a
junior minister in 2002. Relations in this
region take time to develop. We have
industry practitioners that have been
visiting this region regularly, one of our
members been coming for more than 40
years, providing for the international
needs of Middle East clients.
page 38-39 Jersey Finance.indd 39
“We have stepped up our activity.
It’s a competitive marketplace so we
have to raise awareness and give
people good reasons to think ‘Jersey’
as opposed to other centres… The UAE
was our first location in which we
put permanent representation, in Abu
Dhabi and now in Dubai.”
Richard Corrigan, Deputy CEO, Jersey
Finance, added, “Capital, in regions of
surplus like the Gulf, is looking for
opportunities further afield. Jersey is
well-positioned to deliver solutions for
those clients as their capital moves
across borders. We don’t tax the capital
movement, we provide expertise on
the structuring and that capital goes
into its destination market where it is
deployed in the real economy where it
creates jobs and tax in that domestic
market… we turntable that capital from
one region to another.”
Ozouf added, “The cost of doing
business is important, when you are
settling assets in a jurisdiction. You are
going to want to have certainty that the
jurisdiction is not going to have any
surprises in terms of reasing costs. The
first thing we think it is important to
demonstrate is strong public finances,
so no surprises in terms of new taxes.
In Jersey you get that.
“You need a good and appropriate
regulatory system, with experience and
world class outlook — we have bilateral
relations with all of the main players in
the world. Our regulator in Jersey has
a strong and ongoing relationship with
the Central Bank.”
What can Jersey offer with regard
to Islamic finance?
“Corrigan said, “Islamic finance is
increasingly important and relevant
away from people who follow Shari’ah
principles. It has been an important
source of global liquidity during the
financial crisis, to the point where
you have seen non-traditional issuers
tapping liquidity in the Islamic market.
It is an important source of funding
around the world. We were early
adopters in terms of having Jersey’s
laws and regulations reviewed to
ensure they were compatible with the
needs of Shari’ah-compliant finance
by the Islamic Council of Great
Britain. They said ‘you are 100 per
cent compatible’ — that demonstrates
the versatility and flexibility of the
various ‘products’ in Jersey whether
companies, trusts, funds law.
“For example, our trust law is
entirely compatible with putting
together a Waqf; in capital markets, we
have a lot of securitisation structures
put together for a variety of reasons
through Jersey; we are 100 per cent
compatible with Sukuk structures.
Investors are looking increasingly at
jurisdictional risk. We are investing
in a jurisdiction which has the right
legal and regulatory environment
behind it. Jersey can offer the
flexibility of structures along Shari’ahcompliant lines but also the absolutely
first class reputation that we have
as a jurisdiction on the legal and
regulatory side.
“The Muslim population around
the world is growing. It is a mobile
population, looking for economic
opportunities in various countries
around the world. We are seeing the
increasing internationalisation of
demand for Islamic finance. Jersey is
well placed as a neutral jurisdiction to
host that.”
1
Under arrangements dating back to 1204 as the remaining part of the Duchy of Normandy controlled by the King of England – the islands remained in the personal possession of the monarch as a ‘Peculiar of the Crown’ and is now a Crown dependency.
39
26/02/2015 15:44
ISLAMIC
FINANCE
Islamic finance in 2015
Jamal Bin Ghalaita, Chief Executive Officer
of Emirates Islamic offers a commentary
on Islamic banking’s global relevance and
reasons behind its growth in market share
Jamal Bin Ghalaita, Chief Executive Officer of Emirates Islamic
40
page 40-41 Emirates Islamic.indd 40
F
or many years, Islamic
banking has been tipped as
the next big thing in the
world of finance. Today, with
an estimated 150 Islamic commercial
banks worldwide holding more than $1
trillion in assets, it could be argued that
the industry has already arrived. The
Dubai Centre for Islamic Banking and
Finance (DCIBF) estimates that in the
markets where Islamic banking exists,
it has captured as much as 20 per cent
of the market share.
The modern Islamic bank emerged
onto the scene in the 1970s but it
is only in the last decade that these
have truly come to the fore. There is
some debate as to whether the 2008
financial crisis had a positive impact
on the industry — by accentuating its
contrasts with the negative aspects of
the “asset-less” conventional banking
system. Irrespective of whether
they led people to challenge their
preconceptions of banking or not, the
crisis years between 2008 and 2012 did
coincide with a period when Islamic
assets grew at an average annual rate
of 17 per cent according to Ernst &
Young data. And again, coincidence
or not, that growth rate was between
two to three times more than that of
conventional banks.
The global development of the
Sukuk market has been one of the
most important trends of recent years.
Moody’s estimates that the market
for Sukuk — the Islamic equivalent of
bonds — has grown at a compounded
annual rate of 30 per cent over the
last 10 years, reaching approximately
$70 billion in 2014. Significantly,
the growth has been driven by both
Islamic and non-Islamic sovereigns.
26/02/2015 15:46
In 2014, the UK, Hong Kong, South
Africa and Luxembourg became the
first non-Muslim countries to issue
Sukuk, demonstrating that investors
across the world are clearly becoming
comfortable with these instruments.
Observers are split on the outlook
for Sukuk in 2015. On one side are the
pessimists who foresee that falling oil
prices will hamper economic growth
and reduce overall financing needs,
exacerbating the impact that imminent
interest rates in the United States
will have on capital market liquidity.
On the other are the optimists who
believe that the strength of Sukuk
in core markets such as the GCC,
Malaysia and Pakistan, allied to a
growing global appetite for Islamic
assets, will more than compensate for
the macroeconomic headwinds.
the era of double-digit growth will
inevitably come to an end, there
are many reasons to believe that
Islamic finance will remain perhaps
the most dynamic segment of the
global finance industry.
At a macroeconomic level, Ernst
& Young estimates that of the 25
fast-growth countries accounting for
half of global GDP by 2020, 10 have
high Muslim populations. In large
countries with significant unbanked
populations, such as Indonesia, India
and Nigeria, the opportunities for the
Emirates Islamic have demonstrated
innovation in Islamic finance, across a
range of segments, products and services,
including customised solutions
Also Takaful, which for a long
time has struggled to get traction,
has benefited from the overall growth
of the Islamic finance industry.
According to a recent study, the global
Islamic insurance industry grew by
approximately 14 per cent in 2014
and could reach $20 billion by 2017.
While the overall figures remain small
— particularly when you consider that
the global market for mobile phone
insurance alone is worth an estimated
$30 billion annually — the growth
figures are nonetheless encouraging.
So, in a maturing market and in
an environment of falling oil prices,
should we expect a slowdown in
the growth of the Islamic finance
industry in 2015 and beyond? While
page 40-41 Emirates Islamic.indd 41
Islamic finance industry are enormous.
This has not gone unnoticed by leading
business hubs such as Dubai, which
has ambitious plans to be the ‘Global
capital of Islamic economy.’
The UAE Government has made
significant efforts to drive and consolidate
growth in the country’s Islamic finance
sector. In 2013, His Highness Shaikh
Mohammad Bin Rashid Al Maktoum,
Vice-President and Prime Minister of the
UAE and Ruler of Dubai, issued law No 13
for 2013 regarding the establishment of
the Dubai Islamic Economy Development
Centre. The Centre has been tasked with
implementing a comprehensive strategy
with practical programmes and initiatives
that accelerate the positioning of Dubai
as the Capital of the Islamic economy.
Another significant push has come
in the form of the recent launch
of NASDAQ’s Murabaha Platform in
collaboration with Emirates Islamic,
widely seen as a major milestone in
the development of Islamic banking.
As a comprehensive Islamic Murabaha
platform, it provides local and regional
banks
with
Shari’ah-compliant
financing solutions. We have already
started to see the fruits of these efforts,
as Dubai is one of the three largest
venues in the world for Sukuk listings,
with current nominal value on its two
exchanges totaling $24.05 billion.
With demand growing, it is now
incumbent on Islamic banks to continue
innovating their product and service
mix to seize the opportunity. Banks such
as Emirates Islamic have demonstrated
innovation in Islamic finance, across
a range of segments, products and
services, including customised solutions.
The bank’s product innovation in the
area of online and mobile banking
made it the first Islamic bank to launch
a mobile app in the UAE, among other
digital milestones.
