by Helen Sanders, Editor, with Alan Kerr, General Manager - Wholesale Banking Group, Dubai & Northern Emirates, and Bhupesh Sharma, Head Mid Corporate Division, Abu Dhabi Commercial Bank
As one of the most economically dynamic regions of the world, United Arab Emirates (UAE) is also one of the most diverse, with a high proportion of both government-owned and family-owned enterprises in addition to publicly listed domestic and foreign corporations and financial institutions. In this article, Alan Kerr, General Manager - Wholesale Banking Group, Dubai & Northern Emirates and Bhupesh Sharma, Head of the Mid-Corporate Division offer insights into the needs, aspirations and solutions for businesses in UAE that are making a direct contribution to economic growth.
Business profile in UAE
UAE has a proud heritage of family-owned businesses, of varying sizes and maturity in their corporate lifecycle: some of which have been operating since the 1950s while others are far more recently incorporated. While many of these owners have chosen to maintain their businesses as small and medium-sized enterprises (SMEs), others have grown into mid-cap companies and large conglomerates with complex needs both domestically and internationally. Owners of these businesses – of whatever size - often continue to play an active management role in their organisations, and in some cases are supported by externally sourced managers, often with international experience. Alan Kerr outlines,
“Many of these family-owned companies are now going through a generational shift with sons and daughters who have been educated at universities in US and UK becoming involved in the business. These highly educated individuals, who have often gained experience in the world’s largest and most respected companies, are now seeking to implement best practices in financial management and processing within their businesses, to enhance investor and stakeholder confidence and maintain their competitive position.”
This focus on efficiency and control to enhance competitiveness is a characteristic most commonly associated with large multinationals, particularly those operating in industries with narrow margins. In this respect, therefore, the needs of privately versus publicly owned businesses are becoming more closely aligned. However, as Alan Kerr comments,
“Although it is difficult to generalise, family owned companies are often able to take a longer-term view of corporate strategy than their publicly owned peers. While these businesses are typically highly entrepreneurial, they may be more patient in seeing results than taking a quarter by quarter view, allowing more innovation and subtlety in their strategic planning.”
The value of long-term relationships
Family-owned businesses of all sizes, as well as government entities are typically attracted to a strong local bank such as ADCB rather than the branch of a foreign multinational bank. There are a number of reasons for this, as Bhupesh Sharma suggests,
“Firstly, we value long-term relationships as opposed to taking a transactional approach, so individuals form strong bonds that last over many years. By maintaining a deep understanding of the business, we can design and deliver solutions that are specifically suited to customers’ needs, and we retain accountability for the success of these solutions in the longer term.”[[[PAGE]]]
A particular challenge for mid-cap companies is that while many local banks will focus on SMEs, and foreign banks on large institutions, the mid-cap sector is less well-served. These companies are characterised by a turnover averaging $80m, with a proper management structure, and senior managers who have typically been in the company for seven or eight years or more. They have therefore experienced a full business cycle and are well aware of the importance of managing liquidity and risk. As Alan Kerr highlights,
“Many businesses in UAE are well-connected internationally, with imports most commonly from India (17%), China (13%), the Far East and other GCC countries. As a trading economy, UAE also exports globally, including Japan (15%), India (13%), Middle East, Africa and Far East. Consequently, the majority of banking requirements for many SMEs and mid-caps focus around cash and trade. For example, trade is the primary focus for 70% of ADCB’s mid-cap customers.”
Bhupesh Sharma continues,
“We work with these customers to enhance working capital through innovative trade and supply chain solutions, supported with an efficient cash management ‘wraparound’ to facilitate payments, collections and liquidity management. These solutions play a vital role in optimising liquidity and facilitating growth, supported by expert advisory services to help identify and implement best practices.”
Inevitably, ‘one size’ solutions cannot be applied to all companies, hence ADCB’s focus on specific solutions that take into account the size, industry, culture and aspirations of each customer. As Bhupesh Sharma summarises,
“While SMEs typically need more vanilla solutions, mid-cap corporations’ financing and transaction banking needs are more comparable with their larger peers; however, in a competitive marketplace, many banks do not feel that it is cost-effective to offer these services.”
Innovative, robust technology to provide cash visibility and automate processes are essential for these companies as they seek to manage liquidity, reduce costs and improve transaction efficiency and control. In addition, financing is typically a more pressing requirement for mid-caps than SMEs, but as mid-caps often have a longer track record and more assets, there are more financing options available to them. Many of these are aiming for the next level in their corporate expansion, so ADCB helps them to achieve their growth ambitions through bespoke financing, M&A, consolidation and private equity partnerships.
A unique value proposition for UAE
Given ADCB’s strength in both transaction banking and customer-specific financing solutions, the bank is well-placed to meet the needs of these companies. Furthermore, as Bhupesh Sharma explains, ADCB’s strategic focus is quite different from that of many foreign banks in UAE:
“ADCB is a universal bank, and therefore has a particular focus on the mid-corporate segment, in addition to our services to SMEs, large corporations and other institutional customers. As SMEs become mid-sized corporates, and mid-sized corporates expand accordingly, we have seen significant growth across our business segments, fuelled by both an increase market share and deepening relationships with existing customers.”
In addition to structuring the business around the needs of different sizes of customer, there is also considerable diversity in treasury requirements by industry. For example, some industries are inevitably more cash-rich than others, irrespective of the size of company, such as retailers. Alan Kerr notes:
“In addition to focusing our business around the needs of different sizes of companies, we also have an industry dimension to our offering, enabling us to deliver industry-specific solutions, which is particularly valued by our customers.”
Bhupesh Sharma continues,
“Our growth ambitions are underpinned by considerable investment in value-added solutions such as advisory services, bespoke working capital and financing solutions, and innovative debt and equity offerings. We anticipate that these services will become increasingly important to our UAE customers over the coming years, particularly the aspirational mid-cap companies that are expanding both domestically and internationally.”
Alan Kerr adds,
“We constantly benchmark key metrics such as customer satisfaction and investment in technology against both international and local banks to support our customers as effectively as possible.”
Creating a virtuous cycle
UAE has a close-knit business community. Local banks, public and private corporates, and government entities alike are committed to supporting the UAE economy and by working together, each participant can benefit the community as a whole. Alan Kerr concludes,
“ADCB plays a pivotal role in the UAE business community by connecting participants, investing in growth and facilitating our customers’ financial supply chains. By offering solutions and innovations that meet our customers’ needs, investing in customer satisfaction and fostering long-term, trusted relationships, we aim to continue growing our market share, therefore further enhancing the value we bring to the UAE, its citizens and businesses.”
