ADCB Representative Offices – A Rationale for Remote Capability

by David Manson, Country Head UK, Abu Dhabi Commercial Bank

The United Arab Emirates (UAE) is the UK’s largest civil export market in the Middle East and the 12th biggest globally (UKTI, Dec 2015). Bilateral trade is now heading for GBP15bn per annum with an annual GDP growth rate averaging 4.76% since 2000. There are presently some highly visible opportunities in transport, infrastructure and engineering (and their respective supply chains) as the UAE continues to develop regional and global communication hubs, whilst opportunities exist to a raft of British and European exporters in many industries, including a rich seam of service and professional industries as the UAE develops a dynamic tertiary sector.

Abu Dhabi Commercial Bank (ADCB) has typified this growth story in building out and developing the UAE economy in partnership with a broad range of clients, and has been increasingly focused on the new opportunities afforded to international investors into the Emirates. This growth has manifested itself initially in increasing volumes of international transactions for its UAE clients, but increasingly to more physical investment in joint ventures and subsidiaries being established onshore which we have facilitated. This opportunity has become all the more significant as it coincides with many regional and international banks reducing capability in the Middle East region, redeploying capital in core businesses (or to meet regulation) and opting instead to support their clients through institutional partnerships. ADCB has made the strategic decision to extend our relationships with these clients (often via their primary banks) and to support them more directly.

ADCB recognised the trend towards international banks reducing capacity in the region some years ago, and moved to establish a series of strong banking partnerships and alliances to deliver full service UAE banking to many of the world’s major banks, and specifically to their clients. The establishment of representative offices in London and Singapore further supports this approach. ADCB seeks to provide a brand presence to these significant investor markets, and to complement and support these clients – and their banks - without duplicating or competing with ‘home market’ providers. In turn, these major banks can increasingly depend on ADCB’s own home market strengths, delivered in partnership and offering a full suite of products and services which would be expensive and inefficient for overseas providers to seek to replicate. In short, we aim to create a connected, ‘best of both worlds’ proposition which best meets the needs of our mutual international client.

Modus operandi and differentiation

ADCB’s representative offices are extensions of the group wholesale banking division, and serve as market ‘anchors’ to develop trade and inward investment from corporate and institutional names. These offices engage directly in business development in both London and Singapore, and indeed their respective regional hinterlands as strong regional hubs for many international names. The representative offices typically engage their respective markets with a three-pronged focus:

• To promote and provide home market institutions with cash and clearing services for their client business in the UAE;
• To connect corporate and institutional clients to ADCB’s risk management capabilities in trade (e.g., to manage risk to the bank, country and buyer in export transactions);
• To support corporates investing and transacting in the UAE with a full range of transactional banking and account services.

In recent years, ADCB has won significant volumes of new accounts from its primary banking partners which have been handled by dedicated specialist teams exclusively assigned to executing client instructions. Increasingly we are looking to extend this capability to a more collaborative approach with these banking partners, adding more value earlier in the client journey. For example, over the last two years, ADCB has hosted a series of inbound trade missions working with Santander’s clients and prospects to explore opportunities and to introduce them to UAE importers, distributors and potential buyers.

Each mission typically comprises 10-12 prospect clients in the UAE each year and creates a model for supporting many more prospect clients remotely or indeed ‘virtually’. For example, our Chief Economist has presented directly to the offices of prospective UK clients via weblink. This has often covered much of the initial ‘fact finding’ we might typically offer during early phases of a trade mission and thus allows our visiting delegates to spend time more productively with ADCB clients much earlier in the programme. This approach is scalable and low cost, and has been very well received by prospective clients evaluating the UAE and the wider region as a potential new market.

We have also established and resourced a dedicated multinational corporation (MNC) unit in the coverage team with a cosmopolitan international team of market specialists. This unit offers dedicated expertise in selected markets where we see significant scale of inward investment, e.g., China, S Korea, India and the UK. Country specialists engage directly with prospective clients, with their ‘house’ bankers in their home country, and with the ADCB representative offices where appropriate, to map out the opportunities and support client planning for growth and investment.

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We support all outbound investors and their banks with clear guidance on investment requirements, checklists of documentation needed, and service level agreements to meet their own, or their banker’s transactional needs. Through our London and Singapore representative offices, we now have the ability to provide this capability on the ground with direct client contact.

Fit for the future

Representative offices focus exclusively on business development, and are characterised by being entirely market-facing. As we choose not to compete locally in London or Singapore (with what would largely be undifferentiated offerings), we take a complementary niche supporting key financial institutions and corporations with a low cost and flexible business model. In parallel, we have seen a strong surge in the number of foreign banks setting up in the Dubai International Financial Centre (DIFC) to manage relationships with their clients, whilst ADCB delivers to these clients the required strength and depth of products, and award-winning service on the ground.

This complementary model is structured to deliver the best possible banking services in both home and ‘overseas’ markets, whilst allowing each bank to play to its respective (home market) strengths, and best direct its investment towards meeting regulatory requirements and/or optimising shareholder return. For this model to work successfully, we seek like-minded banking organisations that operate similar business models to work together to meet the needs of complementary client bases. Some of the techniques we employ to do this include:

• Interoperable technology, so that each bank provides transaction services to the ‘lead’ bank in the client relationship, and connects into to their transactional banking suite;
• Commitment to service, with partner banks adopting comparable service standards, such as consistent service level agreements, and execution time wherever possible;
• Priority handling; just as airlines offer ‘passport’ priority services across alliance members, partner banks are offering similar services. For example, at ADCB, we honour Santander’s ‘passport’ clients through a bespoke inbound desk for UAE business. A VIP client of Santander would be considered a VIP at ADCB and vice versa.

Working in this way, ADCB can provide a full service offering to our banking partners, and their customers, in what for many is a strategically important country. While correspondent banking services were traditionally procured on a transaction by transaction basis, there is now greater recognition of the importance of long-term relationships to deliver robust and reliable cross-border services to customers. Not only are banks looking for execution capabilities when selecting a partner bank, they are seeking market insights, relationship support and highly differentiated levels of service. This requires like-minded banking organisations operating similar business models to work together to meet the needs of complementary client bases. At ADCB, we are working proactively as part of a wider ‘team’ of banks working on our (and our partners’) clients’ behalf to provide best possible capability in the markets we cover and represent. The model is client-driven, complementary, and designed for long-term effective partnerships both with the clients we serve and the banks who introduce and represent them.