Abu Dhabi boosts Al Hilal Bank's capital by Dh400m, CEO says

Abu Dhabi has increased the share capital of its wholly-owned Al Hilal Bank by Dh400 million, a timely boost for the Islamic lender, which is modernising its branch network and investing in technology.

The increase in capital by the Abu Dhabi Investment Council, the state-owned firm that has tied-up with Mubadala Investment Company, was granted in June, Alex Coelho, the Al Hilal chief executive, told The National. Al Hilal's share capital has risen to Dh3.5 billion from Dh3.1bn, as it pursues growth plans, he added.

“While the increase will further strengthen the bank’s balance sheet and capital base, from a more long-term perspective, it allows us to meet the growing demand for Islamic finance by investing in areas with the greatest growth prospects,” said Mr Coelho.

Lenders in the UAE, the Arabian Gulf's second-biggest economy, are recovering from tough operating conditions amid muted growth because of the three-year oil price slump that forced the Government and consumers to cut spending. Crude prices have rebounded from the lows of near $30 per barrel in January 2016, staying mostly above $70 per barrel during the first half of this year.

Banks are expected to increase profitability as demand for credit picks up and the Government resumes spending, especially in oil and gas and infrastructure sectors, kick-starting economic growth, according to analysts including those from Moody's Investors Service and S&P Global Ratings.

The Central Bank of the UAE has raised this year's economic growth forecast to 2.7 per cent from its previous projection of 2.5 per cent. Non-oil GDP growth is forecast to rise to 3.9 per cent this year compared with 3.4 per cent last year.

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The bank, which completed the first decade of operations this year, has a well balanced portfolio, almost equally split between retail and corporate banking, Mr Coelho said.

“We are neither only a corporate bank or a retail bank,” he said. “There’s a beauty into that ... when you are a corporate bank and you have a full-fledged retail presence you have an excellent offering,”

The lender is now placing more emphasis on its wealth management businesses, he said.

Improving asset quality, expanding its offerings and digitising services have been the big priorities for the Islamic lender.

"We as a bank are clearly focused on the quality of the assets," Mr Coelho said. "We are not concerned with the general growth but we are concerned with qualitative growth, both in retail and corporate banking [businesses]."

The bank, which is modernising its branch network, is also heavily investing in electronic banking.

Al Hilal has updated its Euro Medium Term Note programme for a possible bond issuance. However, Mr Coelho would not specify either the time or the size of possible transactions and whether Al Hilal has appointed financial advisers on the deal.

“We don’t have a date yet. We are soft sounding the market and discussing it with our peers to see where’s the best window for us,” he said.

The lender issued a $100 million private placement sukuk last year, its third issuance under the $2.5bn EMTN programme, it said at the time.

Bloomberg earlier this year reported that the bank has hired Emirates NBD, First Abu Dhabi Bank, HSBC, JP Morgan and Nomura Holdings to manage the sale of another dollar-denominated sukuk transaction.

Last year, Al Hilal uncovered a fraud attempt, which Mr Coelho said was a one-time occurrence. However, the bank’s internal control processes identified the “unusual transaction” and blocked “all but a relatively small amount on the same day the incident occurred”.

However, Bloomberg in April reported that the amount involved was worth more than Dh500 million. It said the matter involved employees of the bank who allegedly withdrew funds from dormant customer accounts.

Mr Coelho said "No customer accounts were impacted, directly or indirectly and the bank does not anticipate a loss from this incident," he said. "There will be no loss on the bank's balance sheet at all."

He said Al Hilal has strengthened its controls and procedures to prevent any such incident from recurring.

“Even before I arrived, the bank had been strengthening all of its core systems and improving its governances and all the aspects of fraud prevention,” he said.