The Swiss Private Bank has been present in the region with its Dubai representative office since 2008 and has been owned by Aabar Investments PJSC since April 2009, a global investment company based in Abu Dhabi, which in turn is majority controlled by the state-owned International Petroleum Investment Company (IPIC).

In a recent visit to the UAE, Falcon Private Bank CEO, Eduardo Leemann commented, “We are very excited about the positive direction in which our global strategy is going, and with our impending expansion plans in the dynamic and fast-growing Middle East market. We have grown our business in the region significantly over the last year. Abu Dhabi offers very promising potential for the future given the city’s economic prospects and we are looking forward to the opening of our second Middle Eastern office in the first quarter of 2011.”

“Our fast approaching expansion into the UAE capital will offer great potential for the future, and promises to solidify the Bank’s success in the region and the strong backing of our owners,” added Zafar Khan, Chief Executive MENA Region, Falcon Private Bank.
***

FALCON PRIVATE BANK LTD. is an experienced Swiss private bank specialized in wealth management for private clients, wealthy families and institutional investors. Its clients all over the world enjoy the benefits of over 40 years of experience in Swiss private banking and the financial strength and solidity of its owner Aabar Investments PJSC. Falcon Private Bank has branches and representative offices in Geneva, Hong Kong, Singapore and Dubai.

AABAR INVESTMENTS PJSC is a global investment company investing across industry sectors in attractive opportunities with significant long-term growth potential. International Petroleum Investment Company, an investment company wholly owned by the Government of Abu Dhabi, owns 86.16% of the shares in Aabar.

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Gap Widening Between Strong and Weak Performers in Corporate Banking Sector, Says Report by The Boston Consulting Group

Leading Corporate Banks, Globally and in the GCC, Seize Opportunities Created by the Downturn to Grow Their Revenues and Profits; Financial Distress of Clients and Lagging Loan Losses Continue to Plague Slow-Performing Corporate Banks

Dubai, 9 November 2010 – Although some corporate banks are still reeling from the global financial crisis, others are successfully shifting their focus from damage control to capitalizing on the dynamics created by the downturn, according to a recent global report released by The Boston Consulting Group (BCG). The study also shows that between 2007 and the first half of 2010, corporate banking units in the GCC were even ahead of their global counterparts in terms of revenue growth but compared less favorably when it came to growth in profits largely due to higher loan loss provisions (LLPs).

The study is based on the report, Crisis as Opportunity: Global Corporate Banking 2010 drawing on BCG’s proprietary corporate banking database, 2007-2009 annual results and 2010 first half year results reported by the GCC banks.

Global corporate banking leaders are shifting from damage control to capitalizing on opportunities

About one-third of the participants in the global benchmarking exercise reported rising economic profit between the end of 2007 and the end of 2009. This improvement was mostly attributable to significant increases in corporate lending margins, new loan and deposit volumes, and increased investment banking and risk management sales. Furthermore, in many cases, loan losses were not as bad as originally feared.

In terms of segment performance in 2009, corporate banking business units serving the micro segment had, by far, the highest average return on regulatory capital, followed by small- and mid-cap and then by large-cap business units. The large-cap segment was the toughest environment, overall, in which to create value.

GCC corporate banking units are still reeling under high loan loss provisions in spite of registering continuous revenue growth since 2007

“Revenues and loan volumes of GCC corporate banking units showed stronger growth compared to their global counterparts between 2007 and the first half of 2010.  However, higher loan loss provisioning growth led to shrinking corporate banking profits” says Markus Massi, Leader of BCG’s Middle East Wholesale Banking Practice.

LLPs almost tripled for the GCC corporate banking units in 2009 compared to 2008.  However, in the same period, their global peers were able to contain this increase to 100%. This directly resulted in a decrease in profits for GCC corporate banking units in 2009; their global counterparts, on the other hand, were able to marginally increase their profits in 2009.

A preliminary assessment of the 2010 first half year results of GCC corporate banks confirms that the observed trends are likely to continue this year as well.  For the full year corporate banking LLPs are likely to increase, although at a slower rate compared to 2009. “As a consequence, many GCC banks will see further decline in their profits in corporate banking this year”, says Mohamed Turra, Project Leader in BCG’s Dubai office.

While non performing loans (NPLs) for corporate banking units are not always reported separately, the comparison of NPLs for the banks overall show that they may not have hit the peak yet. NPLs as a percentage of total loan portfolio for major GCC banks averaged at 2.4% in 2009 compared to 1.3% in 2008. However, if some of the stress test estimates are to be relied on, the NPL ratio could even double in the coming years in some of the GCC countries.

