Dubai: Bank of Baroda (BoB), the only Indian bank that has full-fledged onshore banking operations in the UAE expects to see strong uptick in its profitability and asset quality in the UAE this year, Vineet Kumar Dudeja, chief executive, GCC operations of the bank told Gulf News in an interview.
“Our performance in 2016 has been satisfactory in line with the economic conditions in the UAE and the region. We expect 2017 to be a better year as far as business growth is concerned. The oil price which has shown improvement in recent months will have both qualitative and quantitative impact on the economic performance GCC economies. Improved macroeconomic environment is expected to generate more business for us and the banking sector as a whole,” said Dudeja.
The bank expects asset quality and compliance issues will continue to remain in focus during this year. During the last 3 to 4 years, the Central Bank of UAE has been increasing efforts to enhance the compliance standards of the UAE’s banking system to match the international financial regulations in areas such as know your customer (KYC), anti-money laundering efforts and most these compliance standards in the UAE are now at par with global standards.
The sensitivities related to money laundering issues have prompted banks to focus on compliance standards more rigorously. With the compliance to OECD’s Common Reporting Standards (CRS) starting in 2018, he expects banks to continue to remain focused on compliance related issues this year.
“Despite the short term difficulties in implementing various compliance requirements, as a bank we are more than happy to join our hands with the regulators to adopt the international best practices in the industry,” he said.
Asset quality on mend
The UAE’s banking sector faced gradual deterioration in asset quality from the second quarter of 2015, particularly in the small and medium enterprises (SMEs) and retail portfolios. While many banks have taken steps to restructure loan books and or deleverage from risky segments, BoB too has taken precautions to improve asset quality.
“We are very much part of the banking ecosystem in the country. So whatever the trend that impacts the industry will impact us too. But as most banks have recognised and dealt with the issue in a timely manner and the impact has been sustainable for the industry and most of the issues are behind us,” he said.
Despite a spike in non-performing assets (NPAs) from SME business over the last two years, the bank has not stopped financing that segment. “Issues such as these happen as part of the economic cycles and we learn from these. Clearly, some of the issues we faced last year have made us more vigilant and prudent. Currently we are doing more scrutiny to finance good quality SME business,” said Dudeja.
He expect the new legal developments in the country, particularly the UAE Bankruptcy Law is expected to have some tangible impact on SME lending and asset quality of banks in the segment.
“This law opens the door for both banks and its customers to deal with extraordinary situations when businesses face difficulties and need to restructure in an orderly manner. While the legal protection is expected to reduce instances of skipping, the transparency it brings to the market will reduce asset quality issues in the banking system,” he said.
Factbox: Pioneer Indian bank in UAE and GCC
Bank of Baroda is the second largest Indian public sector Bank with a global network of more than 5380 branches and 8700 ATMs. It’s an Indian public sector bank, majorly owned by the Government of India. The bank has presence in 26 countries with 107 offices. In GCC countries the bank is present in UAE, Oman and Bahrain. In UAE the bank has been operating for 43 years through 6 branches and 10 Electronic Banking Service Units) and 46 ATMs. In Oman the Bank of Baroda has 4 branches while in Bahrain it is operating through a wholesale banking branch. The bank has plans to expand further in GCC market.
