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29 March 2024

National Bonds records 27% growth in seven months

Bruno Rochecouste CCO, National Bonds Corporation (DENNIS B MALLARI)

Published
By Parag Deulgaonkar

National Bonds Corporation (NBC) posted 27 per cent growth in the first seven months of 2009 and expects to increase its sales for the rest of the year. "The global credit crisis is reminding many people of the importance of saving," Chief Commercial Officer Bruno Rochecouste told Emirates Business.

"In tough times people need to save for a rainy day. We have taken the lead to encourage people to save and promote a culture of savings in the UAE. This is why our sales went up quickly at the start of the global economic downturn."

He said the three-year-old Shariah-compliant company would continue to invest in projects that are "safe and suitable" in the UAE.

The company, which he said has a conservative low-risk portfolio, plans to launch new products, but Rochecouste refused to reveal details.

NBC, which was launched in March 2006, has a diversified investor base.

As of July 2009, nationals hold 32 per cent of the bonds, Asian expats 28 per cent, Arab expats 20 per cent, Western expats eight per cent and others 12 per cent.


NBC recorded seven per cent profit last year. How much has the global economic slowdown affected the company and what repercussions will it have on this year's profit rate?

NBC is not immune to the global downturn. However, as ours is a pure saving scheme we think the crisis has presented us with a great opportunity to focus on the importance of savings. Yes, it's true that we returned an impressive profit rate of 7.07 per cent last year and 6.03 per cent in 2007. While we all know 2009 is going to be challenging, the first half has been positive for us and we expect this to continue throughout the rest of the year. The global credit crisis is reminding many people of the importance of savings. In tough times people need to save for a rainy day. We have taken the lead in encouraging people to save and promote a culture of savings in the UAE society. This is why our sales went up quickly at the start of the global economic downturn. While it is not possible to determine in advance this year's profit, we expect to remain as competitive in 2009 as we have been in the past.

NBC plans to invest in which sectors this year? Have you changed your investment focus?

Our investment portfolio is balanced between infrastructure and development investments in the UAE and a mix of short-term Shariah-compliant assets. This makes for a conservative, low-risk portfolio composition. Because NBC is dealing with people's savings we need to be prudent about how we invest. Our investment choices do tend to be more conservative. We focus on assets that are aligned with our commitment to providing a safe, secure and Shariah-compliant way for our bondholders to save. In 2009, we will continue to invest in projects that are safe and suitable and also look at launching new products. NBC has invested in Taaleem, an initiative aimed at raising standards in the region's education sector. It is the new brand for Beacon Education that aims to inspire young minds and help them identify and develop their passions and talents. NBC has also invested in BCS, a strata management company, Souk Extra, the retail community shopping chain, and M'sharie, the private equity arm of Dubai Investments.

You recently announced that you have moved to weekly draws from monthly ones. How much have you benefited from this in terms of sales?

We have had an excellent response to the launch of the weekly draws. Holdings increased by 27 per cent in the first seven months of the year. Additionally, we have been creating a millionaire every week. We have increased the frequency of our draws to a weekly structure in order to make savings even more rewarding. We are committed to helping our bondholders achieve their goals and to promoting the benefits of saving to a wider audience. We have seen more people taking advantage of the opportunities to save with us since the frequency of the prize draws was increased.

The prizes being disbursed by National Bonds have increased with the weekly draws. Will this affect the profit rate?

The prize money has not increased but it has been redistributed. NBC funds the prize draws from its own finances, we do not use funds from bondholders. The increase in the number of prize draws has been made in response to customer demand and follows the remarkable success we achieved for all our bondholders with the highest annual profit rate of 7.07 per cent in 2008. The programme is based on the Islamic principle of Mudaraba, whereby at the end of the financial year 20 per cent of the profits made by NBC are distributed among bondholders. The profit distribution will be based on the number of bonds held and the time period the bonds were held during the related financial year.

Have you noticed an increase in the number of people redeeming bonds as a result of the crisis? Many expatriates are losing their jobs, has that had an impact on your customer base and deposits?

People have redeemed their bonds but for a multitude of different reasons, not just the global downturn. This is normal and expected. Redemption is a key product feature, which makes access to funds simple and easy in times of need.

National Bonds is a Shariah-compliant company, so if you were to make a loss would you pass it on to investors, or is their investment safe at par value?

Under Shariah law everyone shares the profits and losses. As it is a Shariah-compliant company, there is a buy-back option for customers in case an adverse situations arises. In such a scenario, NBC has a mandate to purchase the bonds of customers at fair value. NBC is 50 per cent owned by ICD, the investment arm of Dubai Government. The remaining 50 per cent is split equally between Emaar, Dubai Holding and Dubai Bank behaviour.


PROFILE: Bruno Rochecouste CCO, National Bonds Corporation

Rochecouste comes from Mauritius and has more than 24 years' experience in the financial advisory services and banking industry.

Before National Bonds, he was working in Al Rajhi Bank in Saudi Arabia and has also worked for such blue-chip companies as Barclays Bank, British American Insurance and Old Mutual.

His key responsibility at National Bonds is to develop and implement an integrated marketing, sales and customer service strategy that is aligned with the long-term objectives of the company.

 

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