Corporate banking performance differs by country and even banks within the same country

Whereas markets across the GCC showed a similar trend in terms of corporate banking revenue and profit growth from 2007 to 2009, there were a few markets such as Qatar and the UAE, which fared better than their counterparts.

The main reason for this differential performance was higher growth in revenues which offset high loan loss provisions resulting in profit growth, albeit at a reduced pace.

For instance, banks in the UAE managed to increase their net interest margins on loans by 75 basis points (bps), an almost 30% increase from 2007 to 2009. Margins for banks in other GCC countries, however, remained more or less stagnant.

Almost all GCC banks managed to grow corporate loan volumes year-on-year in both 2008 and 2009, thereby contributing to higher revenues. In this regard, banks in Qatar outperformed their GCC peers, with loan volumes almost doubling in 2009 compared to 2007. However, in 2010, this trend seems to have slowed down across most of the GCC banks.

The study also shows that about 40% of the corporate banking units in the GCC were able to grow their profits between 2007 and 2009 while also growing their revenues. Another 40% were able to grow their revenues but their profits declined. The remaining corporate banking units saw both their revenue and profits decline in 2008 and 2009.

Although banks from some of the GCC countries fared better than others, there were strong and weak performers in each market, clearly indicating that better managed units were able to stand out even during the downturn.

Leaders can deepen their advantage even further

In the boom years from 2004 to 2007, most corporate banks grew robustly amid surging economies, low loan losses and readily available cheap capital. The crisis, however, rudely awakened legions of banks. While some successfully navigated the turbulent times, others found themselves with devastating loan losses, client portfolios whose quality profiles had deteriorated overnight, and revenues that relied excessively on rapidly weakening sectors.

The study outlines steps that corporate banking units in the GCC should follow to improve performance. Based on BCG’s review of top performers during the crisis and conversations with senior corporate banking executives, some of these steps include:

1. Keep risk management at the top of the agenda

While risk management is at the top of the agenda, many banks regularly fail to build a sustainable risk culture from the top to the bottom and in all areas of the bank. This includes having a dedicated risk strategy in place, agreeing with the board of directors on the overall risk appetite and making risk a consistent parameter in client discussions and loan pricing.

2. Build an effective transaction banking platform with a focus on close integration with the client’s system

The crisis has highlighted the attractiveness of transaction banking. It is a business that can provide reliable growing fees and spread revenues, rich deposit volumes and high profitability over the economic cycle. Previous corporate banking reports of BCG have already documented the tendency of transaction champion models to outperform the market. These findings have been confirmed in the current report. Furthermore, transaction champions have proven to be more crisis-resistant than their loan-heavy peers.

3. Develop end-to-end transparency

To win in the post crisis era, institutions will certainly need to enhance transparency by measuring the true profitability of individual clients, products, channels and regions. Strong management information systems are needed both at the product and client levels to integrate risk, liquidity, and capital. Other important factors include emphasis on transparency from the relationship manager’s (RM) portfolio to the CEO level, and operational metrics such as sales pipeline, RM productivity, risk-adjusted customer profitability, share of wallet calculations and back office efficiency. BCG research has shown that high levels of transparency on revenue, costs, risk, liquidity and capital can create up to 12 percentage points of return on equity (RoE).

4. Making the matrix work

Also essential to remaining competitive, is a carefully designed end-to-end operating model. Such initiatives should work towards increasing collaboration among pillars like private, corporate and investment banking. Means to achieve these can include joint account planning, joint pipeline management, collaboration incentives, as well as clarification of roles, responsibilities and decision-making authorities (e.g. margin decisions).

5. Above all, cultivate deep client relationships

It is important for both senior managers for strategic planning and relationship managers to use analytical insights to better understand client needs.

This can be achieved through data-driven clustering analytics to understand client’s product usage; disciplined ‘deep relationship’ client engagement process and culture; and an efficient sales and service model to deliver multi-product solutions to the clients.

“In the past, corporate banking units in the GCC did not pay too much attention to their clients’ business models or needs. They were happy to satisfy their client’s ongoing demand for cheap loans. Post-crisis these units will have to become more client focused and develop a better understanding of both the clients and their industries if they want to truly benefit from these relationships, while at the same time, avoiding unwanted risks” said Massi.

Corporate banking units that execute these initiatives well will have far greater chances of surviving and thriving in the post-crisis environment than slower-moving banks that take a ‘wait-and-see’ approach, the study concludes.

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About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 70 offices in 41 countries.

BCG serves the Middle East from Abu Dhabi and Dubai. Our offices there, in conjunction with the BCG office in Casablanca, play a key role in serving clients in the rapidly developing Gulf region as well as Middle East North Africa (MENA). To date BCG has successfully conducted assignments in the Middle East serving clients across a wide range of sectors, including government, financial services, energy, industrial goods, telecommunications, real estate, healthcare and private equity.

