Make the right calls when navigating through the economy: RAKBANK

What factors contributed to the bank’s impressive 38 per cent rise in net profits to Dh1 billion at the end of 2010?

• The foundations for this milestone were laid over 10 years ago when the new management team took shape. The requisite strategic vision combined with the ability to outpace the market in launching innovative products and services, has helped the bank to increase its consumer and SME business customers by 9000 per cent and thus its revenue, in the past decade.
• The bank’s ability to adapt swiftly to a changing market environment has also helped. For example, our lending policies can be amended weekly to changing circumstances.
• The bank’s focus on retail/SME banking, emphasis on revenue growth, cross sell to increase products per customer and conservative credit policies have been the keys to success
• Excellent customer service to build up a loyal customer base, backed by motivated staff has been one of the key success factors. We have retained an obsessive focus on trying to provide products and services that our customers want to have, and at a reasonable price. For the past five years we have been ranked Best Bank in an Independent survey on customer service in the UAE.
• Staff including contracted people, have grown from 130 to 4000 in 10 years. We only recruit and motivate people who can be trained to focus on customer needs and care.
• Our conservative but customer friendly lending policies which are constantly under revision, have contributed to our bad debt levels being less that 50 per cent of our similar competitors.
• The almost obsessive focus on our “core customer” product service offering has driven growth in our revenue streams.

How has RAKBANK delivered such high earnings growth metrics amid a fragile, post recession economy?

Making the right calls when it came to building the lending book and choosing the appropriate customer segments has helped the bank during recent rough times.

• A careful and measured approach in selecting who and how much to lend, and which product/customer segment to downsize, when the wider market was extremely positive and growing rapidly, ensured that the down side was limited.
• Concentrated focus on diversified income streams through retail, bancassurance, card payments, mortgages and SME business i.e, our “core business.”

How did RAKBANK manage to increase customer deposits by 33 per cent in 2010 in the most fragmented competitive retail banking market in the GCC?

Our Service Quality and transparent pricing model has been a key factor. Customers have reposed faith in the Bank’s brand and services and we have consistently grown a strong and loyal customer base across the Emirates. Ensuring that the customer experience at every touch point with the bank is a ‘wow’ in all respects has helped retain them, amidst stiff competition from local and multinational players.

Is RAKBANK the largest consumer banking franchise in the UAE?

We are probably the fastest growing retail bank in the UAE, and we are amongst the tope three or four in terms of customer numbers. We are in the top three in the market in the case of many retail/SME banking products, whether in terms of pace of growth or market share.

Does the risk-reward calculus of corporate banking in the UAE attract you?

We are primarily a retail/SME bank and it is the board’s strategy to continue to focus on growth in this segment. It is our endeavour to continue to make forays in our core customer segments with new product ideas suitable for the market, especially in the areas of Islamic banking, bancassurance and online delivery of products and services. At the present time our hands are full with developing these existing/new business streams, which prevents us from considering a move into corporate or investment banking.

Your shareholders must be thrilled with your performance. An ROE of 30.8 per cent, ROAC of 94.8 per cent and ROA of 5.2 per cent means exceptional profitability metrics in international banking. What valuation metrics do you command in the stock market?

We are a closely held company with minimal trading in the stock market. We feel the market value of our shares is not a true reflection of our inherent strength, as only a tiny fraction of our shares are traded on annual basis.

Please outline your vision for RAKBANK in 2020.

In the coming years, consolidation will be a key factor in the UAE banking industry which is currently very fragmented with a large number of players. We envisage the ultimate emergence of four or five major local players in UAE commercial banking market, and we hope to pursue our growth strategy to eventually play a significant role in the evolution of such entities.