Mashreq Expects Consumer Bank Profit Surge on Wealth, SMEs

Mashreqbank PSC (MASQ), Dubai’s third-biggest lender, expects its consumer business profit to double this year, driven by the wealth management and small companies segments as the United Arab Emirates’ economy rebounds.

Profit at the consumer banking arm may rise to about 1 billion dirhams ($272 million) in 2014 from 450 million dirhams last year, and jump to 2.5 billion dirhams in three years, Farhad Irani, the lender’s head of retail banking said in an interview on June 1. An increase in credit and debit card payments in the U.A.E., where Mashreq is both an issuer and a manager of payments, is also helping boost growth, he said.

“Dubai and the U.A.E. have become the magnet of wealth being attracted from the hinterland, Syrians, Iranians, Jordanians, Africans, Indians in Africa and the U.K.,” Irani said from his office in Dubai. “The big transformation started happening from the second quarter of last year.”

The International Monetary Fund said last month it will probably raise this year’s 5.1 percent growth forecast for Dubai. Bank lending growth in the U.A.E. surged 7.1 percent last year, the fastest since 2008, central bank data show. Mashreq, owned by the billionaire Al-Ghurair family, reported a 35 percent jump in first-quarter profit to 575.1 million dirhams.

World Expo

Dubai’s benchmark share index more than doubled last year and has risen 50 percent this year, making it the world’s best-performing among more than 90 major gauges tracked by Bloomberg. Abu Dhabi’s main measure jumped 63 percent last year and has gained 18 percent this year.

Mashreq’s consumer or retail banking arm contributed 18 percent to revenue last year, according to data compiled by Bloomberg.

Investor sentiment has improved further since the emirate was chosen to host the World Expo fair in 2020, according to Irani. Dubai won the right in November to hold the event that is expected to trigger about $8 billion of investments.

The emirate, which was on the brink of a default in 2009, raised $20 billion from the U.A.E. central bank and oil-rich neighbor Abu Dhabi to help state-owned companies through the credit crisis. That debt was rolled over in March for another five years at 1 percent, a quarter of the original cost.

“With Dubai settling its debt issues and taking that question off the table, there is a huge amount of confidence,” Irani said.

Mashreqbank plans to raise about $500 million from a three-year loan as it seeks funds to expand, three bankers familiar with the plan said May 28. Bank of America Corp.’s Merrill Lynch unit and Australia & New Zealand Banking Group Ltd. are helping coordinate the fundraising with five other banks also expected to participate in the loan, one of the people said.

“There is true market expansion” as the U.A.E.’s bankable population will shortly rise to about 6.5-7 million from 4.5 million a year ago, Irani said. The average income of a new Mashreq customer is about 15,000 dirhams a month, compared with about 5,000 dirhams a few years ago, he said.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net James Doran, Chris Kirkham

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