Banking, Finance & Takaful

U.A.E. Islamic Bank Asks What’s in a Name After Barclays

Abu Dhabi Islamic Bank PJSC (ADIB), which bought the local retail assets of Barclays Plc (BARC) last month, is weighing whether to change its name as it targets more non-Muslim customers beyond its home market.

The second-biggest Islamic lender in the United Arab Emirates may change to Abu Dhabi International Bank outside the nation to lure customers drawn to ethical banking, Tirad Mahmoud, chief executive officer of ADIB, said during a conference in the emirate last week. This could help capture a loan market that’s about 200-times the size of Shariah lending.

With 60 percent of U.A.E. residents already holding bank accounts, faster growth opportunities for ADIB may need to come from international markets, according to Shabbir Malik at EFG-Hermes Holding SAE. The lender’s purchase of the Barclays asset was a rare chance to secure 110,000 new customers at home.

“The U.A.E. is a market where credit penetration is relatively high,” Malik, a Dubai-based analyst at EFG-Hermes, said by phone May 26. “So maintaining a high loan-growth rate just in the U.A.E. isn’t easy.”

Home Growth

Having the word “Islamic” in the name makes it seem like the bank is only for Muslims, Mahmoud said. Islamic banking assets represent a tiny proportion of total financial assets globally. Borrowers raised $6.7 billion of Shariah-compliant loans this year, compared with $1.27 trillion for conventional loans, according to data compiled by Bloomberg.

“You want people to come to you because you have something good,” Mahmoud said. “You don’t want to say at the door that this is by invitation only.”

The bank wouldn’t change its name in the U.A.E. to avoid alienating its core market, he said.

Islamic banking assets in the country increased about 15 percent in 2013 compared with less than 10 percent for non-Shariah compliant lenders, Adnan Yousif, a board member with the Union of Arab Banks, said in April. Dubai Islamic Bank PJSC, the oldest Shariah-compliant lender in the world and the biggest in the country, is at the forefront of the emirate’s efforts to be capital of the global Islamic economy.

Noor Rebrand

Still, another Dubai-based Shariah-compliant lender in January rebranded to remove “Islamic” from its name. Noor Bank, formerly Noor Islamic Bank, made the switch to aid future expansion, according to an e-mailed statement at the time. The new name gives the bank “freedom and inspiration to flourish,” Chief Executive Officer Hussain Al Qemzi said in the statement.

ADIB last month agreed to buy the conventional retail assets of Barclays in the U.A.E. for 650 million dirhams ($177 million). The deal is the second of its kind for ADIB, which bought a stake inEgypt’s non-Shariah compliant National Bank of Development in 2007.

“These banks want to compete outside the Islamic space,” Raj Madha, an independent regional banking analyst, said by phone from Dubai May 26. “They’ll probably see their mortgages and deposits rise, because at the end of the day, most people don’t care if their mortgage is Islamic or not, they want to a good deal either way.”

Source: Bloomberg

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