National Bank of Fujairah looks to raise $350m bond as it continues to grow

The National Bank of Fujairah, which counts the emirate's Government and Dubai's sovereign wealth fund as shareholders, is looking to raise $350 million (Dh1.3 billion) from the capital markets this year, amid growth and digitisation of its operations. The bank wants to tap the debt capital markets for the tier-1 issue, which will boost its capital, said Vince Cook, chief executive of NBF . The lender, which has already converted an earlier tier-1 capital bond into equity and paid a tier-2 tranche in November, is awaiting the right time to place the issue in the market. “It seems to be good time but the question on everybody’s mind is what is going to happen to interest rates,” he said. NBF posted its best ever operating and net profit for full-year 2018. Operating profit climbed to Dh1.1 billion, up 15.2 per cent year-on-year while its net income rose 30.4 per cent to Dh615.3 million. Loans and advances and Islamic financing receivables rose 8.9 per cent Dh26.2bn, while customer deposits increased by 9.4 per cent Dh30.5bn. Mr Cook is optimistic the lender will be able to achieve the same growth in loans and deposits in 2019, despite a slow start to this year. The Investment Corporation of Dubai, the emirate's sovereign wealth fund, owns 9.8 per cent of the bank, while the Government of Fujairah has a 40.2 per cent stake in the Abu Dhabi-listed lender. The bank is boosting investments on technology in a bid to attract more customers. It has earmarked Dh160m to Dh200m for new initiatives and about 80 per cent of that is being spent on digitisation. “If we see the momentum grow where it is absolutely compelling, we have the technical capability to launch a digital only bank now," said Mr Cook. A digital bank is an online platform with no bricks and mortar infrastructure. NBF is looking at automation around robotics to eliminate paper work from the banking processes while on the business banking side, it is developing trade finance payments and other digital platforms. The bank will continue to expand its branch network by two to three outlets a year. However, the new branches are increasingly digital as NBF customers respond to emerging technology, Mr Cook said. Lenders in the UAE and across the Arabian Gulf are spending more on digitisation to cut costs and compete with the financial technology companies that offer same services at a fraction of costs of banks . Dubai’s Mashreq has launched Mashreq Neo, a digital-only platform. Emirates NBD, the largest lender in Dubai, plans to spend Dh1bn on digitisation, too. As part of its growth plans, NBF is also upgrading the licence of its investment banking arm, NBF Capital, a Dubai International Financial Centre-based entity, to offer advisory, funds management and structuring and asset distribution services to its clients. “We do see more activity on the distribution of assets and having a platform that could facilitate fund structuring and fund management will be quite helpful to us,” Mr Cook said. “We will be hiring the team and improving the skill set, which will happen in the next few months.” NBF is heavily exposed to small and medium-sized enterprises and considers lending to the sector among its core activities. Lending to SME s accounts for 11.6 per cent of NBF's total loan book, and it posted a 10.3 per cent income growth from the SME sector in 2018. He expects the small businesses to yield double-digit growth in 2019 as well. “Our SME banking has seen very strong year after having a couple of very difficult years,” he said. “The strategy that we followed of staying true to that sector has paid dividend ….. we carried on through [difficult times] so we gained a lot of business.” The risks associated with the sector are not entirely eliminated, however, the number of troubled cases is much lower than during the peak in 2015-2016 period. Banks are generally more open to negotiate repayments and to help the businesses. The government is also keen on boosting lending to the sector, Mr Cook said. “There is a growing realism that it is not in our [banks] interest to precipitate the collapse of a business. Banks have an interest in keeping the businesses alive,” he said.

National Bank of Fujairah looks to raise $350m bond as it continues to grow

The bank is increasing spending on digitisation of its operations