And therein, perhaps, lies the answer
in advancing this age old valuebased banking system in 2015 and
beyond. By offering increased service
and efficiency via comprehensive
solutions, Islamic banking can widen
and expand its presence beyond just
Muslim customers. If we can provide
customers with a more ethical form of
banking combined with a full suite of
banking products and the convenience
of ‘on the go’ digital solutions, Islamic
banking can even become the dominant
way of banking.
41
26/02/2015 15:47
RETAIL
BANKING
Farhad Irani, Head of Retail at Mashreq
Mashreq:
Leadership,
innovation
and customer
service key
to success
In a conversation with Zoya Malik,
Executive Vice President and Head of
Retail Banking at Mashreq, Farhad Irani
plots his division’s rise from the doldrums
to becoming a service innovator and
leader in the UAE banking market
Tap n Go
G
ive us highlights of the
retail banking division’s
performance?
“In 2011, the retail business
had its challenges; our growth was stifled
as we were coming out of a tumultuous
environment that had generated a huge
amount of bad debt on our card business.
The retail group’s financials were not
meeting the targets set and delivered
a loss. We were reputed with terrible
service, considered to be cut-throat and
42
highly transactional and very behindthe-curve in digital business.
“Over the last three years however, we
have turned the bank around brilliantly.
Our revenues have grown 35 - 45 per
cent year-on-year; our market share
growth has expanded from between 8
– 12 per cent share depending upon the
product line, and our bottom line has
doubled three years in a row. In 2014,
we delivered a profit of over AED 900
million. Management’s objective now
is to build a quality franchise which
is enduring.
“To that end, I am particularly proud
in what we have built by way of our
product and service propositions, in
terms of digital experience and in our
service in the industry, in fact we were
rated Best Service Provider by Gulf News
two years in a row in 2012 and 2013
and received an accolade by Gallup
in 2014 as The Best Place to Work.
Anyone who understands retail banking
iMashreq branch launch at Deira City Centre Metro station
must appreciate that progress does not
happen on single bullets, rather progress
happens when critical pieces of the
puzzle are all addressed effectively.”
What
brought
transformation?
about
the
“There was no miracle, just the
temerity to continue irrespective of
any obstacle. Number one, Mashreq’s
retail business is the right size with
2700 people, not too big nor too small,
so you can modify and change quickly.
Second, we have a CEO and a Board
of Directors that applauds you when
you drive change and does not scold
you when you make some mistakes, so
it’s an environment that is conducive
to innovation. Third, we have a strong
economic environment and a great
regulator that is neither strangling the
banking industry nor letting it run
laissez faire. In 2011, there were 650
redundancies; a stronger leadership
was brought in who then hired another
Region’s first fully automated iMashreq branch
1500 over the past few years with
similar experience to themselves.
“We said let’s not try to get customers
to like us because of our brand, but to
like us because of our propositions, so
we put exciting bundles together and
embellished them with iPhones and
iPads. We were heartened to see that
customers recognised the value saving
and the benefit in taking these products.
“We expanded our distribution by
converting our branches to digitally savvy
customer service centres. Our growth
comes 40 per cent from our branches, 40
per cent from direct sales and 5-10 per
cent is now coming from e-commerce,
a new channel of distribution. Another
important component of our distribution
expansion is our outbound call centre and
our online capability. All portfolio actions
such as card upgrades, line increases, and
cross-sales of investment and insurance
products are now done over the phone.
We recognised that quality customers
do not come to branches, so we meet
our customers via our sales forces, call
centres and tablet banking.
“We got the fundamentals right:
leadership, proposition; distribution; and
service capability and at end of 2012, we
delivered a profit of AED 250 million.”
What investment was made in
branches and the online platform?
“Well as I said at the time at an open
forum, “We are fundamentally sound,
but what do we need to do to get
sexy?” Well, you go digital. In 2013
we converted and launched 12 of our
branches into ECubed branches, where
the customer’s entire engagement with
the branch is through touch screens, with
the tellers through tablets, where posters
appear on digital screens and sensitivity
tables, where customers can build and
expand their mortgages or personal loan
programme. This transformation has all
been about gamifying the experience
to offer tailor made solutions to
the customer.
cont. overleaf
43
RETAIL
BANKING
cont. from pg43
“Each of these branches has cost
$50,000. Did I expect it to drive more
revenues and get more customers?
Not necessarily, but I expected my
customers to have a much better
experience at the branch level, that
technology might make their branch
visit, part of a great day out.”
How is Mashreq investing in
mobile banking?
“Over the past two years our
engagement and our PPI (cross sale
index of products to customer) has
increased exponentially and today we
are in a fortuitous state, recognised as
being good at service which is very
important to me, and at innovation,
which is critical to our future especially
as customer behaviour has changed
in response to mobile culture. Fortyseven per cent of all our transactions
in December 2014, almost 4.5 million
transactions a month happened over
mobile phones, not even online.”
What’s the future for branches?
“We have 48 branches and while there
is migration steadily to digital, branches
will remain a critical component. As we
move to a more sophisticated customer
income and professional set, in-branch
experience will be geared to advice
on mortgages, investments, insurance
and bonds. Questions relating to credit
cards and TT transactions will remain
the domain of remote channels.
“Another one of our successful
endeavours is Mashreq at Work, where
we have given 21,000 professional
customers working across UAE
corporates, the Mashreq tablet banking
solution. The tablet becomes their
bank and assigned with a dedicated
relationship manager. For the larger
corporates such as Petrofac and
Emirates Airlines, we have created
automated banking centres that are
unmanned machines that do everything
44
E Cube branch
for the customer such as pay cash,
accept cash and cheques for clearing
and TT transfers and where a customer
can conduct utilities payment as well.
“We have really been successful in
travelling with the customer as the
customer’s experience and demands
have changed. We were delighted that
CPI Financial awarded us the Best
Retail Bank in quick succession in
2012 and 2014, which we are very
proud of at our company; this gives
the entire team a significant sense
of confidence. There is no end to
excellence, there is only the journey.
“It is no secret that Mashreq had
many firsts since its inception and
we have been known for not only
leadership but also for innovation.
The latest of that was the launch
of the region’s first fully automated
branch ‘imashreq’ in Deira City Centre
Metro Station. We are investing in
this technology to deliver a better
customer experience. The world is
going digital. In the future, customers
won’t visit bank branches to transact,
take or deposit cash and ask for TT
drafts or other things but they will
go to the branch to get advice, to
chat about restructuring their loans,
making investments, looking after
their SME business, etc. The branch
will increasingly cater to medium and
small enterprises.
“Mashreq is setting the precedent
for everyday banking in the region,
and is already seeing its market share
increasing as a result of its innovative
leadership. The key driver behind
Mashreq’s innovation initiatives is
‘Omni-channel convergence’, aimed
at migrating our current physical and
traditional distribution channels to a
resilient and robust digital business
model. We want to play a role in
achieving Dubai’s vision to transform
the Emirates into the smartest city in
the world. No longer intent on just
providing traditional banking services
part of H2 2015. That business will
then expand on our credit card and
wealth management capability. We are
hungry for expansion and our strategy
is to exploit trade flows between the
UAE and other markets.”
Tell us of the impact of Al Etihad
Credit Bureau on banks’ lending
and risk management?
Max 2
and products, the bank is executing its
multi distribution strategy to become
the everyday bank and primary
financial partner of the consumer.”
What are the challenges to staying
ahead in the market?
“Growth in the industry is anywhere
between eight to 12 per cent depending
upon the retail product / business
segment...normally 2.5 X the GDP
growth of the nation. The bankable
population is around 4.5 million but
this space is pressured on the back
of intensive competition leading to
excessive price discounting that can hurt
the long term viability of this industry.
All banks copy each other and poach
talent, so the challenges we have are
the same as a mature market. However
in the UAE the benefit is that we get
good returns on an EDM (email direct
marketing) i.e. the conversion rate is 15
per cent which tells us that customers
are hungry for good propositions.
Snapp
“So where can this market go? The
market is growing at 4.3 - 4.6 per cent of
GDP and the retail banking revenue pool
is growing at 10-11 per cent; Mashreq is
growing at 36 per cent revenue, so we
are hopefully taking some share there.
The market could go into saturation
irrespective of 2020, so there is a need
for consolidation. Moving out the GCC
and expanding is an imperative for any
bank. We were the first to become truly
international; in 13 markets we operate
financial institutions in corporate
banking and in three markets we operate
in retail banking, namely the UAE,
Egypt and Qatar.
