RAK Bank shares 21% underpriced

 

RAK Bank is 21 per cent underpriced on the back of UAE’s booming economy and overall growth in the country’s consumer loans, according to the latest research from The National Investor.

 

“We reiterate our positive stance on the bank and maintain our earlier recommendation. Our target price is unchanged at Dh8.8 per share,” the TNI wrote, adding the bank is well positioned to capitalise on the consumer segment. RAK Bank closed at Dh7.27 on Wednesday.

 

The bank, which has been recording above 50 per cent growth in the past three years, reported a net profit of Dh142 million in the first quarter this year, an increase of 65.3 per cent compared to Dh86m in Q1 last year.

 

Its thrust towards the high-margin consumer segment has helped it register strong profit growth. The bank has also kept delinquencies under control.

 

According to Graham Honeybill, the bank’s general manager, bad credits across the entire range averages around one per cent.

 

“We have a very conservative credit policy and that is reflected in the level of our bad debts. If you take our major competitors, their bad debt level is running at 50 per cent higher,” Honeybill told Emirates Business.

 

Despite strong asset growth, the quality of assets remains under control as non-performing loans to gross loans declined from 3.4 per cent in Q406 to 2.1 per cent in Q108.

 

The bank’s strategy to focus on personal mortgage, small business and credit cards has resulted in strong growth in core banking as well as fees and commission during the first quarter of this year.

 

Until 2001, 32-year-old National Bank of Ras Al Khaimah did not have any retail product other than current and savings accounts. But buoyed by the expanding economies of its sister emirates, the bank [re-branded RAK Bank in 2001] has decided to abandon corporate banking and focus on retail banking.

 

In what was thought as an audacious move, RAK Bank metamorphosed itself and offered its first credit card in 2001, which was also the first “free for life” credit card in the region.

 

Today, the small kid on the block has become the leading credit card provider in the UAE and it would not rest until it gets the top laurel – should the plan goes well – by the end of this year.