RAK Bank to expand Islamic finance business

10 February 2014

Lender looks to offer sharia-compliant trade finance in the near future

National Bank of Ras Al-Khaimah (RAK Bank) is planning to expand its Islamic finance business, the lender’s CEO, Peter England tells MEED.

“[Our Islamic window] Amal makes up 30 per cent of the bank’s incremental business and in 2014, we expect it to go up to 40 per cent of all incremental sales,” he says. “We will also add trade finance offerings to our portfolio of sharia-compliant products sometime in the near future.”

“We anticipate a surge in demand for Islamic banking in the country over the coming years, due to Dubai’s ambitious plans to set up an integrated platform for an Islamic economy

The plans are set to follow the launch of the bank’s Islamic home loans in January 2014, a year after it launched the Islamic window.

The UAE’s adoption of new mortgage credit rules at the end of 2013, which caps banks’ property loans to 20 per cent of deposit, could help RAK Bank grow its domestic business, as larger banks in breach of the limit seek to reduce their exposure. That could also lead to greater diversification in the lender’s loan book, which is heavily dominated by credit cards.

The bank’s main business comes from retail and small-to-medium enterprise banking (SME), which it aims to increase by focusing in particular on its cards, wealth management and mortgage offerings.

“We see a significant opportunity to capitalise on the noticeable growth in SME banking requirements in Dubai as a result of the increased economic activity post the Expo 2020 win,” says England.

“[We are] not [planning to increase corporate lending activity] in the foreseeable future. We will however increase our SME and commercial banking business activity even further.”

RAK Bank’s yearly net profit, at AED1.4bn ($0.4bn), remained flat in 2013, as the lender increased its impairment provisions by 62.9 per cent to AED340.6m. That led to its non-performing loans (NPL) ratio dropping to one of the lowest in the region. NPLs now make up only 2.4 per cent of the bank’s total loan book.

Customer deposits grew by 11 per cent to AED 23.1bn in 2013, of which AED2bn is sharia-compliant, while total assets grew by 10.6 per cent to AED 30.1bn.

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