“The Citi Bank Egypt business
has come up for sale and we have
aggressively bid for it and have been
shortlisted. Currently we are engaged
with the Egyptian regulator, when we
get its blessing we will go forward
with the due diligence starting in
February 2015, then will expect the
transaction to complete in the latter
“Our CEO Abdul Aziz Al Ghurair has
been working hard with the UAE Banks
Federation for the cementation of
the credit bureau; all data has been
exchanged and we are in the last steps
of completing paperwork. There will be
some disruption in the market, however
banks will be able to look at the customer
from an individual perspective and it’s a
bank’s fiduciary duty to help in making
society and the community, risk free. We
see there is a growing market for new
mortgages every month. Refinancing is
the new game, 20 per cent of demand
for mortgages is coming from SMEs
either to buy a property for a business
or for releasing equity from properties.
The AECB will be critical in making the
market for lending more sound.”
What’s your outlook for 2015?
“Retail banking is all about perspiration
and a bit of inspiration. It is ultimately
a cookie cutter, systematised platformoriented business. At the upper end,
the relationship management piece is
very important, but across the board
processes, systems, compliances and
service levels, play a very important
part in delivering the outcome. So I
am in a very happy place. Mashreq
has made a profit of AED 2.4 billion
in 2014. We continued to double our
profits for three years in a row and
we want to make Mashreq the best
bank in this part of the world from
the customer’s perspective. For me the
critical piece that defines success, is
customer experience.”
45
INVESTOR
RELATIONS
BOP: Resilience and hard
work paves the way
Zoya Malik sat down with Hashim Shawa, CEO of Bank of
Palestine (BOP) to discuss the objectives of the new branch at
DIFC, business challenges and opportunities posed by Palestine’s
economy and his approach to investors
T
ell us of the new branch
opening at DIFC in
March 2015?
How do you counter negative
perceptions for investors into
Palestine’s banking sector?
“This is really an important
juncture in our history; we were
established in 1960 in Gaza and now
BOP is the largest bank in Palestine
with 55 branches throughout the West
Bank and Gaza. We have $2.5 billion
in assets, we are the second largest
employer with 1300 employees and
have a market share of deposits of 22
per cent and loans of 24 per cent.
“The DIFC representative office
launching in March 2015 is part of
our strategic plan for international
expansion, primarily targeting the
Palestinian diaspora of which there are
around eight million globally, to include
300,000 Palestinians in the UAE, second
only to those living in Jordan.
“BOP will offer a platform to attract
investment and promote trade to and
from Palestine connecting the Palestinian
diaspora to opportunities in Palestine’s
real estate and the capital markets.
“There is also a large community in
Chile where we will open our second rep
office after Dubai, in Santiago in early
“I have just attended the opening
game of the Asian Cup tournament
where BOP are proud sponsors of
the Palestinian national football team
that qualified for the first time. With
this alignment, the bank fulfills its
objectives of putting Palestine on the
global map and promoting Palestinian
success stories to overturn the often
overly negative perception that ‘only
bad news comes out of Palestine’ and
convincing foreign investors to place
their money in Palestine.
“Sure in people’s minds, Palestine
has always been about the politics and
‘the struggle’ for our own ultimate
identity, freedom and statehood, but at
BOP we are also determined to present
the economic success stories that
can snowball to create a dynamic, to
positively influence the political sphere.”
46
page 46-48 Bank of Palestine.indd 46
Hashim Shawa, CEO of Bank of Palestine
2016, where we are planning to see
much investment and south-south trade
between the fast growing economies of
Latin America and GCC countries.
“At DIFC, we are engaging with
clients, partners and the international
community and noticed an interest
from positive social impact investors
from around the globe, looking at BOP
as a perfect investment choice.”
What can you tell investors
about security and ease of doing
business in Palestine?
“Law enforcement (police and security)
24/02/2015 16:25
and the court system all function very
well with a lack of corruption and very
good transparency. There is business
confidence to start-up, expand and
access finance, all key ingredients in
the makings of a strong developing or
emerging market economy.
“In an environment of turmoil
and instability, with restrictions on
trade and movement due to the Israeli
occupation, we still have an amazing
amount of entrepreneurial activity.
“So imagine with greater stability,
freedom, peace and our full sovereignty
to control our own resources, borders
and ports, we can flourish to become
one the fastest growing economies in
the region and will likely experience
double digit growth rates.”
Which are the economic sectors
of interest for investors?
“We may not have natural resources
such as gas and oil, but tourism is
one good example as Palestine has
important holy cities to both Islam and
Christianity. However, currently tourist
numbers are low at around 1.5 million a
year compared to other religious sites in
the region. If Palestine was more open,
we would see increased employment in
the industry, with much scope for project
financing and FDI. BOP is banking on
the tourism sector and participating in
financing small family hotels to large
international brands like Moevenpick,
one of which we have financed in
Ramallah. So gradually, we are seeing a
change and development on this front.
“Agriculture is another area where
due to the restrictions, we have lost 80
per cent of our water for irrigation and
60 per cent of our agricultural land in
West Bank alone, causing a deficit of
$2.5 billion in GDP a year. Our GDP
stands at around $7.5 billion a year
with GDP per capita at $2600; I view
Palestine’s economy like a spring that
has been pushed down to the maximum,
just waiting to be unleashed. Again
given the chance to access our natural
resources, we can develop a competitive
economy in the region.”
Tell us of regulations and governance
of Palestine’s BFI sector?
BOP headquarters in Ramallah
“PEX (Palestine Stock Exchange) is a very
solid stock exchange (PEX) developed
under the sound stewardship of CEO
Ahmed Aweidah, both on the regulation
and infrastructure side, administered by
the Palestine Capital Markets Authority’s
(PCMA) highly vigourous governance
framework. 80 per cent of those listed
companies are profitable, giving
dividends with the average return on
investment at around six per cent per
annum, not bad considering we live and
work under duress.
“The BFI sector to include insurance
companies also runs under the robust
regulations of the Palestine Monetary
Authority (PMA) which also pioneered
six years ago, the first electronic credit
bureau in the Middle East, making
lending to individuals and businesses
much easier. Lending in the banking
sector expanded in 2009 from $1.7
billion - $5 billion in loans to date.
PMA has also introduced a deposit
insurance scheme which guarantees
about 90 per cent of depositors in the
bank (up to $10,000).
“Palestine’s NPLs are well below the
region’s average and we have one of
the best credit records, facts that raise
investors’ eye-brows, questioning what’s
behind the sector’s solid growth and
performance. I believe this is the result
of a culture of discipline - of preserving
one’s credit and banking record and
name, demonstrating preparedness and
steadfastness in the face of constant
challenges. This discipline has protected
both our customers and the sector.
“There is a relatively conservative
nature in how customers manage their
business and their finances - they don’t
over stretch nor over borrow. There is no
aggressive and irresponsible lending, as
we witnessed in the global financial crisis
and, so it’s a mix of all that and very
good contingency planning, being ready
for the bad times, always buffering.
“This means the amount of liquidity
in the banking sector is very high;
we have a loan to deposit ratio of 55
per cent and much room to grow in
deploying finance and lending as a
banking sector on a whole, and as BOP.”
Which are your growth segments
and how are you expanding your
distribution channels and reach?
“Financial inclusion is high on
our agenda by reaching out to the
unbanked. This way we have nearly
doubled in size over the past six years
cont. overleaf
47
24/02/2015 16:25
INVESTOR
RELATIONS
cont. from pg47
from 28 to 55 branches; our asset base
has grown from $0.5 billion in 2005,
to $2.5 billion in 2015. So we have
enjoyed pretty phenomenal growth.
“We are expanding via bricks and
mortar, setting up in a town or village
because we want the money to go from
‘below the mattress’ to the branch. We
are increasing SME and micro lending,
the fastest growing part of our portfolio
over the past few years, growing at 35 per
cent every year. We have hired dozens of
credit officers, based in the field to meet
micro and small entrepreneurs, a model
proven to be successful, by adding that
personal touch.
“We are also growing via Women
Banking where the core business
strategy promotes greater financial and
non-financial services, getting women
banked, giving them cards, loans and also
collateral free loans, as we have found
in other parts of the world that women
prove themselves to be credit worthy.
Another area is start-up businesses, by
advising entrepreneurs on accounting,
marketing and financial planning.
“This is not only profitable, but
also enhances the bank’s reputation
in the marketplace, keeping in line
with a holistic approach to sustainable
finance. BOP allocates five per
cent of its net profit towards social
responsibility programmes and I believe
this reinforces a message that it pays to
put the community first, before revenue
and profit.”