For more information, please visit www.bcg.com

“There are three key benefits that Dubai Islamic Bank has already realized by moving to IP telephony from Avaya – improved customer service through a centralized communications system, enhanced employee productivity as all DIB staff can now be reached by their own extensions, and a reduced telecoms cost of almost 50% in less than 6 months,” said Mr. Ali Al Basti, Head of Admin Affairs, Dubai Islamic Bank.

“The new IP telephony infrastructure has given the bank its fastest-ever return on investment for an IT/telecoms deployment, which is important at a time when the financial services industry is making every effort to maximize its technology spend.  IP telephony has also empowered the bank to centrally manage, control and administer our communications, including a disaster recovery option should we experience any downtime.  All of these elements combine into a more cost-effective communications strategy for the bank which also benefits our customers,” he explained.

Olive, an Avaya partner in the Middle East, delivered the new IP telephony system to Dubai Islamic Bank, including a seamless integration of a multi-vendor voice messaging system to a single Avaya modular solution.  Opting for IP telephony means that all of the banks calls from branch-to-branch are via extension, or ‘internal’ calls on the Avaya network, delivering substantial cost savings.  Customers can also reach Dubai Islamic Bank’s different service groups, including retail and private banking, business and corporate banking, investment banking and real estate finance, more quickly and easily via the new network.

“The banking sector is facing rigorous pressure to reduce costs and optimize its technology solutions while maintaining and even improving customer service.  By moving to IP telephony, Dubai Islamic Bank can now more accurately forecast its telecoms costs while benchmarking savings from the new system, and benefit from increased staff productivity and customer service delivery,” Nidal Abou-Ltaif, area vice president of Emerging Markets for Avaya

The conversion of an AED 3.75 billion deposit granted to DIB by the Ministry of Finance into Tier 2 capital of the bank, pursuant to terms and conditions proposed by the Ministry of Finance, was approved at the EGM. The amendment of article 14 of the Articles of Association of the bank as a result of the capital increase was also approved at the EGM.

“By approving the capital increase, members of the assembly have demonstrated their support for DIB’s expansion plan aimed at protecting the lending position of the bank during the current global financial crisis. We look forward to their continued support in 2009 and in the years to come,” said His Excellency Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank.”

Chairing the EGM, Sheikh Khaled Bin Zayed Al Nehayan, Vice Chairman of Dubai Islamic Bank, said: “The bank will sustain its commitment to contributing to the ongoing growth, stability and diversification of the UAE and all the markets we serve. Further, the increase of the bank’s capital will provide additional liquidity to the financial operations carried out by the bank, thereby strengthening the UAE economy.”

DIB reported AED 1.73 billion in net profit for 2008, a marginal decline compared to AED 1.88 billion in 2007, excluding an extraordinary gain on transfer from a DIB subsidiary. The distribution of a cash dividend of 25 per cent and bonus shares of five per cent for the year 2008 was approved at the bank’s AGM.

DIB will continue to build upon its many achievements in 2008, including the launch of its legal subsidiary, Dar Al Sharia Legal & Financial Consultancy LLC; a new joint venture with Jordan Dubai Capital and Dubai International Capital, via a strategic investment in Industrial Development Bank, which is being converted into Jordan Dubai Islamic Bank.

The bank’s current growth strategy – with a renewed focus on its already robust retail operations – will deliver significant results. By the end of this year, the bank expects to record a 15 per cent increase in its customer base, reaching some 900,000 customers, while the bank’s retail assets business will grow by approximately 20 per cent.

The Mega Sale Event 2009 follows the stupendous success of the 2007 & 2008 events, except that this year’s event offers more exciting discounts, a wider range of choices and much variety in products.

Saif Al Mansoori, Head of Marketing Consumer Banking and Wealth Management said, “The summer holiday season is just around the corner, and we thought that this will be the perfect time to give our valued customers an early season present. Our credit and debit cards come packed with exclusive benefits, but we are pretty sure that this is one benefit that will be appreciated more than the rest at this time of the year; and our strategies constantly seek to provide customers with innovative and unique products.” 

Al Mansoori added, “The four day Warehouse Sale starting today, will feature the top brands in electronics, apparel, furniture, jewellery, accessories, perfumes and lots more from some of the most recognized houses in the UAE including Ahmed Siddiqi, Bin Hendi, Guess, La Fayette, i2, Joy Alukkas, Guess and mots more. Discounts of up to 70% are on offer at the event, making it an event that no bargain hunter can afford to miss.”

The Warehouse Sale will be held in the East Hall of Dubai Airport Expo on 29th April from 6:00 pm – 10:00 pm, and on April 30th – May 2nd from 10 am to 10 pm.