There are few finer Middle East locations than the one occupied on Dubai creek by the regional head office of the British Bank of the Middle East (BBME). Opened in November last year, the functional new building is the perfect place to observe the busy waterway and the bustling conurbation that has developed around it.

The view from the creek is familiar to BBME, which originated in Iran in 1889. It has had a presence in Dubai since 1946 and was the first bank to open in the city. Today, BBME is the largest foreign bank in the UAE.

The history of BBME is long and eventful. A key turning point for the bank came in 1960 when it was acquired by the Hongkong & Shanghai Banking Corporation (HSBC). By the end of the 1980s, HSBC was one of the most influential financial institutions serving Asian markets.

As part of a strategic move ahead of the return of Hong Kong to China in 1997, HSBC bought Midland Bank in 1992 and established a UK-based holding entity to govern its global network. Financial results for 1993 show that HSBC Holdings was the UK's largest bank in terms of both assets and capital. Pre-tax profits were 150 per cent more than its nearest British rival's. 'Overall, our view of HSBC is very positive,' says Gerry Rawcliffe, UK bank analyst at London-based IBCA.

These developments have given fresh impetus to BBME. The investment in the new Dubai office is part of a programme of initiatives that include the opening of a fourth branch in Lebanon and the ground-breaking decision to establish a representative office in Jericho, the first opened in self- ruled Palestine by an overseas bank.

BBME's existing Middle East network comprises these units plus eight branches in the UAE and others in Bahrain, Oman, Qatar, where an upgraded branch has been opened, and Jordan. In India, BBME has branches in Bombay and Trivandrum which work closely with the HSBC network. Activities are supported by offices in London and Geneva and an offshore banking unit in Nassau in the Bahamas.

Earlier this year, the administrative head office was shifted to Jersey from Hong Kong. As part of a corporate re-organisation, BBME sold its 40 per cent share in Riyadh-based Saudi British Bank to HSBC at the end of 1993. The Cairo-based Egyptian British Bank is also 40 per cent owned by HSBC.

The changes are being supported by a more active approach to the use of the HSBC group connection. This entails exploiting HSBC's global banking capabilities, Midland's position in the UK market and the specialised services provided by merchant bank Samuel Montagu and London stockbroker James Capel & Company.

'We are now going through a very important development in terms of developing synergies with the Midland Bank,' says David Howells, a BBME executive director and head of the bank's Middle East management office in Dubai. 'It has great strength in the UK and correspondent relationships throughout the world.'

Howells is one of three BBME executive directors. Timothy O'Brien, who heads private banking, and Christopher Keirle are based in Jersey. All sit on an eight-member board chaired by HSBC group chairman Sir William Purves.

The effort to make full use of group capabilities is also reflected in the arrival in Dubai in 1993 of Mukhtar Hussain, a Samuel Montagu director. 'We are able to show more commitment to the business here and more dedicated support,' he says. 'It demonstrates that BBME is aware of growth opportunities, particularly in project finance.'

Hussain says project finance opportunities are being developed. They include a possible export credit in support of a UK company's bid for a major substation contract in Saudi Arabia (MEED 29:4:94, Saudi Arabia). 'We have a portfolio of interests in projects in the pipeline and we are confident that some of these will turn into business,' he says. 'What we would like to achieve is to be one of the principal providers of project finance and trade finance in the Middle East.'

BBME is working to develop private banking and the HSBC group connection has proved useful in this sector. An executive from James Capel has been assigned to the Dubai office to enhance services for high net worth customers.

Brand recognition

At the same time, the bank is enhancing the BBME brand. 'Where a name has a franchise that adds value, it doe not make sense to chuck it away,' says Howells. 'This same argument holds good for the BBME.'

Recognition of the BBME name has helped the bank get to where it is today. Consolidated assets at the end of 1993 were £3,304.7 million ($5,125 million) and net income for the year was £60.5 million ($94 million). It employs about 2,200 people, the overwhelming majority of them in BBME branches.

BBME's future will be shaped by its ability to compete. 'There are a lot of banks in the market place,' says Howells. 'It is quality of service that is going to differentiate us from the others.'

BBME offers the full range of commercial banking facilities. In the retail sector, there are automated teller machines, MasterCard and Visa, telephone banking and retail investment products. In the corporate sector, letters of credit can be opened in 24 hours. HSBC's Hexagon electronic banking service allows customers to execute a wide range of banking orders through computer terminals.

Investment launch

In the UAE, BBME is confident about its position and market prospects. 'The UAE has been growing fairly consistently over the years,' says Brian Frederick, BBME's senior manager for the UAE. 'We shall see some continued growth this year. Business is good, margins are under pressure, but the rate of return on assets remains healthy.'

The first retail investment products were launched in the emirates in May. 'Over half the funds brought in were from outside our existing customer base,' says Frederick.

Looking ahead, BBME is anticipating securities' market developments in the UAE. The possibility of setting up a formal stock exchange is being studied by the federal authorities. Says Frederick: 'When we see capital markets in a more concrete form, we will play a big role.'

Developing a team of banking professionals who are citizens of countries where the bank operates is a priority across the BBME system. 'In Oman and Bahrain, we have something like 80-90 per cent locals, and we have more than the government requirement here in the UAE,' says Howells.

This is all part of BBME's renewed effort to stay close to the market and respond to opportunities. 'We have a keen eye on areas we feel are likely to take off,' says Howells. 'For example, somewhere like Lebanon where we were the only foreign bank that remained in the civil war. It is a changing scene and I am very optimistic that Lebanon's problems are now behind it.'

'Similarly, we have someone placed in Jericho,' Howells adds. 'We decided the momentum (in the PLO-Israel negotiations) was such that it was going to go forward. Having come to that decision, the next move was to send someone there...We are opening branches wherever we feel we have a need to have one and where we think we can do business.'

Howells plays down the significance of signs of regional economic slow down caused in part by the fall in oil prices during 1993. 'I think the Middle East has gone through much more difficult periods,' he says.

'Of course, you have to be realistic. These are fairly mature markets here. But I don't see that we should not be able to do satisfactory business for the next few years and beyond.'