In the past couple of years, DIB has been strengthening its geographical presence, namely in Indonesia and East Africa (Kenya). How is the expansion coming along? Is that the strategy moving forward, ie to focus in Indonesia and Kenya?

While we continue to grow and enhance our franchise within the UAE, international expansion forms an integral part of the overall strategic agenda for the bank. Though we intend to focus on markets that offer demonstrable potential for Islamic finance and where the DIB name and brand is recognized and carries weight, our key objective remains simple – bank the market. Focusing on the entire bankable population in the UAE has been a key pillar of our growth agenda and the same strategy will now be implemented across all our international operations. You may even see us rationalize some legacy investments where we have been passive investors or which we feel are not aligned to the current roadmap of the bank.

Today, our focus remains on three key markets – Pakistan, Indonesia and Kenya and is primarily aligned with our future plans for capturing the flows between Asia, the subcontinent and East Africa. We view Pakistan as a thriving market that offers huge scope of growth. We presently have 243 branches in 62 cities. Last year, we embarked on a new strategy built around the reconstitution of the business model which has yielded tremendous results and has now positioned the franchise for significant growth in the coming years. This is a similar approach to the one implemented in the UAE which has already met with huge success.

With a sizeable stake in Bank Panin Syariah in Indonesia, we are ready to transform the institution from a niche-focused player to a fully-fledged commercial banking franchise ready to exploit one of the largest Islamic populous countries in the world.

Kenya is a greenfield setup and 100% owned by the bank. The market offers strong potential returns but remains underpenetrated as far as Islamic finance is concerned. With infrastructure already in place, we are ready to launch operations and subsequently use the entity as a platform to expand our presence into the rest of the East African belt.

Are the regulatory environment and cultural dynamics of those countries supportive toward foreign banks like DIB penetrating the market?

Our international expansion agenda focuses around markets where our inherent expertise and positioning can be exploited and where we see strong potential for future growth. Clearly, the regulatory regime has to be Islamic banking-friendly for us to get a foothold. As long as the regulatory environment is supportive of our ambitions, we are confident of delivering success in a manner similar to the performance of the bank in the UAE.

The three countries currently targeted remain significantly underpenetrated from the perspective of Islamic finance, a situation quite similar to what we witnessed in the UAE a decade or so ago. So if DIB’s performance at home is anything to go by, our strategy should work well in growing the business to impressive new heights over the coming years.

On one hand, DIB is making headway in Asia and Africa, but DIB also scaled back on the Jordanian front, having offloaded its stake in Jordan Dubai Islamic Bank – what’s the rationale behind that move?

As mentioned before, we have some legacy investments where we are passive stakeholders. Under the new strategic agenda, we want to be active players and actively manage international investments and franchises. So as part of rationalization, whenever we see an opportunity to unlock value and exit in what we consider not core to our current strategy, we will exercise the option.

You’ve mentioned multiple times that India is a market with great potential for Islamic finance – but with the current religious sensitivity and lack of enabling regulations, do you still see India as a feasible market?

India has seen steady progress in the Islamic finance space in recent years. Just two years back, the Reserve Bank of India had allowed a Shariah compliant, non-banking financial company established with equity participation from Kerala State along with private investors, mostly Gulf-based non-resident Indians, to operate.

In my opinion, the Indian government requires huge capital to accomplish its ambitious projects including modernizing railways, the construction of smart cities and establishing dedicated freight corridors. Clearly, the main objective of Prime Minister Narendra Modi’s frequent foreign visits is obviously to bring in more investments and inflows into the country. Currently, India is facing a funding gap of US$300 billion in meeting its infrastructure funding requirements until 2017. Public sector banks, which have been the main source of funding, are overleveraged. According to sources, the Indian finance ministry is also considering the possibility of Sukuk issuances for infrastructure development.

Despite the regulatory challenges and the limited understanding of Islamic finance, we think India is set to become one of the largest emerging Islamic finance markets, just going by the sheer size of its Muslim population of 200 million. We are also optimistic of India’s potential, particularly with huge opportunities arising from infrastructure projects as well as India’s growing trade relations with the Middle East.

What other markets do you see as opportunities of growth?

The wider Eastern African market is quite attractive with growing demographics and infrastructure needs. Africa has benefited from a decade of solid economic expansion. Since 2005, GDP growth rates have averaged around 5%. This has led to increasing urbanization and more foreign investment. Therefore, overall we see strong prospects for Islamic banking in Africa.

DIB is off to a good start this year issuing the landmark US$1 billion Sukuk – were you happy with the issuance, was the pricing competitive? Can we expect more issuances from DIB this year?

Yes, we started the year in a very positive manner with the issuance of a US$1 billion Sukuk [facility] under our US$5 billion Sukuk program, the largest Sukuk to be issued by a financial institution globally. It was subscribed over two times and the overwhelming demand from global investors reflects the confidence and trust they have in the bank’s ability to deliver on its strategy and plans. Not only was it the first financial institution deal for 2017, but it was the first time this year that DIB had accessed the global capital markets.
We will continue to look out for opportunities in the market and assess if the liquidity is available at the right time. I don’t think we can reveal a time frame as our current liquidly levels are quite strong and it is really dependent on market conditions.

What are your growth targets for DIB this year? What areas will you focus on? What challenges do you foresee?

We are looking at a financing growth of 10-15%, supported by both wholesale and retail. Wholesale sectors include governments and government-related entities, aviation, healthcare, transportation, tourism, hospitality, education, logistics – basically everything that makes up most of Dubai and the UAE’s GDP today. Compared with 2016, I feel that the liquidity and margin pressures are somewhat alleviated. With the oil prices steady in the US$55-60 range, and EIBOR and LIBOR picking up in anticipation of a rate hike by the US Fed, we expect to remain at market-leading levels again this year.

The UAE banking landscape is going through interesting times with major consolidation taking place – do you see this as a threat or opportunity? How will things change for banking players?

The consolidation of NBAD and FGB in hindsight makes sense. Many synergies are being realized particularly around existing exposure diversity and funding status. The ‘Big 5’ banks which control more than 60% of the banking sector in the UAE will now effectively become the ‘Big 4’ post the merger. However, I don’t see a massive change in the banking landscape as these four banks will continue to be the dominant players. It is important to note that DIB is the only fully-fledged Islamic bank in this category.

What is your forecast for 2017?

We are looking to pursue growth for the next couple of years, so effectively, no change in the strategy followed over the last three years. For 2017 specifically, we have outlined key target metrics for ourselves which revolve around a 10-15% loan growth, margin protection, asset quality improvement while simultaneously ensuring strong returns to shareholders with ROEs around 17-18% despite dilution from last year’s rights issue. We have built an incredible franchise which has shown its true potential in the last three years as the leading performer in the market. Our aim now is to protect what we have today and progress and grow further from here, capitalizing on the opportunities that exist within the business model as well as capturing those that blossom in the market over the coming months.

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