First Gulf Bank eyes overseas expansion
First Gulf Bank, which achieved the best financial results and the biggest profits among all other banks in the UAE despite the economic crisis, is not planning to acquire banks in the UAE. However, it is seeking to expand outside the country.
"The bank is looking at future extensions in the UK and Chinese markets," Andrei Sayegh, CEO of First Gulf Bank, told Emirates Business.
He said a deadline has not been fixed to issue new bonds for the bank yet, and added that any issue will be made as per the needs of the bank and the market.
Sayegh added that the bank has no objection to increasing the rate of foreign ownership. "Foreign ownership currently represents 13.3 per cent. The bank will increase this level if circumstances allows it to do so."
He believes 2010 will be the best year for banks operating in the UAE. "Indicators of the first quarter are good and quite satisfactory," he said.
The extraordinary general assembly of the bank last week agreed to extend the transferable bond for five years to end by 2015. Do you intend to issue bonds shortly?
The bank is currently studying the possibility of issuing new bonds this year, which is part of the bond programme that the bank approved at a value of $3.5 billion (Dh12,85bn). During the fourth quarter of 2009, the bank issued short-term international bonds at a value of $500m. Subscription for this issue was made at $ 3.1bn, which represents six times the value of the required issue. This reflects the trust of international markets in the bank and its promising future. First Gulf Bank also enjoys a distinguished status in the international financial market, thanks to its strong credit rating, where the bank was rated 'A+' by Moody's and Capital Intelligence and 'A2' by Fitch.
This strong credit rating reflects the strength of the bank's performance and its strategic importance and the vital role its plays.
Despite all these indicators, we have not yet decided to issue new bonds and it may not be issued. We should not misinterpret the decision by the normal general assembly to issue new bonds shortly. I confirm that issuing new bonds is based on the status of the market, and as per the need of the bank.
Does the bank intend to increase the quota of foreign ownership after having previously reduced it?
The current foreign ownership rate in the bank is 13.3 per cent. The fact is that the allowed rate is 15 per cent. We have no objection to increasing this rate at all if the circumstances allow us to do so. However, this will be done when at the right time.
How are the talks with Saudi's Sa'ad and Al Gosaibi Groups progressing?
I assure you the bank is currently carrying out talks with the two Saudi groups either directly or through the general framework of the lending banks. It is possible to arrive at an agreement for rescheduling the outstanding debts of the two groups.
Does First Gulf Bank plan to acquire new banks outside the UAE, like Abu Dhabi Islamic Bank and Union National Bank where they acquired two banks in Egypt?
We have no intention to acquire banks outside the country. The bank is investing as per a well-studied scientific and strategic plan. It is currently heading for setting up a series of banking services extending from London to the Chinese market abroad. We intend to open a representative office in London, and this is on top of our priority list, as well as our existence in China. This will be made gradually.
In 2009, the bank continued working as per its strategic plan where it turned its representative office in Singapore into a banking transaction branch for companies. It launched operations in Qatar and India by opening representative offices. It also entered the Libyan market through the Libya First Gulf Bank, which started operation in the fourth quarter of 2008. I believe that our international extension is part of our strategy to diversify our income resources, especially that the markets that we entered are considered very important and strategic for us. We will continue in the same direction by gradually expanding in more markets around the world.
How do you evaluate the bank's performance in 2009 – a difficult and exceptional year for the UAE banking sector?
First Gulf Bank is a pioneer institution in the UAE banking market. It achieved the best results at the level of banks in the country last year despite that year being an exceptional one for all banks.
The bank was awarded a number of international awards, such as the award of the Best Bank in the UAE and the Strongest Bank in the UAE. These awards reflect the strength and success of the bank and the distinguished and the leading status it enjoys as a strong financial institution.
Last year, our profits were Dh3.3bn, which represents 21 per cent of the total profits made by all the banks operating in the UAE that was Dh12.6bn. Such profit rates exceed to a large extent our profits in the previous years.
If we compare our profits with the total profits of all Abu Dhabi banks, we will see that the bank's profit in 2009 represented 47 per cent of Abu Dhabi banks' profits of Dh3.69bn. And the bank's profit in 2003, which hit Dh121m represented only seven per cent of the total banks' profits in Abu Dhabi which was Dh1.68bn.
