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What keeps you up at night at the moment?
There are two aspects that keeps me awake at night— the first is risk management. As a banker, risk management is always on your mind, as is low investment. Thus, having an efficient risk management system is of prime importance.
The second one—this doesn’t bother me so much—but it's a concern for the long term. NBB strives to lead the market in Bahrain. Hence, the bank needs to be aware of what the market requirements are, which products and services are being provided elsewhere, but not replicating without researching the viability of the products in Bahrain.
If the bank adopts different banking products from the UAE, the UK or Italy, we should be in a position to know if we can replicate the product andevaluate if the product or service will be compatible with the local market.
Banking products from other markets may be important to our clients, and some products makes operations more efficient. However, this creates questions such as, “Are we keeping up? Are we still doing the right thing? Are we adapting fast enough but not too fast?” The banking sector is also moving quickly not only in terms of adaptation but also in terms of size.
Consolidations, bank sizes compared to the operational environment, as well as areas of growth, are important aspects that, as a national bank, we try to assist in terms of areas of economic growth to enable us to come up.
However, it’s not an immediate risk but it is something that we should consider because growing and developing the bank is good, and adapting technology is key. In terms of strategy, the questions that come to my mind are: “Going forward, does the bank need to develop a completely new proposition?
Do we need to associate with an industry that is completely different from ours?” NBB is open for consolidation, we have a 29 per cent stake in Bahrain Islamic Bank and we are weighing whether to increase the stake, although the plans have been delayed.
The idea is that as a national bank working in Saudi Arabia or other huge cooperates, we need a bank with an Islamic financing capacity or either we create one or create more synergies with this bank.So, the bank is open to ideas because we understand by growing, we can improve the efficiency, increase growth, and increase our client intake, and at the end of the day we need something bigger.
How do you plan to increase NBB’s presence in the UAE and Saudi Arabia?
NBB currently has two branches in Riyadh and the UAE. We plan to leverage the bilateral trade and business relations between Bahrain and its neighbours to increase our presence in the region. NBB is looking forward to diversifying through strategic expansion in regional markets.
As a Bahraini bank, NBB has a real advantage in regional countries leveraging long-held relationships. Similarly, having been strong in the local market, NBB plans to replicate the local model and use its vast infrastructure and headcount to succeed in the regional markets.
Both Saudi and the UAE-based banks are regionally active compared to NBB. So we have ambitious expansion plans and aim to have Saudi Arabia represent about 20 per cent of our profits, however, since we are coming from a very low point this plan will take some time.
There are few Bahraini banks present in the UAE and Saudi Arabia, and we plan to be more active in those markets through increasing our client base, grow our services in line with what we do here in the local market, expand our in trade finance business, offering digital services and more importantly service the corporate industry until we are established enough to venture into retail banking.
Tell us more about NBB’s three-year business plan?
The three-year business plan is based on the bank’s transformation efforts. We are in the first year of a three-year business plan that is about modernisation, more participation in the local economy, as well as support for SMEs, larger financial projects and corporates.
The National Bank of Bahrain seeks to create new businesses by being more active in trade finance, structured finance and debt capital markets. We also want to be more proactive in advising clients on forex trade. These will be new products that we plan to offer.
NBB was not sufficiently involved with clients and now we want to know our clients better so that they remember the bank as top of the market in Bahrain. In other markets, we plan to partner with an international bank to provide our services. In corporate banking, we aim to be able process transactions in the local market and lead syndication when companies start borrowing. Thus, the bank’s biggest area of change will be full services including lending and advisory to corporates and SMEs.
Give us an insight on the current economic landscape in Bahrain.
The economic growth in Bahrain in the last few years has been sustainable. In 2017, the Kingdom reported the strongest growth in the GCC. The economic growth in Bahrain was assisted by several government projects, infrastructure developments as well as industrial sector projects.
However, in spite of the downgrades from rating agencies late last year, I can still say that the future is promising. The Bahraini Government has introduced several financial and fiscal reforms which are accompanied by financial aid from Kuwait, Saudi Arabia, and the UAE. The financial aid by these GCC allies has been very well-perceived in the markets due to its credibility and investors have confidence that it is feasible.
Bahrain has started implementing some fiscal reforms in the form of subsidies, value added tax (VAT) and reduction of incentives service. The fiscal reforms were well-received—not only in global markets, but to all communities in the Kingdom. This is because extensive consultations and dialogue were conducted at all levels with the business community, the parliament and decision makers.