How are you growing the business
and investor confidence?
“Over the past few months we have
established the first venture capital
fund in Palestine to invest in earlystage start–ups, focusing primarily on
youth in the High–Tech sector in
Palestine. It is a $10 million fund
that BOP started, registered in the
Netherlands, which has already seen
investment from Dubai of $2 million.”
48
Ramallah Convention 2014
How is the idea of statehood
impacting investors?
“I am very bullish. I’ve seen that
during the toughest times, Palestine’s
economy has realised growth both at
the state, bank and sector level. I
have witnessed a major increase in
investor shareholdings and of foreign
investment ownership over the past 10
years, that’s moved from 90 per cent
local to 10 per cent foreign ownership
and today we are approximately at
70 – 30 per cent respectively. When
I say foreign investment, I refer not
only to diaspora Palestinians that have
bought into the bank’s shares and
across the board, additionally there are
institutions for example the IFC World
Bank and GCC Gulf investors, from the
biggest families, that are convinced by
the returns potential in Palestine.”
How are you competing in the
region to attract capital?
“We travel with investor road shows
from London to Dubai to Chile, where
we have seen great interest from equity
and investment managers on some of
the listed companies on PEX. Similarly,
we have seen these investment funds
take positions and put BOP stocks in
their portfolios. So I am optimistic that
we can compete for investment funds
and receive FDI. Imagine if the political
dimension improves even marginally,
let alone significantly, Palestine can be
one of the fastest growing economies in
the Middle East. We just need freedom
to offer access; this openness would be
a positive element in influencing our
pitch to foreign investors.”
Can you tell us of PalPay’s business?
“Three years ago we set up a payment
company called PalPay that has made
a transformational impact on how
people make payments for services
and settle bills. Earlier this was done
with cash, spending half a day taking
care of finances. The Bank positioned
6000 POS machines around Palestine
in corner-shops and supermarkets
partnering with Visa and Mastercard,
for whom we are also the agents. So we
introduced the culture of payments into
Palestine, making people’s lives easier.
“PalPay’s success can also be seen
via WFP’s (World Food Programme)
food voucher system that was migrated
to PalPay’s platform in Palestine;
WFP’s team is amazed by its flexibility,
speed and seamlessness in reporting
and are considering using the platform
in other countries.”
26/02/2015 15:52
bleed guide.indd 1
16/02/2015 13:31
RETAIL
BANKING
Top trends for 2015
What’s hot in retail banking for the next 12 months? We review what
banks will be investing in to boost their consumer business
T
he branch is dead! Long live
the branch! There has been
much talk in banking circles
over the last few decades
about the death of the bank branch
and, indeed elsewhere branch networks
have been reducing significantly in
size. For example, a report by the
University of Nottingham, entitled The
Changing Geography of British Bank
and Building Society Branch networks,
2003 -2012, showed a net loss of
nearly 7,500 bank and building society
branches in the period 1989 to 2012 or
more than 40 per cent of all branches.
There have been more closures since.
Nevertheless, the branch network
still has a role. “There are two camps.
There are those who feel the branch is
an old relic of retail banking which isn’t
really needed any more. That conclusion
is predominantly fuelled by statistics:
how many visits to the branch, etc., and
that is on a continuing trend down,”
David Horton, Head of Innovation,
Synechron, told Robin Amlôt.
“However, largely people visited the
branch before for a transaction which
you can now do online or via mobile
banking. Even if you need to deposit
cash you can go to an ATM/CDM which
does it for you. Previously, the purpose
of the branch was to fulfill transactions
and that’s not what people need
any more.”
50
page 50-55 retail banking trends 2015.indd 50
BRAND RELEVANCE
And yet “…there is general recognition
that without a branch you are
somewhat commoditising yourself, it
is also a key location in which to do
other things: offer financial advice,
relationship building. The type of
consumer you want in the branch is
someone looking to make a big ticket
decision, taking a mortgage or getting
investment advice. Branches still have
relevance and banks are now looking
to change the model to support that
so it becomes a sales, onboarding and
relationship-building experience.
“Beyond that, I think it [the branch]
does a lot for your brand. There is
also a sense of security people have
in knowing there is a place they can
visit if they have an issue. Having a
branch where you can go and ‘shout’
at someone gives you more security.
This is basic human nature. We like
dealing with humans and not just via
a telephone call or a virtual experience.
The bank branch is definitely here to
stay although the branch models are
changing to a hub and spoke concept
whereby the hub is a full-fledged branch
that can handle transactions and offer
24/02/2015 16:26
advice, supported by spokes, self-service
ATMs or unmanned branches. What
you may see is branches shrinking in
size with more automation but also
with a different type of staff member,
someone who can give investment or
mortgage advice,” said Horton.
“When most people ask me about
this I point to Handelsbanken in the
UK, the fastest growing bank in the
country (with around 180 branches)
and high customer satisfaction ratings.
Handelsbanken’s motto is ‘the bank
is the branch’; the branch manager is
empowered to make lending decisions
and is able to get to know customers. It
is a very different model.”
It is a model which probably strikes
a chord in the Middle East. In a report
on retail banking trends specifically
in the UAE, Horton wrote, “Physical
distribution and branch banking in the
UAE continues to be a critical element in
the success of onboarding new customers
and fostering increased engagement
to improve customer experience and
loyalty. Whilst it is undeniable that
financial transactions are increasingly
moving to online and mobile banking
channels, the branch and its employees
still remain an important part of the ‘local
bank’ culture. The challenge recognised
by most banks is that transaction cost
per teller is on a steep incline, and there
is a need to justify the branch network
investment, and subsequently they will
look to change the dynamics of the
branch visit such that it becomes one
of an advisory role. Streamlining the
KYC and onboarding process, brand
awareness, and strengthening the
relationship with customers will drive
physical distribution ROI. Throughout
2015 it is likely that your local bank
branch will be digitised, provide more
self service facilities, and offer far
broader access to specialised advice
from investment to savings, and even
insuring your home or car. This advice
might be delivered via tablets, digital
tables, Touchable Walls, or perhaps
even through a Skype-like service, but
what is certain is that your branch
visit experience will be a lot ‘cooler’
than waiting to be served in a long
line of customers with a queue ticket
or token! Much like CBD [Commercial
Bank of Dubai] has already done, you
will also see banks start to offer virtual
branch experiences through Facebook
banking, or a dedicated virtual reality
portal in which the physical and digital
world converge.”
BRANCHING OUT?
Early in February, Mashreq launched
what it claims to be the region’s first
fully automated branch: imashreq,
in Dubai. It followed on from the
unveiling in January of an E Cube
branch that allowed customers to carry
out everyday banking transactions
with the latest technology. Whether
customers want to open an account,
make a utility payment or apply for
a new credit card, apply for a loan,
deposit to a savings account or transfer
money; all these transactions may be
carried out at the imashreq branch.
Shaker Zainal, Mashreq’s Regional
Head of Distribution said, “The ‘imashreq’
concept has been created to empower
customers and assist them to carry out
complex transactions at their own pace.
No queues, no waiting time, just walk
in and carry out quicker and smarter
banking transactions or requirements.”
The new imashreq concept branch in
Deira City Centre also offers Mashreq
VTM (virtual teller machine), which
delivers self-service, video-enabled
engagement between Mashreq customers
and the bank’s call centre, and have
access to various banking services.
Mashreq is not the only bank
in the region to be reaching out
to customers with investments in
new technology. In Beirut, Lebanon,
Bank Audi launched its flagship
NOVO in December 2014. In addition
to smart ATMs which allow cash
withdrawal, cash and cheque deposits,
and credit card settlement, the branch
features, for the first time in Lebanon,
Interactive Teller Machines (ITMs)
which offer customers live video
conferencing with personal tellers.
Through ITMs, customers can perform
banking transactions, manage their
accounts, deposit and cash cheques,
deposit and withdraw cash, pay
bills, transfer money to a Bank Audi
account, and get live assistance.
cont. overleaf
51
24/02/2015 16:26
RETAIL
BANKING
cont. from pg51
A Novo advisory room is also
available for customers and enables live
video chat, browsing and applying for
services, loans and cards, in addition
to account opening, as well as instant
debit card issuance.