The First Gulf bank story began 30 years ago. During the three decades it has set an example to follow, by transforming itself from a small bank to an integrated financial institution. This is due to the wise board of directors and the dedication of its faithful staff. After three decades, we can boastfully say that we have set a new basis for banking work, have offered new and innovated products as well as contributed in the development of UAE economy. This success is directly linked to the effective management of the bank's budget with a focus on the maximum use of human and financial resources to achieve top profit.
During the extraordinary general assembly last week, you confirmed that the last 10 years witnessed a radical change in the bank. What are the features of these changes?
In the past 10 years from 1990 to 2009, the bank witnessed a radical transformation in ownership and management. During that period the actual progress began. And later with each passing year we were keen to broaden our asset base and profits.
For example, the bank's assets in 1999 was Dh2bn, which jumped to reach Dh125.5bn in 2009. The deposits also increased from Dh1.4bn to Dh86.4bn for the same period. The net profit was minus Dh49m in 1999 and it hit Dh3.3bn in 2009.
The same period also witnessed increasing volume of loans from Dh1.3bn to Dh90.4bn. The market value of the bank was not more than 0.9 in 1999 to reach to 22.1 in 2009. Its branches also rose during this period from three to 19 branches, and we are planning to open four new branches in the local market in 2010. The bank employees increased from 207 to 969 in the same period. The bank received non-investing rating of 'BB+' in 1999 and 'A+' investment rating in 2009.
What was the nature of net profits for 2009?
I confirm that 75 per cent of the net profits of Dh3.3bn in 2009 was achieved through the basic activities of the group, which included banking services for individuals and companies, treasury, investment and Islamic financing. The remaining 25 per cent was achieved through sister and subsidiary firms that follow the bank strategy of diversifying its income resources.
For example, the bank's assets of Dh125.5bn in 2009 were distributed as follows: 71 per cent loans, eight per cent cash assets, five per cent investments, five per cent investments in properties, four per cent other assets, one per cent investment in similar companies. I think the main activates of the bank were the main factors to achieve these results. The bank is focusing on diversifying its sources of income as an efficient means to manage risks and avoid economic fluctuation.
Following a difficult financial year for the banking sector, what were the most important reasons that helped First Gulf Bank achieve such big profits?
I believe that First Gulf Bank not only achieved the best results among all the other banks operating in the UAE, but also maintained its distinguished performance and wise risk management.
A quick look at the indicators of the bank's income list for 2008 and 2009 will show the bank achieved revenues of Dh6.1bn in 2009, which increased by 31 per cent from 2008 when its revenues were Dh4.6bn.
Expenses fell by five per cent when it hit Dh1.08bn in 2009 compared to Dh1.13bn in 2008. Also, the lending-to-deposits ratio in 2009 retreated to reach 105 per cent instead of 107 per cent in 2008. Capital adequacy rate increased from 14.1 per cent to 22.6 per cent in 2009.
We are following a wise strategy for lending and investment and are providing the necessary financing sources for the bank. We are also maintaining a suitable liquidity. The companies' borrowings represented
70 per cent of the total loans and personal borrowings 30 per cent. Our loans portfolios follow international standards.
Total deposits are Dh86.4bn following the shifting of federal government deposits of Dh4.5bn to the second split of the capital, with this shifting proportion of loans to deposits becoming 105 per cent instead of 100 per cent.
On the other hand, the injection of funds by the Abu Dhabi government to the bonds of the first split of the capital, and transfer of the deposits of the Federal Ministry of Finance to the second split of the capital have greatly helped to improve the capital adequacy ratio to 23 per cent by end-2009.
What is your expectation for the banking sector in 2010?
I think 2010 will be better than last year. The initial indicators of the first quarter of this year assure us that this year, the local crediting banks will retrieve amounts exceeding allocations they reserve to face loans of Sa'ad and Qusaibi groups. I think allocation will decrease in the current year to pave the way for more profits. The UAE economy, particularly the banking sector, is improving and the government is providing solutions for problems the sector is facing. It is important that the sector remain healthy because it supports other economic segments such as the industrial, service and commercial sectors.
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