News Column

Mashreq on its way to double retail banking profits this year

May 25, 2014

Babu Das Augustine Deputy Business Editor

Dubai: Mashreq's retail banking business is literally firing on all cylinders doubling profits for the two consecutive years and is set to repeat the performance this year, said Farhad Irani, Group Head of Retail Banking at Mashreq in an interview.

Irani with more than 30 years of experience in payments, retail banking and e-commerce across Asia has worked with institutions such as PayPal, Standard Chartered Bank, Citibank Japan, Korea Exchange Bank. At Mashreq he is on a unique mission to maximising profits by taking the bank to its customers on digital platforms.

"Overall the bank's growth is driven by multiple engines and is set to perform even better this year. A large part of the growth is coming from the retail business," said Irani.

Clearly the figures validate the claim. Mashreq's bottom-line has grown 35 per cent year on year in the first four months of the year while the retail profits have grown 40 per cent, the retail assets and liabilities grew 50 per cent and 45 per cent respectively.

Fee income has been one of the key factors that have been driving the bank's profitability. "The UAE and Dubai is emerging as an epicenter of wealth management interest. Our fee income's share in the retail revenue is almost 40 per cent and this is the regular fee income that is coming from the wealth management side of the retail business," said Irani

Additionally, a lot of its revenue streams are supported by a robust insurance business, foreign exchange and a payment business. The bank has both issuing and acceptance business with a 12 per cent share on the issuing side and a 30 per cent share on acceptance.

Customer growth

While the wealth management business is emerging a key profit centre, the bank's total assets under management is growing at 200 per cent year on year with $9 billion of assets under management on the wealth side. "We are also growing by nearly 10,000 new customers a month and 24,000 new accounts a month. The new customer growth is largely aided by the growth in the economy as well as a great proposition of good service," he said.

Irani says Mashreq is fully prepared to utilise the strong revival of the UAE economy. During the last two to three years the bank has cleaned up the balance sheet, trimmed the team and hired new talent, invested in systems and technology. "We took out 222 redundant processes. We empowered frontline to take decisions. I believe something called servant leadership - where I serve the frontline and they serve the customers," said Irani.

The results are visible on Mashreq's balance sheet. The bank's retail business made a loss of Dh180 million 2011 then it went on to make about Dh300 million profit in 2012 and Dh600 million in 2013. This year profits from retail business is projected to cross Dh1 billion.

Irani expects a mild slowdown in retail loan growth this year as a result of implementation of credit bureau. Credit bureau, according to him, is a very positive development. In the immediate future there could be a small increase in impairments and provisions and some amount of loan restructurings.

Although there could be a small rise in provisions, Irani expects the impact on non- performing loans will be marginal. The bank currently has a relatively low NPL ratio of 1.5 per cent for its retail portfolio and about 3 per cent on total assets.

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Source: Gulf News (United Arab Emirates)

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