Investing in branches is, however,
not just a matter of the bank deciding
what’s best for its customers. Instead,
Gulf International Bank asked its
customers what they wanted in a
branch and has now launched the
first customer-designed retail bank in
Saudi Arabia. Meem, the letter ‘M’ in
Arabic was officially launched by Gulf
International Bank (GIB) at an event in
Al Khobar. Over the past three years,
meem has been designed and created by
employing the concept of ‘co-creation’
which involved a large group of target
customers (meemers) who were engaged
using various social media channels.
Meem has opened branches in Riyadh,
Jeddah and Dhahran that enable
customers to complete the account
opening process and receive their debit
cards immediately as well as withdraw
and deposit cash, make transfers and do
their own account maintenance.
services to customers in the Kingdom
of Saudi Arabia and eventually across
the GCC.”
“You will see more investment in
branch networks. There is a comfort
level now about this being something
that they [the banks] should do… it is
definitely one of the key areas in which
banks will be investing, moving from
the old traditional format of what a
branch used to be and what it used
to stand for to creating more digital
content and digital tools, enabling the
customer to help themselves as well
as give them access to a wealth of
information,“ said Horton. “In the past
you would be restricted to what was on
brochures and what was on posters on
the wall. Now, bringing the digital access
into the branch you can pretty much
find out everything.”
Horton sums up the future prospects
for the bank branch, “People like to
meet in person and they like to have
that rapport. I don’t think the branch
is really going to disappear especially
in this part of the world where that
personal relationship is part of the
culture and even more important.”
The branch manager is empowered to
make lending decisions and is able to get to
know customers. It is a very different model
Dr. Yahya Alyahya, GIB’s Chief
Executive Officer, said, “The launch of
our retail banking service capitalises
on the immense potential in the GCC,
focusing on an audience that values
and relies on technology for the benefit
it offers - convenience and simplicity.
Our retail proposition is built on
technological innovation and harnesses
the advantage to provide a unique
customer experience. Our aim is to be
‘ahead-of-the-curve’ in providing clear
and simple products and professional
DIGITAL BANKING
Investment in retail banking activities
will not, however, be confined to the
bricks and mortar [or should that be
‘chips and mortar’] of the bank branch.
The digital banking trend is not only set
to continue, but will accelerate, as local
banks look to invest in innovation and
stay in touch with those that have a
first mover advantage.
According to a study by research
firm the Collinson Group, three
quarters (75 per cent) of board
Dr. Yahya Alyahya, CEO at GIB
members and senior managers at
UAE financial services organisations
are most concerned about increased
competition over the next 12 months.
According to the Collinson Group,
this increased competitive pressure
is focusing executive minds on their
customers to a greater extent than
in either Singapore or the UK. The
key issues highlighted by respondents
include: ensuring a consistent customer
experience (cited by 45 per cent of
UAE respondents, compared with as
little as 27 per cent in Singapore),
achieving brand differentiation (45 per
cent compared with 32 per cent in the
UK), and, harnessing customer insights
and data (45 per cent compared with
33 per cent in the UK).
Investment in loyalty and other
customer engagement initiatives
looms large on the priority list of UAE
financial executives. Over the next 12
months, almost half (48 per cent) plan
to invest in developing and improving
customer loyalty initiatives, whereas
two fifths (39 per cent) anticipate
engaging with customers via digital
and social channels of importance.
Many institutions in the UAE are in fact
cont. on pg54
52
24/02/2015 16:26
bleed guide.indd 1
16/02/2015 13:32
RETAIL
BANKING
cont. from pg52
shunning ‘traditional’ communication
channels and engaging with customers
using social methods in order to satisfy
the needs of the increasingly mobilefocused customer.
MOBILE FIRST
As the mobile phone continues to drive
everyday banking and convenience,
increasing consumer demands combined
with continued competition from outside
the industry will drive a new mindset of
‘Mobile First Design’. Traditionally banks
have never considered ‘Design’ to be
as important as product offering, but
increasingly they have become aware
that the user experience, or ‘UX’ is as
important as a dedicated relationship
manager in how the bank’s customer
service is perceived.
Banks will look to develop mobile
phone compatible solutions to streamline
the onboarding process and ensure that
customers (or potential customers) are
able to initiate their relationship with
a bank by using their mobile phone
first. From browsing products and
services, to using the camera to upload
ID documents and complete a screen
friendly application process, the mobile
has become the most important channel
to banks hoping to capture millennial
prospects and an increasingly tech savvy
expat population.
BUILDING
ENGAGEMENT
“Over the last five years, coming out
of the crisis, banks were focused on
reducing their operating costs. Now
there is a certain degree of comfort
that the market has recovered and
is actually doing very well. If you
look at the results for 2014, there
are very few banks where there are
alarm bells ringing. That brings us to
‘disruption’ and ‘innovation’ — you
hear this everywhere nowadays. Talk of
‘digital transformation’ two years ago
54
was probably not a big subject for most
banks. Now they sense an opportunity
to reinvent themselves because if they
don’t someone else will! Nobody wants
to stand by and see someone else reap
all of the rewards’” said Horton.
The big data and analytics market
will reach $125 billion worldwide in
2015, according to IDC. Whilst the
amount of use cases in banking for
big data adoption increases day by
day, there are three key areas which
are likely to see a tangible impact in
2015. Internally, ‘Security’ will become
more effective and banks are far more
likely to predict and detect fraudulent
behaviour through the intelligent use of
big data analytics.
are increasingly looking to banks to help
manage their day to day spending habits
and make realtime offers based on their
physical proximity. Offering contextual
advice allows banks to become embedded
in the customers’ everyday life, and
fosters whole new levels of engagement
previously not offered to consumers.
When a customer spends too much
money on coffee in a month, they expect
the bank to advise them as such, and
provide them with instant alerts that help
them to manage their monthly budget.
Similarly when there is a discount or
deal available in a store, the customer
will see real value in its bank if they
receive a notification at the point of sale
or when entering the store. 2015 will see
The digital banking trend is not only set
to continue, but will accelerate, as local banks
look to invest in innovation and stay in touch
with those that have a first mover advantage
On the consumer side, storytelling
will be the hot new job in analytics with
data scientists and business intelligence
teams set to become pivotal roles
as retail executives seek to use their
skills to improve customer everyday
engagement and targeted marketing.
Finally, two of the most omnipresent
trends for the year will be the elevated
use of consumer insight for the delivery
of an enhanced customer experience,
and the continued evolution of
electronic channels and associated
digital services. Gone are the days when
banks were just organisations that
safeguarded your money and offered
financing solutions.
Today’s consumer has a far more
elevated expectation of the advice
they require from their bank. With
the coming of age of PFM (Personal
Finance Management) solutions, and
real-time mobile payments, consumers
the proliferation of smart banking tools
like PFM, Beacons, and GPS geolocation
alerts to drive the value proposition
offered to the customer.
Horton said, “There will be a lot
of investment in mobility, mobile
apps, beyond the traditional mobile
banking there will be a lot of apps
that are supporting either benefits or
loyalty programmes. These will be
services supporting something like
dining privileges on your credit card
— so an app that shows you where the
restaurants are, what discount is offered,
how to make a reservation… You’ll see
banks start to invest in non-financial
experiences with regard to mobility.”
KEEP IT SIMPLE, SOCIAL
One trend that really started over the
past two years, and, believes Horton,
is set to explode in 2015 is banking
simplification. The banking industry
24/02/2015 16:26
has often been criticised for making
banking too complex and difficult to
understand for your average man on
the street. Nowadays banks are far
more likely to succeed in selling their
products and increasing cross-sell with
existing customers if they simplify the
language of their product brochures
and make them free of banking ‘jargon’.
Social media in banking has been
slow off the mark, but 2015 will be a
critical year in developing this area to
create brand advocacy. Given that the
most consumed media on the internet
today is video, it is also likely that
banks will ramp up their use of this
media to build a catalogue of product
and service videos, how-tos, and
practical advice for their customers.
Video content is proven to have a
far better success rate than traditional
text and image websites, and banks
looking to capture the attention of
consumers will invest in this marketing
media far more throughout 2015. In
addition to the online audience that
video content attracts, the new digital
branch is far more effective when the
content it showcases uses video rather
than traditional collateral.
whilst it is still debatable whether Apple
will be the winner in the race to own
mobile payments, one thing is for sure
is that it’s publicity has finally educated
consumers and merchants alike about
NFC technology. You can expect mobile
payments to reach an inflection point
in 2015.
