National Bank of Fujairah (NBF) has had an impressive run in 2016, particularly its Islamic finance business which will continue to be the bank’s main focus going into 2017. CEO Vince Cook gives us an insider look at NBF Islamic’s performance and achievements over the past year and shares with us the bank’s Islamic banking growth strategies, product pipeline and aspirations for 2017.
How did NBF Islamic perform in 2016? What were your biggest challenges and biggest achievements of the year?
Since NBF Islamic launched in 2014, we have seen an extremely encouraging response for our proposition and on the whole, it has continually been one of the strongest performing divisions of the bank. While we cannot discuss full-year results for 2016 yet, in the first nine months, customer financing was up 81% compared to the previous year, while Islamic customer deposits rose 28% compared to previous year-end.
In terms of the biggest challenges we faced, these are consistent with those the broader banking industry sees today. Margin compression, increasing costs of regulation, a more complex credit environment, and broader macroeconomic concerns such as the ongoing impact from the drop in oil prices, are all issues that banks will need to take into consideration.
However, we are confident of achieving continued business growth and believe that what we have achieved puts us on a strong footing for expanding NBF Islamic customer base and ongoing success next year. Reflective of our success, we recently won the ‘Best New Islamic Window – UAE’ award at the recent Islamic Business & Finance Awards 2016.
What are the range of products offered by NBF Islamic and has the product suite expanded over the past year?
As you know, when we launched NBF Islamic at the end of 2014, our first offering was our suite of retail banking services in Fujairah. This allowed us to test the waters and determine customer appetite, as well as our ability to compete with some of the larger Islamic financiers while maintaining the highest level of compliance with Shariah guidelines.
In turn, we launched our Shariah compliant corporate banking and trade finance products and services which have been well received in the market.
Central to these developments has been our focus on strengthening our Islamic capabilities in fulfilling customer needs quickly and effectively. This included implementing systems and building processes to support our infrastructure; as well as investing in the ongoing development of our staff and bringing experts on board.
What are your top predictions for the domestic Islamic finance market? What will be your biggest challenges and key opportunities?
I think competition from fully-fledged Islamic banks in an environment where liquidity is tight, is the biggest challenge we envision. However, at NBF, we believe that our greatest opportunities come from our tireless focus on catering to our customers’ needs and adopting the highest standards of Shariah principles. Given this commitment, we do see pockets of opportunity that we are nimble enough and better suited to capture, particularly with the UAE’s ongoing drive towards becoming the capital of the Islamic economy.
As we enhance our infrastructure and invest in resources and expertise, we are confident that NBF Islamic will further establish our position as a reliable and trusted banking partner in the UAE. Furthermore, as our Islamic balance sheet has grown rapidly, we see no reason why we cannot compete with larger and more established Islamic financiers in the near future.
What are the targets and focus areas for NBF in 2017? Where do you see growth, and where will you be scaling back?
Our top goal for 2017 remains to continue expanding our Shariah compliant customer base and improving our customer service levels, as it will enable us to develop long-term relationships with clients that will in turn drive our long-term growth. Over time, we would like to see our Shariah compliant business grow and eventually reflect the local banking sector as a whole, with a 75:25 split between conventional and Islamic banking. To achieve this, our expectations of annual growth are still around 20% and we believe we will soon be able to capture a 1-2% share of the market.
What new products and/or pipeline do you have for the coming year?
We have a full suite of Shariah compliant treasury products now and we continue to grow our retail product base including a planned launch of Mudarabah instruments in 2017. On a bank-wide level, investment in technology is a priority, and we continue to enhance our digital channels to improve our clients’ banking experience. We have just launched a mobile banking app and are currently upgrading our online banking service for our corporate and business banking customers. This will see the introduction of new features such as corporate cheque printing. All such developments are now accommodating both Shariah and conventional customer needs.
Moving ahead, once we have grown our core business and our market share, we may look to expand into areas such as capital markets. Another area in which we are keen to expand into relates to the recent development of a Shariah standard for gold-based products. The establishment of a new set of standards by AAOIFI means that there are now a whole range of Islamic banking services we can provide in this space. We are keen to leverage this and build on our existing expertise and long-standing business in the precious metals and jewellery sector, in order to provide the most innovative Shariah compliant services to businesses in this industry.