UAE’s Biggest Islamic Bank Hungers for Growth, Scouts Out Deals

(Bloomberg) -- The biggest Islamic bank in the United Arab Emirates is emerging from the pandemic as acquisitive as ever and has identified new countries where it might expand next.

With operations already in place in Pakistan, Indonesia and Kenya, Dubai Islamic Bank PJSC is actively exploring opportunities to grow “both organically and inorganically” in those three markets, according to Chief Executive Officer Adnan Chilwan.

Egypt, Saudi Arabia and Turkey are also on the bank's “radar,” he said in a Bloomberg TV interview on Friday.

“These are three markets that one cannot ignore,” he said. “International expansion has always been a key part” of the bank's strategy,” he said.

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Established in 1975, the Dubai lender is the world's second biggest Islamic bank with total assets reaching 279.1 billion dirhams ($76 billion) at the end of last year. It bought its smaller rival Noor Bank PJSC via a share-swap agreement three years ago.

Investment Corp. of Dubai, the emirate's main state-owned holding company, is the largest shareholder in Dubai Islamic Bank with a 28% stake.

“We are looking at the next five years and we anticipate that not just organically within the country but we will look at organic and inorganic growth outside the country and some of the markets that we currently operate in” -- and beyond, Chilwan said.

Banks in the Arab world's second-biggest economy have increasingly been turning overseas to sustain growth, with First Abu Dhabi Bank PJSC last year expanding into Egypt by buying Bank Audi's local unit. Emirates NBD completed its acquisition of Turkey's Denizbank AS in 2019.

Meanwhile a wave of bank mergers and acquisitions in the Middle East's finance industry culminated in Saudi Arabia with one of the biggest banking takeovers of 2020, when the kingdom's largest lender by assets bought Samba Financial Group for $15 billion to form Saudi National Bank.

Facing pressure on their bottom line during the pandemic, lenders in the region could respond by trying to consolidate in the face of lower profitability, according to S&P Global Ratings.

Despite a downtick in the UAE's business conditions at the beginning of the year, growth can be seen in real estate, aviation and hospitality, according to Dubai Islamic Bank's CEO.

The lender reported its profit jumped 33% in 2021 to 4.4 billion dirhams as impairment charges fell by nearly half. Its liquidity coverage ratio was 136%, up 700 basis points year-on-year.

“Liquidity has always been the key strength for the bank,” Chilwan said.