A Partner for Multinational Corporations in UAE

by Ashish Sharma, Head of Wholesale Banking Dubai and Northern Emirates, Abu Dhabi Commercial Bank

Abu Dhabi Commercial Bank (ADCB) has built up a strong reputation as a universal bank for the UAE, covering a wide spectrum of products and customer segments, from retail customers through to small and medium-sized enterprises, mid-caps, large regional corporations and public sector entities. Recently, ADCB has expanded its focus to the growing number of multinational corporations (MNCs) headquartered outside the region who are choosing to work with ADCB in the UAE.

Banking dichotomy in UAE

The UAE is becoming an increasingly attractive destination for MNCs, with corporations across a wide range of industries establishing a presence here. Not only is the UAE an attractive market in its own right, but with excellent logistics, an attractive business environment and a highly skilled, cosmopolitan workforce, it is ideally positioned as a regional hub for the Middle East, Africa, and into eastern Europe and central Asia.

However, while the number and diversity of international MNCs in UAE is growing, the banking landscape is contracting. Until recently, a large number of international banks were located in UAE, so MNCs doing business in the region often chose to work with an existing banking partner, rather than approaching an additional local bank specifically for UAE. There are various reasons for the declining number of foreign banks in UAE, but in general terms, the cost and risk associated is resulting in international banks choosing to ‘derisk’ their business. Some banks have chosen to exit UAE altogether (and indeed other regions too), while others are narrowing their focus to specific products or key relationships.

Creating certainty and gaining advantage

As a result, corporate treasurers are faced with the need to replace bank relationships or products quickly, while their choice of international banks is diminishing. Furthermore, they are understandably concerned that if they appoint another international bank, they may not be altogether mitigating this risk. Instead, treasurers of MNCs are increasingly recognising that working with a local partner bank such as ADCB brings considerable advantages.

In some cases, these treasurers are introduced to ADCB through our partner banks, such as Bank of America Merrill Lynch and Santander. These strategic partnerships are proving a highly attractive proposition for both our partner banks and our mutual clients: Bank of America Merrill Lynch and Santander are able to provide a full service offering to their clients in UAE, while clients benefit from consistent service levels, coherent solutions and a single point of access. In other cases, new clients approach ADCB directly as they are attracted to the breadth and depth of solutions we offer, our market expertise, and our long-term commitment to the market. This latter point is becoming increasingly important given the ongoing uncertainty in international banks’ regional strategy.

Some of these MNCs are obliged to change banks as a result of a change in their partner bank’s strategy but others are looking to manage their bank risk more effectively by initially appointing ADCB on a selected product basis, which gives them the option to extend the relationship in the future. For example, as they expand their activities in UAE, many companies require local receivables solutions which international banks typically lack the depth of local presence to offer. Having established a relationship and understood our client engagement model, our comprehensive product offering in the UAE and our penetration across their supply chains in the region, these companies are increasingly choosing to extend their relationship with us further.

A local bank within an international context

One issue which often surprises MNCs when they first start working with ADCB is our depth of understanding of their needs and priorities, as well as the solutions to meet their strategic and operational ambitions. Our relationship management teams have extensive international banking experience, so they are already familiar and accustomed to working with MNCs. As our business supporting MNCs has expanded, we have continued to bring in and develop these skills and expertise further. We offer multi-lingual support not only for western MNCs in the Western Hemisphere, but also for those headquartered in China and South East Asia.

A key area of focus for MNCs is to establish a standardised approach of communicating with their home country banks to provide a seamless global platform. In addition to our electronic banking solutions, we actively support clients who use multi-bank channels such as SWIFT, and recognise the importance of standardised XML formats to streamline connectivity and automate processes across banks. With 48 branches in UAE and a strong electronic platform for transaction banking, ADCB offers effective solutions to the local cash management needs of MNCs.

[[[PAGE]]]

The value of local partnerships

Given the success of the partnership model that ADCB has established with Bank of America Merrill Lynch and Santander, we expect that other banks will recognise the value of this model, both in UAE and elsewhere, as a means of providing a cohesive and robust service to clients.

However, in the meantime, and given the uncertainty that exists today, treasurers of MNCs need to consider their business in the region carefully, and as how it could evolve in the future. They can then look at how best to manage their bank risk, and the services they are likely to require over time.

In many cases, the most appropriate means of achieving these objectives is to appoint a local bank such as ADCB alongside their international bank, perhaps initially for selected services to build a relationship and understand our capabilities. In time, they are then able to migrate more services to the bank in the event that their international banking partner exits the market, and as they increasingly understand the value that ADCB can offer to their business.