Abdul Aziz al-Ghurair:The UAE economy continues to create opportunities but we can't rest on our laurels. The customer is always pushing us. For example, the arrival of internet banking in the UAE means we are now competing internationally as well as domestically and this raises the bar for us. It pushes us to be more innovative and try new products. We have nine core values at the bank and one of them is to be innovative. We want to be an organisation tolerant of occasional failures. We used to punish people for failure, now we encourage new things. Most banks in the region are very highly regulated internally and there is little room for new ideas - all the innovation is top down.

We also believe in having a strong management team. About 90 per cent of our top 50 senior managers have come from the world's top 50 banks and they all have considerable experience. When we recruit, we don't compromise: our only product is people.

MEED:Is Mashreqbank preparing for regional expansion?

Al-Ghurair:Most banks try to expand. Most banks discover they should concentrate on their own territory. As for us, our success will come in the UAE and we have to be a dominant player here. But we are also looking at the GCC market. We have an offshore presence in Bahrain and we are considering opening an onshore branch there. We already have two branches in Qatar and are the second largest foreign bank there behind HSBC. The key to regional expansion is that it has to be cost-effective. In Qatar, all our operating procedures and back-office activities are processed in Dubai. We are pushing to move the back office for our London and New York branches to Dubai as well. By having the capability in place, it allows us to expand into regional markets quickly and at very low cost.

Kuwait and Oman would be the markets for natural regional expansion. If you operate in the UAE, where 50 banks create competition that doesn't exist elsewhere in the Arab world, you can thrive an ywhere. We also think Egypt is an interesting proposition for retail banking. Its complex regulatory environment means that we don't want to be the first bank in, but we have a long-term interest.

MEED: Would regional expansion come through acquisition or organically?

Al-Ghurair:Organic growth is probably the way for us. But we won't close our eyes. If a good deal comes, we'd look at it. If 1+1=2, there's no point, but if 1+1=3, we'd do it.

MEED:In your domestic market, will future growth be driven by a focus on new products or new business lines?

Al-Ghurair:Both. For example, we never used to do investment banking or sell investment products, but then we realised that we had the client network and distribution capabilities. We've launched 30 products in the last year and have taken the market by storm. And this generates fee income: stable, low-risk fee income.

MEED:Almost every bank in the GCC would claim its aim is to diversify. What is Mashreqbank's revenue mix, and what are its targets?

Al-Ghurair:Revenues are split 50:50 between retail and wholesale banking, and in this we include corporate, treasury and financial institutions. This is roughly where we want it to be. The fee/interest income mix is about 45:55, giving us the highest proportion of non-interest income in the country. It continues to rise and we are aiming for 50:50.

MEED:What has been the impact of the current low interest rate environment?

Al-Ghurair:We're not that interest rate-sensitive, fluctuations have only limited impact, maybe 2.5-5 per cent on our bottom line. On the liabilities side we are hurt on NIBs [non-interest bearing deposits] and capital, but the rates on consumer lending - particularly on credit cards - have moved less and spreads have actually widened. Looking ahead, the market is allowing consumers to lock in low rates - some up to five years - and this will hurt when interest rates mov e up. The whole market is a borrowers' market at the moment.

MEED:There is speculation that the lending market is set to expand with the development of mortgage products. What is your view?

Al-Ghurair:There will not be mortgages for the national community in the near term, but we are exploring the possibility of developing mortgages for the expat community, and this will force a change in the law. There are excellent prospects in this area, but repossession is a serious issue: there is no point in having a security if you can't access it. We are likely to end up with a leaseback structure.

MEED:How strong is corporate credit demand?

Al-Ghurair:Demand is stable, but not great. The market is fairly tight and we wish we could lend more.

MEED:You have recently made some recoveries from the Solo Industries fraud.

Al-Ghurair:Yes, we've recovered 20 per cent [about AED 10 million ($2.7 million)], and there will be more good news in the next two months. There are other institutions that collaborated with [Madhav] Patel and we will reveal more about this soon. We have been relentless in our pursuit as we have to send the message that people cannot get away with this.

MEED: Are you acting alone, or in conjunction with the other defrauded banks?

Al-Ghurair:We've acted alone right from the beginning and we have been able to move fast by not being part of a consortium. Mashreqbank is the only one to have made a recovery so far.

MEED:Given that Emaar Properties is a major depositor with Mashreqbank - some speculate that it has AED 800 million ($218 million) deposited - what are the implications for Mashreqbank of the establishment of Dubai Bank?

Al-Ghurair:Firstly, I should say that I am also on Emaar's board, so I have been involved in Dubai Bank discussions. Secondly, Emaar has only about AED 350 million deposited with Mashreqbank. Dubai Bank will have t o build both sides of its balance sheet in tandem. It can't just grow liabilities without developing outlets so it can lend. The biggest challenge is on the lending side. The market is good - there is plenty of room for Dubai Bank - so it is a question of finding the right asset at the right margin.