First Gulf Bank PJSC (FGB), the United Arab Emirates’ third-biggest bank, said it’s planning new hires for its investment banking business and is seeking to double the share of profit from its international unit in five years.
The Abu Dhabi-based lender, which has two mandates to arrange initial public offerings for local companies, will hire bankers in mergers and acquisitions, debt and equity capital markets, Chief Executive Officer Andre Sayegh said in an interview yesterday. The lender also plans new offices in South Korea, China and Indonesia over the next 18 months as it seeks to raise the contribution of international business to profit to the “teens or more” from 5 percent last year, he said.
First Gulf Bank in March hired Simon Penney, Royal Bank of Scotland Group Plc’s CEO for the Middle East and Africa, as head of its wholesale banking business to boost growth. The lender is among several Abu Dhabi banks expanding overseas as a local population of 8.3 million restricts growth at home and local companies expand their trade and investments abroad.
First Gulf Bank aims to “provide more value” to companies through its investment banking services such as helping them access capital markets, risk-hedging and Islamic banking, Sayegh said. “I expect more listings to happen probably starting next year and to be even encouraged by the government.”
Abu Dhabi’s benchmark share index has jumped 48 percent this year and Dubai’s 64 percent, fueling expectations of a revival of local IPO activity after the financial crisis curbed investor appetite for offerings. Stock markets in the U.A.E. and neighboring Qatar were upgraded to emerging-market status in June by MSCI Inc. (MSCI:US), triggering speculation that foreign investors will channel more money into these oil-rich countries.
First Gulf Bank rose 0.6 percent to close at 17.1 dirhams in Abu Dhabi today, bringing the surge for the year to 47 percent.
First Gulf Bank in July reported second-quarter profit rose 15 percent to 1.17 billion dirhams ($319 million), the second-highest in the U.A.E. after National Bank of Abu Dhabi PJSC. Borrowings by companies and consumers helped boost lending 7.4 percent in the first half and the bank expects to maintain the “same momentum of growth” over this year, Sayegh said.
Net Interest Margin
First Gulf Bank’s net interest margin, the difference between what the bank earns on loans and investments and what it pays on deposits and debt, narrowed by 0.04 percentage points in the second quarter to 3.6 percent. The decline in local interest rates over the last two months will result in “mild pressure” on the interest margin as the bank plans to expand its retail and small- and medium-enterprise businesses, which traditionally carry higher yields, Sayegh said.
The U.A.E. has the biggest banking market in the six-nation Gulf Cooperation Council, which also includes Saudi Arabia and Qatar. Fifty-one commercial banks operate in the country, including HSBC Holdings Plc (HSBA) and Citigroup Inc.
First Gulf Bank in June bought Dubai First, a consumer loan and credit card company, for 601 million dirhams from Dubai Group LLC, an investment company owned by Dubai’s ruler. First Gulf Bank managed the deal itself, Sayegh said.
The bank, controlled by Abu Dhabi’s ruling family, already has a presence in Singapore, India, Hong Kong, Qatar and Libya, Sayegh said. The lender has avoided overseas acquisitions and usually begins by setting up representative offices in new markets and upgrading them to full branch status.
“It’s very important to position yourself where the trade links are,” Sayegh said. “It’s important to be in this belt of London, U.A.E., Qatar, India and the Asia-Pacific. That’s very important for financial exchange and for trade.”
Other U.A.E. lenders which have announced expansion plans include Abu Dhabi Islamic Bank PJSC (ADIB), the U.A.E.’s second-biggest Shariah-compliant bank, which said this month it had applied for licenses in Algeria and Libya while top-ranked Emirates NBD PJSC (EMIRATES) bought a bank in Egypt this year.
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