Mashreq Sees 20% Gain in Retail Profit on Wealth, Insurance

  • Earnings gains seen even as more SME owners flee unpaid debt
  • Lender targets gains in Islamic banking, reigonal expansion

Mashreqbank PSC, the United Arab Emirates lender owned by the billionaire Al Ghurair family, expects retail-banking profit to climb by more than 20 percent next year even as concerns increase about the rising number of small company owners fleeing the country, leaving unpaid debt.

Retail assets, which account for about a third of earnings at the Dubai-based lender, will expand at a “mid-teen” clip in 2016, helped by its wealth, insurance and small- and medium enterprise businesses, Farhad Irani, Mashreqbank’s head of retail banking, said by phone on Tuesday. 

Gains in Islamic banking and consumer operations in Qatar and Egypt will further bolster expansion, he said. The bancassurance and wealth management divisions should benefit as the U.A.E. builds its position as a regional business and tourist hub, he said.

Falling oil prices are weighing on the U.A.E. economy and have started to lead to business failures, with owners responsible for about 5 billion dirham in defaulted loans estimated to have fled this year, U.A.E. Banks Federation chairman and Mashreqbank Chief Executive Officer Abdulaziz Al Ghurair said on Monday. The rising number of “skips” won’t reduce the segment’s importance to the market, Irani said.

“SME business will remain the core of the economy, notwithstanding the recent spate of skips witnessed across the industry, plus the increasing regulatory scrutiny directed at this segment,” he said.

A more than 40 percent drop in crude prices over the past year is expected to hurt U.A.E. government revenue, slowing growth in the second-biggest Arab economy. The slump is already leading to an increase in loan defaults, with loss provisions at Abu Dhabi-based Union National Bank PJSC jumping 57 percent in the third quarter and United Arab Bank PJSC swinging to a loss from a year-earlier profit in the period.

While Mashreq has stopped adding staff in its retail operations for now, it has no plans to cut jobs, Irani said. “There is a natural attrition of about 30 to 50 people every month, which we have not been filling since August,” he said.

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