Barclays may quit UAE retail business

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Barclays is carefully assessing its UAE retail banking operations and may consider options that could lead to a sale of the business.

Barclays
Barclays is conducting a review of its global banking operations and may sell some banking units, leading to speculation that their UAE operations may be sold, as keen competition with local and cash-rich lenders take a bite out of bank profits.

Sources familiar with the matter have disclosed that the British bank, fourth-largest by market value in its home country, is conducting a strategic review of its retail banking operations in the UAE. The move is part of Barclays global drive to review its business operations and reorganize itself around key markets to revive profitability. Under Chief Executive Anthony Jenkins, the bank has shed at least 3,700 jobs, cut of pay of senior bankers and closed businesses due to new regulatory curbs on risk. The banking group is also no longer involved in speculative trading in agricultural commodities or tax advisory services.

The bank currently offers personal banking, lending and mortgage services and credit cards in the UAE as part of its retail banking operations. The bank also employs about 500 to 1,000 staff in retail banking, most of whom are outsourced employees and not directly part of the bank’s payroll.

In recent years, foreign banks in the UAE have faced stiff competition from local institutions, in both retaining business and top talent from the region. These large local banks are cash-rich and are not limited by capital issues faced by the foreign banks. The local banks have been able to attract a large customer base because they are offering sophisticated banking services to meet the client requirements.

The banking industry in UAE is highly crowded, with a total of 51 commercial banks servicing a population of about 8 million people. Out of these, 28 are foreign lenders who have struggled to recover from the global financial meltdown in 2009-10. Some global banking giants have already quit the UAE market to be acquired by large state-backed financial institutions. In 2010, the Abu Dhabi Commercial Bank purchased the retail banking operations of Royal Bank of Scotland in a deal worth USD 100 million.

The source said any sale was most likely to interest local banks in the region.

BACKGROUNDER:

“Earlier in the week, the UAE’s biggest lender, Emirates NBD, reported a 40.37 percent year-on-year rise in half-year net profits, amounting to 1.808 billion Dirham (493.09 million dollars).

With 23 local banks and 28 foreign banks, the UAE has one of the highest banking densities in the region. In the first six months, the Gulf state’s economy has witnessed a strong surge amid rising oil prices, trade, tourism and real estate activity.

The International Monetary Fund estimates that the UAE’s real economy would grow 3.6 percent in 2013 and 3.7 percent next year.” — Xinhua via Global Times

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