The local credibility of Bahrain’s fiscal reforms is important because it means that the package will work and that it is going to be relevant. The local response to the fiscal reforms has had a strong, immediate effect as noticed in the way rating agencies are contemplating a potential upgrade of the Kingdom’s credit rating, as well as a major overhaul expected in markets.
These indicators are a positive for the economy as the inflow of funds mean expansion of some of the projects that are currently underway, which means business for the banks. Last year was a difficult period and the difficulties were more on the financial side of things than they were economical, but with these fiscal reforms and financial aid package, a rebound is expected.
We are cautiously positive that major projects will continue in the region. In Bahrain a number of infrastructure projects such as the metro system and the King Fahd Causeway are progressing according to plan—it is a good mix and it is important for the future of the country.
What opportunities do you presently see for the bank?
The bank sees opportunities in expanding its regional footprint, increase clients, corporate and investment banking business as well as improving our products and creating partnerships. The bank also aims to increase its operations in Bahrain but it’s not going to be total game changer if we are to become more active, especially in Saudi Arabia and the UAE.
The National Bank of Bahrain is recognised as a pillar of the Kingdom’s banking industry and it is our primary objective to further consolidate this position by providing an even broader range of services and solutions to serve all our clients better and become their bank of preference.
What are your plans on the tech side of things?
NBB hired a new team to pursue its digitalisation strategy. We aim to lead in digitalisation without creating a separate bank, therefore we are digitalising processes, services as well as touchpoints where clients interact with the bank.
The digitalisation drive is NBB’s in-house strategy, however the bank is working on technological transformation with consultancy firms, and the strategy is based on the bank’s objective as well as our current clients and those the bank seeks to attract. As a national bank, NBB aims to lead the market in digitalisation to appeal to a younger generation.
Hence, the challenge is not purely to grow but also to attract clients. The bank is opening digital branches in Bahrain. These digital branches are different from the traditional walk-in branches, in that bankers are more like advisers on clients’ accounts, financing and investment, with the operations conducted in the form of a machine.
Similarly, you often hear people say that they do not want branches anymore—in the GCC region that could be true in the next 10 years. As a national bank we need to ensure that there is a convergence of digital and conventional banking in our service offerings.
Bahrain has a more active capital market compared to its regional peers. What are your thoughts?
There is more to be done. While governments and GREs are active, it is encouraging to see corporates actively participating in the debt capital market. The development in this space is a positive sign—there is also some activity on the stock exchange, and it is another sector which needs acceleration.
Several companies have recently gone public, adventurously some private groups, as well as family offices are listing on the stock markets, and that is the next frontier. Bahrain leads in terms of creating ideas—it was the first to establish a financial hub regionally—so the Kingdom should aim to maintain that success because it’s not a large market; if it gets replicated somewhere, it will be 10 times bigger.
Bahrain needs to be at the forefront and in that perspective, it will be interesting to see private groups tapping the local market.
What are your plans for family offices in Bahrain?
We have reaffirmed our strong commitment to the development of the local economy, which remains at the core of the bank’s strategy and in which NBB has a special role to play. As a national bank, we plan to enter into partnerships to serve family offices, wealth individuals and high net wealth individuals (HNWI).
We know our clients, we have access to our clients, and the bank understands their requirements. The right move will be to compliment them with the right products in compliance with market regulations. The bank is well-positioned and family offices is a sector we have not yet served.
However, as a national bank and with the reach we have in Bahrain, it is a market that we should be active in. NBB also plans to extend its footprint into other GCC markets that the bank is present, to gain market share in serving this group of clients and in cases like these, partnerships is key.
What risks do you expect NBB to encounter in the next 18 months?
NBB aims to become the market benchmark in terms of compliance with regulations, corporate governance and risk management, this is one of the bank’s main changes and transformational goals. In the last two years the bank has built a strong risk department.
Risk is not only credit risk but also includes cyber threats, market risk, liquidity risk and reputational risk—all these risks need to be managed. Today for instance, a bank can be hit, and although credit risk is important, reputational risk and compliance is more important.
Market risk causes losses, as do credit risk, cyberrisks and reputational risk, so banks need to be on top of managing these as well as to stay disciplined and technically accurate in conducting their daily banking business. Risk management is therefore key for the future.
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