DISRUPTERS ON STUN?
Digital disruption is reinventing
financial services — nobody is
challenging this opinion. Most of the
disruption or small Fintech startups/
niche organizations are unlikely to
make a real dent in the market share
of leading UAE bank’s in 2015. Whilst
this might alleviate some of the fear felt
by retail banking executives, the more
important danger, is that banks lose the
close connection with their customers,
and that day to day engagement, and
its associated insight grinds to a halt.
For this reason, 2015 will see significant
change and investment by banks as
they seek to embrace digital banking,
and look to compete as disruptors in
their own competitive markets.
PAYMENT TO GO…
In the UAE we have already seen the likes
of BEAM Wallet, Mashreq’s TAPnGO,
ENBDs MePAY, and NBAD’s Arrow
making headway into the payments and
remittance space. Tech savvy consumers
in the region are increasingly becoming
aware of services offered abroad like
P2P payments via Facebook, and
ApplePAY in the US and solutions like
Barclay’s Pingit in the UK, and Kaching
in Australia. The Middle East’s expat
community will, not unreasonably, be
looking to their local banks to provide
similar services. Horton also notes that
the love affair that UAE residents in
particular have with Apple products will
also drive the ApplePay agenda, and
DAVID HORTON
David Horton was appointed Head of Innovation for Middle East by
technology consulting and outsourcing firm Synechron in January.
Based at Synechron’s regional headquarters in Dubai, UAE, Horton’s
appointment highlights the company’s strategic ambitions in
developing and leading collaboration with retail banks including
current and prospective clients.
David Horton has two decades of experience and extensive
knowledge in technology, innovation and financial services. Prior to
joining Synechron, he was the Chief Transformation Officer at Mashreq
Bank, providing technology innovation initiatives and digital strategy
across the bank. David Horton has also worked as Mashreq’s CIO, Head
of Strategy, Head of Infrastructure and Information Security. Before
joining Mashreq, Horton worked for Investcorp Bank in Bahrain as its
Chief Information Security Officer, and has held several senior positions
in financial institutions including Reuters, Lloyds and Accenture.
55
24/02/2015 16:26
CORPORATE
GOVERNANCE
Winds of change:
Corporate governance
in the Middle East
Corporate governance are the new
buzzwords, fast training MENA corporates’
focus, consideration and investment
comments Omar Selim, Chief Executive
Officer at Arabesque Asset Management
C
orporate
governance
frameworks in the Middle
East and North Africa have
developed significantly over
recent years. Remarkably, just over a
decade ago, there did not even exist
an agreed-upon phrase for corporate
governance in Arabic, which of course
made debate and reform a challenge.
Indeed, if an issue cannot be defined,
then it cannot even begin to be addressed.
An effort in 2001 led by the Arabic
Linguists Council, supported by the Center
for International Private Enterprise,
resulted in the first standardised term
for ‘corporate governance’ in the Arabic
language. After intense deliberation
and consultation that lasted more
than a year, hawkamat ash-sharikat –
literally “the governance of companies”
– was developed as the Arabic term
for corporate governance, in 2003.
It combines three Arabic root words:
hukuma, meaning “government,” hukm
Omar Selim, Chief Executive Officer at
Arabesque Asset Management
– “judgment,” and hikmah – “wisdom.”
The participants involved recognised
that the lack of an accurate Arabic
equivalent to the word governance was
not just an issue of semantics, but a
barrier that made the implementation of
corporate governance difficult in practice.
Fast forward to 2015, and the regional
corporate landscape has changed
significantly. Greater enforcement
of corporate governance rules and
regulations has been particularly
noticeable in recent years, as it emerges
as a core priority for the region.
Governance frameworks and codes
now exist in all of the key regional
capital markets, which are accompanied
by new recommendations contained
in company and security law. Some
of these, such as the recently revised
Kuwaiti companies law, contain
detailed governance requirements and
deliver detailed enforcement powers to
the Capital Market Authority and other
regulatory bodies.
Whilst there are varying levels of
sophistication between the regional
governance frameworks, it is clear that
newly developed legal and regulatory
legislation has put governance as a
central issue in the Arabic corporate
world. The upgrade in 2014 of Qatar and
the United Arab Emirates to emerging
market status by S&P Dow Jones Indices,
combined with the recent opening of
the Saudi stock exchange to foreign
investors, has revealed the interest of
shareholders and the broader public in
greater corporate governance practice.
However, despite new frameworks,
questions remain as to whether enough
of a cultural shift has occurred across
the Middle East to facilitate significant
changes in how companies operate at
board level. The perception lingers –
particularly amongst investors - that
transparency is still an issue in the region.
cont. on pg58
56
page 56-58 Arabesque Corp Gov.indd 56
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01/02/2015 10:01
CORPORATE
GOVERNANCE
cont. from pg56
Let’s first consider the benefits
of corporate governance. A report
commissioned in 2014 by the University of
Oxford and Arabesque Asset Management
outlined research which showed that
poorly governed firms have lower
operating performance levels, whilst good
governance leads to better valuations.
Robust governance can lower
the cost of capital and drive wealth
creation through expanding markets.
Transparency in decision-making can
spur economic growth by demonstrating
to investors that their investment will
be properly managed and used, that
accountability checks are in place and
that shareholder rights are protected.
You only need to look at some
of the high-profile global examples
where governance was thrown out of
the window to understand the harm to
increasingly developed regional
governance framework, Arab companies
do face certain challenges in meeting
international governance standards.
For example, there is a challenge to
increase the region-wide percentage rate
of independent directors on company
boards. Indeed, research reveals that the
bigger the firm in the region, the lower the
number of independent directors. There
is a challenge also in improving levels
of transparent reporting at board level,
from disclosure of board attendance to
frequency of audit meetings.
Whilst recent research shows that
over 80 per cent of companies in the
Middle East now publish a CSR report,
following the internationally recognized
standards of the GRI (Global Reporting
Initiative), only a small percentage of
the reports fully comply with the GRI
Good governance exists where
sustainability is at the heart of a company,
and ultimately delivers value creation for all
stakeholders in the long-term
shareholders and the wider economy.
Whether it be the case of Enron,
Worldcom, Bear Sterns or Lehman they all failed because of a chronic lack
of transparency, loss of internal control,
damaging remuneration systems, poor
understanding of risk and questionable
culture direction from the C-Suite.
Put simply, good governance exists
where sustainability is at the heart of a
company, and ultimately delivers value
creation for all stakeholders in the longterm. Furthermore, good governance
reinforces the values of accountability,
responsibility and transparency that
are the bedrock of properly functioning
market economies.
In light of growing levels of data
demonstrating the broad benefits
of corporate governance, and an
58
page 56-58 Arabesque Corp Gov.indd 58
requirements. Furthermore, only 19 per
cent of all sustainability reports sample
contained external assurance.
A central issue, and one that goes to
the heart of strong corporate governance,
is the separation of ownership and control.
In the Middle East, many companies are
family-owned, with businesses passing
between generations. Subsequently,
governance issues gradually become
more complex as companies grow and
capital markets develop.
Once investors have bought into the
company, they have a clear interest in
the governance of that firm – therefore
helping to establish the essential
separation
between
ownership
and control.
In
the
long-term,
robust
corporate governance will truly be
achieved throughout the region by
the embracement of a culture that
allows for that vital separation.
This can be achieved by increasing
the average regional percentage of
independent directors at Middle Eastern
companies – with increased diversity of
background. Committees should be run
independently, with available resources
to ensure that misbehavior is correctly
identified and reported. Furthermore,
regional firms should adopt Integrated
Governance models where sustainability
is firmly at the heart and value creation
for all stakeholders is the priority.
As regional capital markets open to
international investors, with Qatar and
the UAE entering the MSCI emerging
market index in 2013, so too will
significant foreign investment flow
through and therefore accelerate the
enforcement of better governance.
And whilst governance frameworks
in the region have so far developed as a
result of almost exclusively regulatory
pressure, investor-initiated actions
may increase in the years ahead and
further influence the development of
Middle Eastern corporate governance.
A future where good governance
is expected as standard, as opposed to
being aspired to, is on the horizon in
the region. A real shift in culture could
be achieved when managers shift their
focus from developing sustainability
policies to executing upon sustainable
strategies.
Omar Selim is CEO of Arabesque Asset Management, a unique asset
management service combining ESG criteria with award-winning
fundamental analysis and cutting edge portfolio management.
