ABU DHABI, (Reuters) – National Bank of Abu Dhabi (NBAD), the UAE’s largest bank by assets, has made several proposals to its government owners to grow through mergers to face mounting global competition, the CEO said on Monday.
Michael Tomalin told Reuters in an interview that NBAD will grow through expansion of branches locally and overseas until it finds the right partner.
“As a leading bank of the UAE and a very important asset of Abu Dhabi, NBAD needs to be developed as a full scale universal bank with offices around the world and therefore for us there is no choice but to get bigger,” he said.
“I have made lots of proposals to the owners and it is really for the owners to decide what to do. We need to get bigger and we can continue to get bigger organically too.”
Increasing competition from foreign banks is making it more difficult for local banks to survive, compelling them to make a strategic choice of either staying in a single niche market or expanding, he said.
“For banks like NBAD operating in different markets and in different activities, you can find yourself sub-scaled in every different activity. So, NBAD needs to be developed to a full-scale universal bank in retail, corporate, private and investment banking and asset management,” Tomalin said.
NBAD continues its search for acquisitions locally and overseas but is still to find the right fit, he said: “We are very much alive to banks and financial institutions that might be up for sale and we are looking broadly but it should make sense in terms of a strategic fit and the right price.”
NBAD plans to open a branch in Bahrain in October and two more branches in Oman before the end of the year as it seeks to grow its international business, Tomalin said.
“We opened our fourth branch in Oman two weeks ago but before end-2007 we plan to have six branches there,” he said.
NBAD is also awaiting a licence in Qatar and opened a branch in Kuwait earlier this year. The bank is also looking to increase its exposure in Sudan, Tomalin said.
Currently, international business contributes some 20 percent of the bank’s profits. “There is potential for it to grow more,” he said, without elaborating.
NBAD expects to earn “modest and positive” growth in profits in the third and fourth quarters of 2007, mainly from core business, Tomalin said.
“We should have modest and positive growth in the third and fourth quarter this year and the principal component of growth would be more interest income,” he said.
“Core business is going to be the key contributor to income and there would be less from exceptional income like IPOs or very strong bull markets. These are much more normal conditions.”
He said NBAD will raise funds through bonds only if market conditions are attractive although the bank has secured shareholder approval for bonds in different currencies.
“We have a $5 billion Euro Medium Term Note (EMTN) programme, a $2 billion Euro Commercial Paper (ECP) as well as domestic issuance programme. Raising money will depend on market conditions and at a price suitable for us,” he said.
NBAD has raised 7.3 billion dirhams ($1.98 billion) ending June 2007 out of its $5 billion EMTN programme and 858 million dirhams out of the $2 billion ECP programme that was launched in September 2006.
“Under the domestic issuance programme, we have so far got permission for Australian dollars. We have asked for issuing bonds domestically in Japanese yen and Malaysian ringgit,” he said.