In an exclusive interview with Banker Middle East, Richard Groves, CEO of Ahli United Bank Kuwait, looks back at the bank’s triumphs and provides his views on operating in current macroeconomic conditions.
What are your views on the current Islamic banking landscape in Kuwait?
The Islamic banking industry enjoys unwavering support of the government of State of Kuwait. With plans to boost its investment spending and allocate a significant share of new project financing to Islamic banks, the Kuwaiti government is instrumental in the industry’s progress. Accordingly, capacity of the Kuwaiti government to execute its investment plans are emerging as key factor to watch for in the growth of Islamic banks. Naturally, to keep with the ever-evolving world, technology-based growth initiatives should potentially play a meaningful role. Based on a recent study by the International Monetary Fund (IMF), it is evident that some GCC countries will have to significantly cut spending to balance their budget with an average oil price of $50 per barrel.
For Kuwait, this is less than five per cent. The Central Bank of Kuwait (CBK) has introduced new Shari’ah banking guidelines for implementation by the end of this year. This highlights that the CBK is keen to enhance and develop proper guidelines for Islamic banking in Kuwait, and to have a properly regulated approach across all Islamic banks in the state. This is especially important as Islamic banking becomes even more widely available and more and more customers are seeking Shari’ah compliant banking solutions.
What are the main challenges that are facing the Islamic banking industry in Kuwait? How are you working to overcome those challenges?
The main challenge impacting the Islamic banking industry in Kuwait will be similar to those faced by conventional banks. Namely, a weaker economy due to the prolonged lower oil price impacting both corporate and retail customer sectors, and the general regional geopolitical instability. We are also heading into a period of more expensive money in the market with the raising of the CBK’s discount rate following the rate increases implemented by the Federal Reserve Bank. Hence, the market is increasingly competitive for good quality business.
The lack of activity on the local stock market and a downturn in the real estate market also provides for more difficult market conditions. To sustain growth in such challenging market conditions, AUB engaged majors like financing portfolio diversification, product innovation, engagement of enhanced risk management techniques suitable for a dynamic risk environment and diversification of AUB’s capital base with the issuance of Additional Tier 1 (AT1) Sukuk, which took place in October 2016.
What differentiates Ahli United Bank from its competition in Kuwait?
At Ahli United Bank (AUB), we are proud of the respect and reputation earned locally and regionally, thanks to all our achievements that have set us apart in the banking industry. From being the first bank to open in Kuwait in 1941, we have grown with the development of the economy and the many changes that have taken place, and are taking place today, in the banking industry. At the same time, we are proud of standing AUB has in the local community.
A major milestone in AUB’s history in Kuwait is, relatively, a more recent event. AUB’s standing amongst our peer group banks was enhanced through the conversion to a Shari’ah–compliant bank on 1 April 2010. This proved to be an historic turning point. The conversion was based on a prudent strategy adopted by the Board of Directors and supported by our major shareholders, effectively propelling the bank vigorously into the Islamic banking industry. With over 75 years of industry-leading expertise, we differentiate ourselves from other banks through our dedicated teamwork, innovative products and services, sustainable returns, experience and solidity and a world-class customer service that our clients deserve. Whilst we have much to be proud of in our history, we are not backward looking. Indeed, we are very much forward looking.
What have been the main initiatives of Ahli United Bank in 2017?
AUB’s business model reflects its vision of meeting the changing dynamics of financial markets by ensuring better distribution of risk and sustainable returns for its shareholders. In response to changing market conditions and challenges, the Bank repositioned its treasury and corporate banking unit to include more integrated Islamic banking services, in addition to growing its retail footprint to include 40 branches backed by a strong technology framework.
From a business perspective, we launched the heavily-supported and well-received initiatives such as Al-Hassad Islamic Saving Investment Account, which is the biggest Islamic rewards account in Kuwait with a prize pool of up to KWD 3.4 million per annum; the Pearls Rewards Program, which is AUB’s loyalty program rewarding our customers for using their debit or credit cards with a simple point system and through instant discounts across many popular retailers, restaurants, medical centres, and more; cash back programs that give back to our customers when they spend on their cards, by putting up to 50 per cent of their cash back into their accounts; the Beizat Card, which is AUB’s new prepaid card that offers clients the security and luxury of using a prepaid card during travels or to give someone in the family to use. Being part of shaping Kuwait’s history, AUB has a proud heritage in social responsibility towards the community, and 2017 was another outstanding year in terms of social initiatives.
Driven by the vision to better serve our customers with special needs, now our branches, ATMs, website and call centers are equipped with inclusive features such as priority service, wheelchair access, braille printers, voice control, headphones, and expertly trained staff, to name a few. In addition, we are the first bank in Kuwait which proactively anticipated the customers’ need as a result of fluctuating market conditions and unpredictable US Fed rate changes and launched innovative ‘profit rate swap (PRS)’ product after Shari’ah approval. The PRS enables the customers to manage their profitability and market risk.
What is your personal leadership style?
My management philosophy has always been to lead by example with a high level of personal integrity. Whilst one makes every effort to obtain the best return for shareholders it is important to take into account the varied needs of all our stakeholders, whilst bearing in mind our overall risk profile. I also believe in engaging our youth in the decision-making processes which helps in bringing innovation, which is always appreciated.
What was the proudest moment of your career?
I have had a career in banking of over 38 years and have worked in 11 countries, in the Middle East, Asia and Europe. Hence my experiences have been many and very varied, and for the most part, highly enjoyable and rewarding over the years. There have been many proud moments and no single one can be deemed to be the proudest. However, AUB’s hugely successful AT1 Sukuk issuance in October 2016, followed by being invited to ring the market opening bell on Nasdaq Dubai in November, will go down in my personal experiences as a very significant and proud moment.