Evolution in the UAE.
For many years the banking industry has shouldered the responsibility of financing the growth of the UAE but now, with the new UAE Central Bank cap on lending to local governments and Government Related Entities (GREs), the sector is set to offer much more.
As a relatively young market, the financial community continues its focus to establish an efficient capital market, helping sustain the growth and liquidity glimpsed in the first quarter of this year. This journey is a long one but the benefits of such a market will be felt by not just bythose in finance but by all. However, it would be naive to consider that the regional community alone can create such a market; we need large international investors to invest in our regional companies.
Our biggest task is to ensure our regional companies, from Small to Medium Enterprise (SME) to large corporates, meet the international standards sought by such investors, principally transparency and corporate governance. Through understanding market requirements companies are able to tap into cheaper sources of capital, either from their domestic bank or capital markets.
This has meant the way domestic banks operate has changed. The maintenance of asset generation and balance sheet financing is still important but this is now complemented by a proportion of fee generation, the advisory element.
What was formerly seen as exclusive international investment bank offering is now common place within domestic banks, advising clients on all areas of business from international deals and issuancestodomesticadviceregarding reporting and regulation. The growth in domestic talent pools now means that clients are able to receive industry leading advice from experts with local market knowledge based in their domestic bank.
A DOMESTIC ADVISORY MODEL
Although the investment banking advisory model is nothing new to the region, how it is offered from domestic banks is. Clients are now receiving advice across the entire business spectrum, from products and services through to listing and mergers and acquisitions, from the people they trust.
Events in International markets, such as the turmoil in Spain and Greece, have also enhanced the speed at which domestic bank advisory has grown. Many international advisers, especially those from Europe, are being increasingly conservative in their exposure to the region, in terms of teams on the ground. This is due to the simple fact they that need to remain agile should their resources be required back in their domestic markets and this creates opportunity in our region for domestic banks to fill the space.
MOVING TO THE MIDDLE
As the domestic market grows so do our clients' businesses. Successfully transitioning businesses through the entire business cycle, from SME to large corporates, is of prime importance to ensure any economy is sustainable. Providing products to clients is only the tip of the iceberg, domestic banks need to listen and understand the environment in which their clients are doing business so they can best advice and create products and solutions to meet the clients demands.
The Mid-Corporate sector is one that has been overlooked for far too long, normally being grouped either under SME or large corporate. The needs and requirements for Mid-Corporates differ from other business segments and this has been realised with the emergence of Mid- Corporate divisions, focused entirely on businesses that have outgrown the SME sector and looking to become a member of the large corporate elite.
Recent news on the importance of SMEs to stimulate growth within economies is supported but the industry needs to do more to ensure companies who are growing receive the advice and products they need to become large sustainable businesses.
It is these businesses that will attract investors to the region and help establish the capital market we desire. To ensure sustained growth in our economy it is imperative the business cycle supports and helps clients at every step of their journey, encouraging new young business and helping them to become the large corporates of tomorrow.
Now is an exciting time for the regional banking industry but many commentators in financial markets still believe regional consolidation within the industry is required. Some in the industry welcome the process but not necessarily for the same reasons. It is a fact that there are a large number of regional banks but the competitive landscape has benefited clients who have access to leading products and competitive pricing. Having such a competitive landscape encourages regional banks to innovate, ensuring they maintain market share. If two banks were to embark on merging in the region it would provide competitors with the opportunity to approach potential news clients, many of whom would not have been in the market for a new supplier if it was not for the transaction.
The times ahead may be challenging for the banking industry, but then so are the opportunities. ADCB has shaped well to the global and regional changes and is, today, seeing exciting opportunities in the economic landscape, true to its motto of "Long Live Ambition."nBME
Head of Corporate & Business Banking Group, Abu Dhabi Commercial Bank.
Howard Gaunt, an American from New York, has led ADCB's Large Corporate, Mid-market and Commercial Banking businesses, the Corporate and Business Banking Group, since joining ADCB in August of 2007. His banking career spans 28 years in senior national and international assignments with Wells Fargo & Company, Citibank, Citicorp, Citigroup and Samba Financial Group. He has a Bachelors degree in Political Science and International Relations from the University of Southern California (USC) and is a Certified Investment Manager, CIMC, with the Investment Management Consultants Association, IMCA.
Our biggest task is to ensure our regional companies, from Small to Medium Enterprise (SME) to large corporates, meet the international standards sought by such investors
2012 CPI Financial. All rights reserved.
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