25/02/2015 08:56
ISLAMIC
BANKING
PwC “voice of the
customer” survey
Islamic banks may be missing a huge opportunity within the
Muslim population due to a perception gap, states the PwC report
‘What customers want’, a voice of the customer survey of GCC
banking customers
A
perception seems to
exist amongst customers
and potential customers
of Islamic banks that
they may not be true to Shari’ah
values — in the survey only 52 per cent
of Islamic banks customers agreed that
their provider “was an Islamic bank
and followed Islamic Shari’ah.”
This perception gap amongst
banking customers is also a huge
opportunity, says PwC; for banks that
can more clearly communicate and
Non-Islamic bank customers
34%
Have coveniently
located ATMs
29%
Have a good reputation
and brand recognition
60
page 60-61 Islamic banking Voice of customer.indd 60
grow; the findings also suggest that
service levels are lacking. Non-Islamic
banking customers were more likely
to agree with the statement “My bank
provides a fast service” than Islamic
bank customers. But again, there is
opportunity says PwC, as customers
are willing to switch to Islamic banks
if they feel that service levels at least
match what they get from non-Islamic
(or conventional) banks. So, enriching
the customer experience can help to
drive growth.
demonstrate their Islamic values, the
benefits could be substantial.
PwC commissioned a survey of
more than 500 retail banking customers
in the GCC, to find out what customers
really want; the findings of which
they say can help inform the growth
strategies of the region’s banks.
However, better communication
and demonstration of Shari’ah values
is just one of the areas Islamic banks
should consider as part of their
strategy to compete, differentiate and
Islamic bank customers
28%
Have a good network of
branches / can find it
everywhere
32%
Are an Islamic bank /
follows Islamic Shariah
23%
Have a good reputation
and brand recognition
22%
Have conveniently
located ATMs
26/02/2015 15:53
“The findings of our ‘Voice of the
customer’ survey suggest that part
of the reason customers may not be
entirely convinced by Islamic finance
may be due to the industry’s tendency to
mirror conventional banking products,”
said Ashruff Jamall, PwC Partner and
Global Islamic Financial Services
Leader. “There are huge opportunities
banks must overcome is reversing the
current trend amongst the Muslim
population of using conventional
banking as customers get older.
Generally, older Muslims were most
aware of Islamic banking, however,
this does not necessarily translate into
usage — the proportion of Muslims
using a non-Islamic, or ‘conventional’
The challenge Islamic banks must
overcome is reversing the current trend
amongst the Muslim population of using
conventional banking as customers get older
for the region’s Islamic banks to grow;
expanding populations and economies,
with a high proportion of Muslims,
create a market with huge potential. But
to achieve that potential, Islamic banks
will need to address this perception
issue and also improve service levels
to be competitive with other banks
— Islamic and non-Islamic — from a
customer service perspective.”
Key findings of the survey:
VALUE DRIVES DECISIONS
Banks looking to grow by attracting
a greater market share of the Muslim
population need to build trust amongst
their core customer base by clearly
communicating and demonstrating
their Islamic values. Currently, only
52 per cent of existing Islamic bank
customers believe their bank lives up
to Islamic Shari’ah values.
THE RISE OF THE
‘SILVER ECONOMY’
The forecast demographics of the GCC
predict a huge increase in the elderly
population, or ‘silver economy’ by
2050, and with it, an opportunity for
Islamic Banks to grow together with
their customers. The challenge Islamic
page 60-61 Islamic banking Voice of customer.indd 61
bank rises with age. The report finds
that 23 per cent of Muslims between
the ages of 18-24 years old use nonIslamic products, but the use of nonIslamic products grows to a 58 per cent
for Muslims between 45-64 years old.
BRICKS VERSUS CLICKS
Customers are spending less time in
branches and are increasingly using the
internet and mobile banking platforms.
Internet banking is the preferred
channel for both men and women,
and 51 per cent of respondents said
internet banking was an important
factor in determining who to bank
with. For those institutions looking to
achieve scale and grow market share,
this customer behaviour offers Islamic
banks the opportunity to leapfrog the
development of an extensive branch
network by creating something more
innovative and virtual.
WHAT WOMEN WANT?
Muslim women continue to like/prefer
having women only branches available,
but in reality they are rarely using
them. They also express a preference for
online banking and they cited online
and mobile banking as very important
when selecting a bank. This suggests
that a compelling digital offering could
be a far more significant factor in
attracting new female customers than
a much costlier effort to develop a
network of women only branches.
Women are loyal and less likely to
switch providers than men, so if banks
can create a strong online and mobile
offering that appeals to young females,
they will find themselves with a more
loyal customer base for the future.
SERVICE LEVELS
NEED IMPROVEMENT
The study finds that a fifth of nonIslamic finance customers would
consider switching to Islamic banks
if service levels matched those of
conventional banks. It is also worth
noting that Muslims and non-Muslims
customers ranked similar areas as the
most important reasons why they use
their current bank: reputation and
brand recognition, the branch network,
and location of ATMs.
The survey was conducted during
September 2014. All 540 respondents,
male and female, between the ages of
18-64, currently use a bank for personal
banking needs. Survey respondents are
based in the UAE, KSA, Bahrain, Qatar,
Kuwait and Oman.
Internet banking is the preferred
channel for both men and women, and
51 per cent of respondents said internet
banking was an important factor in
determining who to bank with
61
25/02/2015 08:57
THE
MARKETS
China to enter
currency war
The recent global economic developments have finally impacted
China. Their latest economic releases were a shock to economists,
and has raised the need for more stimulus packages, comments
Nour Al-Hammoury
T
he inflation data, YoY CPI
crashed to the lowest level
since 2009 at 0.8 per cent
in January, down from a
previous 1.5 per cent, while it had
been anticipated to decline to 1.1
per cent only. The PPI also crashed
by the highest levels since 2009
after declining by -4.32 per cent in
December. This is the worst deflation
cycle China has ever seen.
Trade Balance data led to other
shock, with surpluses increasing
to a new record high, and exports
unexpectedly falling by -3.3 per cent
in January. This is the first monthly
decline since March of last year and
imports crashed by the highest levels
since 2009, declining by -19.9 per
cent, which is the biggest monthly
decline since May of 2009.
This is off the back of a Q4 GDP
figure of just 1.5 per cent only
compared to the 1.9 per cent of the
previous quarter. This is the lowest
QoQ growth rate since Q1 of 2012,
even with the stimulus packages which
the Peoples Bank of China (PBoC)
62
page 62-64 the markets.indd 62
CHINA - EXPORTS YoY
First decline since March of 2014
50
40
30
20
10
0
-3.30
-10
-20
-30
2009
2010
2011
CNFREXPY Index (China Export Trade YoY) Economic Chart
2012
2013
2014
Copyright© 2015 Bloomberg Finance L.P.
2015
11-Feb-2015 20:15:00
25/02/2015 08:57
This is the first monthly decline since
March of last year and imports crashed by
the highest levels since 200
have already announced. The Durable
Goods Orders Index saw the worst
monthly decline since February of last
year, declining by -13.9 per cent. This
is the second monthly decline in a row,
one that we have not seen since the
beginning of last year.
So the PBoC needs to react and we
saw its first indirect intervention a
few weeks ago when it cut the Reserve
Requirement Ratio by 50bps to 19.5
per cent, down from 20 per cent. This
is the first RRR cut since May of 2012.
However, and most importantly, the
PBoC issued a statement with the latest
inflation readings, saying that it is
ready to expand the trading band on
its currency but without mentioning
when. This could be the first bullet
to engage in the global currency war.
The bank is likely to intervene again
in the next few days or weeks to
weaken the currency — following that
actions of many other Central Banks.
If it does increase the trading band, it
would be sending a clear message to
the global economy — China is fed up
from supporting global growth – but
as always, the PBoC will take its time
before intervening.
USDCNH (dollar/ offshore yuan)
has been rising since the beginning
of the year. With the current policy
and the expected interventions, the
pair has more room to rise in the
next few months. The major obstacle
will be 6.36, while a break above that
resistance might clear the way for
another rally toward 6.42. This would
be the highest level since 2011, but it
would also be enough to show some
recovery in Chinese exports over the
next three months.
CHINA - IMPORTS YoY
Biggest decline since May of 2009
80
60
40
3rd monthly decline in a row
20
0
-3.30
-40
2009
2010
2011
CNFREXPY Index (China Export Trade YoY) Economic Chart
2012
2013
2014
Copyright© 2015 Bloomberg Finance L.P.
