Dubai: The sluggishness in the economy which began in the second quarter of 2015 seem to have peaked, the troubles for the small and medium enterprises (SME) segment are fading and revival in project awards, especially those linked to Expo 2020 is expected to support faster growth in the retail banking business, Subroto Som, Head of Retail Banking Group at Mashreq told Gulf News in an interview.
The worst seems to be over for the SME loans business with a significant drop in the number of cases of businessmen skipping the country loan repayment. “The skips caused the bulk of the loan losses last year. They started to climb from the middle of last year and peaked in the first quarter of this year. Definitely in last 3-4 months there has been a sharp decline in skips and we expect it to improve further,” said Som.
But a revival in SME lending business will largely depend on an overall improvement in the economy. Som does not expect to see a sharp jump in SME loans in the short term, but he is already tapping opportunities outside the assets business.
Despite all the troubles the SME sector has been facing, Mashreq has witnessed strong growth in new SME accounts this year with its deposit balance growth in excess of 30 per cent. “We have been getting good business from customers who maintain transaction accounts with us and use our foreign exchange products has also grown by about 35 per cent,” said Som.
The bank expects the SME sector to pick up growth from the middle of next year as the economy gains growth momentum. The gloom in the SME business is slowly giving way for optimism. With the new bankruptcy law to come into effect from the beginning of next year, Som expects the business conditions will significantly improve in the SME segment.
“With the new [bankruptcy] law coming to effect, SME segment will become much safer to do business. I think 2017, 18 and beyond, we will see a better quality business emerge both for the SMEs and banks,” he said.
Retail & wealth
In the UAE the biggest reason for slowdown in retail banking business came from job losses. The troubles in the SME sector also added to the woes of retail banking business.
“There has been some slowdown in the credit card and the personal loans business. But even within this slowdown we have witnessed growth in our high value customer base. Better quality customer segment is growing much faster. The premium segment of the customers has grown by almost 25 per cent compared to last year,” Som said.
In cards business, the bank is in both acquiring and issuing business. In the acquiring business even though there has been a general slowdown in the business because of the decline tourist-spend and slower domestic spending growth, Mashreq is seeing a double digit year on year growth of 12 to 14 per cent compared to the market growth of 7 per cent.
With the card-spends on the rise in the eCommerce business, the bank clearly wants a fair share of that market segment. “We are we are growing at over 30 per cent in eCommerce linked card business. Acquiring business within the e-commerce is the fastest growing segment and we are growing at a pretty good rate,” he said.
In the personal loans business the bank is seeing diverging trends in loans by the UAE nationals and expatriates. While the expat business that is directly linked to employment has witnessed some contraction, the rest is least impacted.
Mortgages have seen a 10 per cent growth this year. While a big chunk of the business is driven by expatriates, it is the mid-segment of the property market in the price range of Dh1.5 million to Dh5 million that has been driving the growth.
Wealth management is a new growth area for Mashreq. “We have seen about 35 per cent growth in assets under management (AUM). Of course, we were a smaller player in the market and the growth looks bigger from a smaller base,” he said.
Factbox: Overseas markets
Mashreq has presence in two fast growing regional markets — Qatar and Egypt. While the businesses in both these markets are relatively small, the bank expects to see strong growth in the years ahead. The Bank completes 45 years in Qatar in 2016. Last two years have seen positive results and good growth from Egypt, however Egypt is facing a number of economic challenges that is dragging the potential for higher growth.
“We are growing because we continue to invest in our products and services. Most significantly, we are investing in technology and innovation. A key differentiator for Mashreq Egypt would be introducing innovation in the form of digital branches, internet banking, mobile banking and smart banking and we are currently putting the right structures and products in place, building cards and accounts business there,” said Som.