(MENAFN- Khaleej Times) Risk averse banks in the country should play a role in resuming lending to Dubai's real estate sector, which has shown genuine demand in recent months, a top official of United Arab Bank (UAB) said.
"The real estate prices in Dubai, in recent months, have shown some positive signs of recovery backed by a genuine demand," Paul Trowbridge, chief executive officer of UAB, said.
In an interview with Khaleej Times, Paul Trowbridge shared his thoughts on the issues facing the banks and financial institutions. He supported the liquidity rules being introduced in the country which will help banks to survive a crisis and protect all stakeholders.
Sharjah-based UAB reported very healthy growth in profits which rose as high as 45 per cent year-on-year in the first half of the year. Lending grew 19 per cent and customer deposits swelled nine per cent. The bank is expanding in Abu Dhabi in a big way by opening more branches to take its share in the economic prospects emerging from the new development scene.
Excerpts from the interview:
Last month, the Central Bank of the UAE has introduced new liquidity rules with effect from January 1. In your opinion, what were the circumstances that led the banking regulator for such an action? Is it an extraordinary situation? Or preparation for Basel III?
There is an increasing global focus on liquidity by the regulators since the financial crisis. We believe that this is a prudent step taken by the Central Bank of the UAE to ensure that all banks carry sufficient liquidity in order to survive a crisis and therefore protect all stakeholders.
In July, the Central Bank of the UAE amended the terms and conditions under which banks give loans to their customers, which many believed have given more leverage to lenders. What is your opinion on the matter?
As far as UAB is concerned, we will continue to maintain the status quo and work with any of our customers in the event that they experience any financial problems.
Many banks have started using loan recovery agencies in their home countries and even using social media to intimidate the loanees forcing them of cough off what they obtained from them. Do you support these measures in order to boost recoveries?
We sometimes have to use collection agencies in another country on rare occasions.
However, we do not use social media and we do not support customers being threatened as a tool to recover outstanding loans.
UAB has shown a very healthy lending growth of 19 per cent in the second quarter this year, but overall lending in the country is depressingly low and has not crossed two per cent growth till now in the year. Don't you think it would make banks to struggle more for revenues in the remaining part of the year?
We are seeing positive developments in certain sectors which will lead to loan growth in our traditional business areas of trade, services and manufacturing.
With the growth in economy particularly in Dubai, do you see some recovery in lending?
Yes, we are seeing positive developments, which will lead to loan growth in certain select sectors.
In the second quarter, most banks reported decline in deposits, do you see it as one off phenomenon and a routine matter. What was the main reason behind it, in your assessment?
This was due in part to money coming in from other countries within the region.
The properties prices in Dubai have picked up in the recent months, though in premium category only. Do you see any role of banks in it? Do you favour banks should jump on the band wagon and open their credit lines for the sector?
We have seen property prices starting to recover in key areas. Banks have not fuelled this growth; buyers are seeing value in these properties and have therefore started to enter the market.
We believe there is genuine demand from end-users and therefore banks should play a role in supporting such property purchases.
The central bank has taken several measures to tighten lending, personal loans and liquidity. Can banks survive and thrive under such circumstances?
Yes, and we believe our results demonstrate that there is a niche for banks that offer strong relationship skills and service levels.
How did you achieve a higher level of lending in Q2?
Strong demand for our products and services backed up by service and customer care.
What are your expansion plans for the rest of the year?
We hope to maintain a suitable level of growth throughout 2012, supported by the opening of several new branches in the next six months.
Do you intend to launch new initiatives, products to attract more business, like a bank has started evening banking, while some other don't charge fee on their certain services?
We have a number of exciting new initiatives that we will offer to our customers in the coming weeks. We believe that these will help to reinforce UAB's reputation for innovative products that meet the needs of our target customers.
What are your key achievements in the first half of the year?
In short, sustainable business growth, demonstrating the value we provide to our expanding base of loyal customers.
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