2015
11-Feb-2015 20:19:51
Nour Eldeen Al-Hammoury is
the Chief Market Strategist at ADS
Securities. He has more than 10
years of experience of foreign
exchange and global economic
developments analysis, and is
known for his reviews of central
bank policies and inter-market
relationships. He previously was
Chief Market Strategist at Markets.
com and Amana Capital, and set up
and runs his own analysis website.
He is a regular guest
contributor on a range of TV
business programmes such as:
BBC Radio, BBC World News,
Al-Jazeera, Al-Hurra TV CNBC
Europe, CNBC Asia, CNBC
Arabia, Alarabiya, Bloomberg,
Russia Today, Dubai TV, Sama
Dubai, Skynews Arabia, Qatar TV
and Future TV News.
63
25/02/2015 08:57
THE
MARKETS
BLOM MENA Banking Index
31/01/2015
provided by BLOMINVEST BANK s.a.l.
0.14 | 1-Day 0.00% • 1-Week 2.08% • 1-Month -1.75% • 1-Quarter -5.50%
COUNTRY
WEIGHT
QATAR NATIONAL BANK
QATAR
10.13%
2
AL RAJHI BANK
SAUDI ARABIA
6.54%
3
FIRST GULF BANK
UAE
4.80%
3,100.00
4
NATIONAL BANK OF ABU DHABI
UAE
4.41%
3,050.00
5
SAUDI BRITISH BANK
SAUDI ARABIA
3.90%
3,000.00
6
SAMBA FINANCIAL GROUP
SAUDI ARABIA
3.90%
7
NATIONAL BANK OF KUWAIT
KUWAIT
3.89%
8
RIYAD BANK
SAUDI ARABIA
3.72%
9
EMIRATES NBD
UAE
3.63%
10
KUWAIT FINANCE HOUSE
KUWAIT
3.01%
11
BANQUE SAUDI FRANSI
SAUDI ARABIA
2.97%
12
ABU DHABI COMMERCIAL BANK
UAE
2.81%
13
MASRAF AL RAYAN
QATAR
2.46%
14
ARAB NATIONAL BANK
SAUDI ARABIA
2.38%
15
ATTIJARIWAFA BANK
MOROCCO
2.07%
2,900.00
16
QATAR ISLAMIC BANK
QATAR
1.78%
2,800.00
17
COMMERCIAL INTERNATIONAL BANK
EGYPT
1.76%
2,700.00
18
SAUDI HOLLANDI BANK
SAUDI ARABIA
1.58%
2,600.00
19
ARAB BANK
JORDAN
1.45%
20
BANK ALBILAD
SAUDI ARABIA
1.31%
3,250.00
MENA BANKING INDEX
BLOM MENA Banking Index
1-Yr Moving Average
3,150.00
2,950.00
2,900.00
2,850.00
3,300.00
Country
COMMERCIAL INTERNATIONAL BANK
COMMERCIAL BANK OF DUBAI
QATAR ISLAMIC BANK
MASRAF AL RAYAN
HOUSING & DEVELOPMENT BANK
EGYPT
UAE
QATAR
QATAR
EGYPT
Biggest Fallers (52 Weeks)
Country
RIYAD BANK
OMAN INTERNATIONAL BANK
UNION NATIONAL BANK - EGYPT
AMEN BANK
BANK AL-JAZIRA
SAUDI ARABIA
OMAN
EGYPT
TUNISIA
SAUDI ARABIA
Source: ASSET MANAGEMENT DEPARTMENT
64
Gains
51%
41%
37%
29%
28%
06/14
06/14
05/14
05/14
05/14
04/14
04/14
03/14
03/14
03/14
02/14
02/14
01/14
2,800.00
MENA BANKING INDEX
Comparative Chart
3,200.00
3,100.00
3,000.00
2.6%
3.3%
3.8%
0.0%
2.0% 1.6%
11/14
10/14
09/14
08/14
07/14
06/14
05/14
04/14
03/14
MENA Banking Index
Arab Indices (Average)
SP Global 1200 Financials
Proportion of Index 68.50%
Biggest Gainers (52 Weeks)
• 1-Year -2.75% • 5-Years 13.52%
Market Capitalisation Weighted
3,200.00
01/14
1
01/14
NAME
01/14
TOP 20
02/14
2,832.72
0.78%
229.7%
12.4%
Losses
-52%
-39%
-34%
-31%
-30%
20.0%
23.8%
Saudi Arabia
UAE
Qatar
Kuwait
#Ref!
Jordan
Egypt
Bahrain
Oman
Lebanon
Tunisia
25/02/2015 08:57
19th - 20th May 2015
CROWNE PLAZA NAIROBI
100
95
75
25
5
0
bleed
bleed guide.indd
guide.indd 11
29/01/2015
08/01/2015
14:19
08/01/2015 15:31
14:16
OPINIONATED
MAN
Time to shuffle
the cards?
T
he stakes are high; the players
are at the table. Gambling
is, well, more than frowned
upon in this part of the world
but the region’s bankers appear to have
turned to playing a card game to build
their market share among consumers.
Taking just the UAE as an
example, bemused consumers have
been bombarded with new offers in
recent months. Back in November last
year, FGB launched a flexible loyalty
programme for its credit cardholders
that allows
customers to choose
and switch between three loyalty
programmes - First Rewards, First Miles
and First Cashback. First Cashback
programme is the only scheme in the
country to provide cashback of up
to five per cent, with no expiry or
minimum spend requirement.
January brought us sMiles from
Mashreq. The bank’s sMiles Credit
Card allows customers to fly for
free, instantly, with over 300 airlines
including all domestic carriers of the
UAE. Mashreq sMiles is offered freefor-life and allows customers to earn
miles from the very first AED of spend.
Cardholders also get a guaranteed
give-back of 1.25 per cent on every
domestic purchase and 3.25 per cent
on all international spends and have
the flexibility to instantly redeem
accumulated sMiles for free air tickets
for anyone (self, friends and family),
from anywhere (not just for flights
originating from the UAE) and at any
time (no black-out dates).
For ladies looking for something a
little more fragrant, in the same month
Al Hilal Bank unveiled its Laha Credit
Card, which has a built-in applet that
can absorb the scent of any perfume
– so you may properly accessorize.
That said, you can use the card’s
own perfume if you wish – the bank
has partnered with Hind Al Oud -
ROBIN AMLÔT
Managing Editor - CPI Financial
66
page 66 opinionated.indd 66
Arabic Perfume to create the ‘Laha
Al Hilal Perfume’ which arrvies along
with the Laha Al Hilal Card in a special
presentation package. The Laha card
offers ladies a clutch of benefits, rewards
and privileges such as Murabaha profitfree purchases, platinum dining offers,
complimentary airport lounge access,
and exclusive discounts from major
women-oriented brands.
At the end of January, Noor Bank
focused on a niche opportunity,
partnering with SriLankan Airlines to
offer FlySmiLes silver card members
lounge access at BIA Katunayake Airport,
Colombo, priority check-in and baggage
handling on all Srilankan Airlines flights
and, perhaps most usefully, an additional
12 kg in baggage allowance.
However, diamonds are, as the
song goes, a girl’s best friend and
February also saw RAKBANK get
friendly with Kalyan Jewellers to launch
the RAKBANK KALYAN JEWELLERS
MasterCard Credit Card. This card does
not offer cashback but ‘Goldback’ loyalty
points that are earned at a rate of up to
seven per cent and can be redeemed at
any Kalyan Jewellers outlets in the UAE
in the form of jewellery. Furthermore,
the card also offers a 0 per cent easy
payment plan on diamond and gold
jewellery purchases. This is by no means an exhaustive
summary of recent launches. I
should also mention in passing the
announcement by Amex of a new
Platinum Credit Card denominated in
AED and exclusive to the UAE… in fact
the first credit card American Express
has launched in the UAE in eight years!
As we report elsewhere in this
issue, customer focus appears to be
one of the key trends in retail banking
for 2015. It is certainly clear that
banks are investing significant sums of
money in the marketing costs of their
cards offerings. Will this investment
pay off?
25/02/2015 09:59
CPI 220x290mm_Mise en page 1 26.05.2014 09:22 Page 1
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PM
21/01/2015
16:56
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BANK OF BEIRUT:TAKING BANK OF BEIRUT:TAKING

Transcription

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