Bahraini bank AUB aims to build Mideast network

01/11/2013 12:10 AST

Bahrain-based Ahli United Bank (AUB) is looking for acquisitions in its existing markets and in new ones as it tries to build a network across the Middle East, its chief executive said.

Its desire to expand across borders reflects a trend among Gulf banks, which are increasingly outgrowing their home markets. Rising trade and travel among the six nations of the Gulf Cooperation Council (GCC) are also pushing the region’s banks to become more international.

AUB, with operations in six Middle East and North African countries as well as the United Kingdom, wants a presence in the three GCC states where it currently has no base — the UAE, Saudi Arabia and Qatar — plus Turkey.

“We have not completed the jigsaw,” Adel El-Labban said in an interview for the Reuters Middle East Investment Summit, adding that AUB aimed to buy majority stakes or stakes as large as local law allowed a foreign party to own.

He wouldn’t be drawn on whether the bank was looking at any specific deals currently. AUB has been built on acquisitions since it was formed in May 2000 through the merger of United Bank of Kuwait and Al-Ahli Commercial Bank; El-Labban said the lender had looked at around 25 deals since formation.

However, obtaining enough information about potential targets in the region can be difficult, while the political environment in the Middle East has shifted dramatically in the last three years, he said.

“The risk level within Arab Spring countries and non-Arab Spring countries is much higher today than it was four or five years ago.”

Doing deals in countries where AUB already has a presence is easier as the bank has local market knowledge there, so it would also be interested in purchases which expanded its existing operations.

AUB looked at BNP Paribas’ Egyptian business when it was put on the market last year before deciding against bidding, El-Labban said. Dubai’s Emirates NBD completed buying it for $500 million in June.

The Bahraini bank would also like to increase its business in Iraq, which El-Labban described as a “major market” for the bank going forward, but its ambitions have been hampered by the security situation and inadequate staffing, given a lack of qualified locals and difficulty in getting visas for expatriate workers.

AUB has some cash to fund potential acquisitions after selling a 29.4 percent stake in Qatar’s Ahli Bank in January for $615.9 million.

That move was triggered by regulatory rules relating to minority shareholdings, and AUB would be interested in returning to Qatar if the right opportunity came along, El-Labban said. Its current capital position — it had a total capital adequacy ratio of 15.7 percent of assets at the end of June — means the bank could take on a purchase without needing to raise its reserves in most instances, he said.

However, he wouldn’t be drawn on whether the bank was looking at a perpetual debt issue that would boost its Tier 1, or core, capital ahead of future acquisitions.

“We want to be prudently capitalized, not overly capitalized, and our capital surplus is available for organic growth or for acquisitions up to a certain size,” he said.

While not vying to be the biggest bank in every market where it competes — it aims for market shares of around 7-10 percent — AUB wants to build a business where customers choose it when they are looking to do transactions between states in its network.

“If a Bahraini wants to buy a flat in London, I want him to come and organize that through us and not HSBC or Citi,” said El-Labban; this would also give the bank an opening to offer other products and services to the client.

Reuters