The global financial crisis that descended in 2008 created unprecedented challenges for the banking world. However, with income and savings levels on the rise in the UAE, Farhad Irani, head of retail banking at Mashreq Bank, views the current climate not as a perfect storm, but a perfect opportunity. With affluence on the up and attentions turning to the Gulf as a safe haven for the protection of assets, Irani’s sights are set on wealth management to rival that of established private banking institutions from Switzerland to Singapore—with a service level to match. Already, the retail banking aficionado is unequivocal regarding Mashreq’s stature; “It’s the best private bank in Dubai with the best service.”
While Irani’s assertion may be open to debate, the success of the bank’s wealth management capability Mashreq Gold speaks for itself. Already catering to the wealth management needs of 15,000 select customers, the head of retail banking believes that this “gold” service which provides clients with dedicated relationship managers certified by the UK’s Securities Investment Institute, leaves his bank well-placed to seize the increasing opportunity. “Given the fact that this market has always been a place where the top end of the triangle has been pretty wealthy, there is an opportunity for Mashreq to engage further in the wealth management space,” he explains. And with a marked improvement in net profits last year, the man with a financial career spanning over 21 years now has the means to make the vision a reality.
But despite growing optimism and increased profitability, the story of this UAE bank, owned by the Al Ghurair family, was one of not only opportunity but challenge last year. Though the worst of the financial crisis and Arab Spring subsided as 2011 drew to a close, (with the notable exception of Syria), an air of economic uncertainty lingered, with financial institutions and enterprises taking a cautious approach. Mashreq was no exception. With an 8.5% decrease in loans and advances on the previous year, reduced lending to non-strategic sectors, streamlining of liabilities and removal of what the bank terms “expensive deposits,” balance sheet rationalization characterized the bank’s strategy in 2011 as it sought to preserve both capital and liquidity. The result—a 6.6% decline in total assets with a figure of $21.6 billion, down from $23.1 billion in 2010, and a reduction in operating income to $1.054 billion compared to $1.19 billion the previous year.
Today, Mashreq’s campaign of rationalization shows no sign of abating. “You may witness our overall balance sheet continuing to reduce by lower single digits. That is a result of prudential strategy,” explains Irani who joined the bank in July of last year after multiple years working in East Asia. But while the sights of Mashreq’s retail head may be set on long-term success rather than short-term gain, 2011 proved that rationalization can yield rapid results, with the bank achieving net profits of $223 million last year compared to $218.7 million in 2010.
Accounting for this resilience, Karti Inamdar, senior credit analyst with Capital Intelligence, cites Mashreq’s large non-interest income base as key in enabling the bank to maintain profitability in tough times. Looking ahead, the CI credit analyst is optimistic. “The Bank is in the process of building the loan portfolio and this is expected to strengthen profitability this year,” she explains. While this may be the case, Khalid Howladar, senior credit officer from credit ratings agency Moody’s explains that, despite a deposit rating of Baa1 underpinned by good capital and liquidity levels, Mashreq has a negative outlook driven by its high stock of problem loans. However, the rating benefits from Moody’s assumptions of government support for the UAE’s banking sector and Howladar believes that stability would prevail should crisis take hold, “Even though the bank is fully private…we still feel the bank would receive some support in times of distress.”
While the future remains to be seen, Irani keenly explains that right now, every asset class on the retail side is growing in terms of portfolio whether in mortgages, personal loans or credit cards which all took a hit in recent years. For the banking expert, this points to one thing: a higher class of customer. “The quality of our customers is coming in at better indices,” he remarks.
Herein lies the impetus for Irani’s fixation on what Mashreq terms the “luxury segment.” The retail banking market may not be growing organically, and the number of expatriates relocating to the UAE might have fallen, but Irani—himself an expat who calls Australia home—claims that those who have remained in Dubai are flourishing. And with flourishing business comes increased demand for wealth management; the stability of the Gulf proving an attraction for well-heeled individuals. “Switzerland and London were the first choices, and increasingly Singapore and to some extent Hong Kong, but a lot of wealthy individuals realize that in this environment of global flux we have a pretty stable cocoon that is the UAE,” explains Irani.
Mashreq is not alone in capitalizing on the UAE’s new found “safe haven” status, as local commercial banks look to occupy a niche, offering wealth management services with a local feel. But counting as one of the UAE’s largest privately-owned banks, Mashreq is well-placed to beat off the competition while maintaining its personal approach. “We have 50 branches. Our closest competitor has five times that,” asserts Irani, adding that Mashreq has an edge over larger government-owned companies given its ability to provide personal service—and quickly.
In fact, efficiency forms one of the pillars of the bank’s drive to excel in customer service. “Any innovation can be copied almost instantly. My pursuit is to have Mashreq command the service division, because nobody can really replicate your service,” asserts the retail banker and former CEO for PayPal Asia. True to his word, Irani and the Mashreq teams are taking customer service to another level with the recent launch of Mashreq Go which offers not only innovative but immediate banking solutions. With the option to obtain instant insurance, a same-day loan, credit cards and cheque books in thirty minutes, or a mortgage within three days counting as just a few of the benefits of this new offering, Mashreq Go is the first service of its kind, currently available in 17 branches across the UAE. Under the leadership of the e-commerce veteran, the bank has also developed cutting-edge online facilities that, according to the man himself, surpass those of larger multinational brands. “This is just the tip of the iceberg,” he remarks.
With online banking in full-swing and an obsession with service, Irani’s campaign to meet the wealth management needs of the top echelons of society, appears to be on target. In fact, as the bank develops its wealth management footprint, strategy is shifting from its Dubai stronghold towards Abu Dhabi. The capital of the UAE has experienced significant growth of late with credit and loan appetite rising, and the mortgage business taking off. With success in Dubai that Irani views as disproportionate, Mashreq is investing both financial and human capital in Abu Dhabi, with strategic interest already taking shape on the ground.
New branches are planned for the emirate with Marina Mall the bank’s next location, and it does not stop there; the real estate sector also presents interesting prospects. “We have four or five very strong property developers in Abu Dhabi...and the bank feels comfortable extending exposures against their properties,” details Irani.
However, while staying true to its roots, the bank’s vision reaches beyond the sandy borders of the UAE. Mashreq’s presence looms largely in 12 countries across the world, with Qatar and Egypt demonstrating strong potential inside the region. The bank’s cross-border mortgage which enables expatriates to purchase a UAE property while still residing in Qatar, counts as one of the most recent developments in Mashreq’s Qatar operations. As for Egypt, Irani is optimistic about the opportunities that the country will offer as reconstruction and reform result in credit hungry customers. With plans to double the bank’s presence in Qatar next year and increase its branches in Egypt from 10 to 14, there seems to be no limit to Mashreq’s ambitions.
Irani is nonetheless careful to mix ambition with caution. The conservative strategy which saw the bank rationalize its operations last year helped set Mashreq on track for future success, suggesting little need to diverge from the same path. But the retail banking head is under no illusions as to the challenges ahead; ensuring sustained, quality growth remaining a top priority. “In a mature state, finding quality customers, keeping them–as simple as that—is difficult,” he explains. But no challenge seems too great for the man who readily turns perfect storms into perfect opportunities—and wealthy ones at that. As the region leaves crisis behind and the rich get richer, Farhad Irani possesses both the expertise and confidence to continue expanding the Mashreq vision and making it a reality.