x Abu Dhabi, UAEWednesday 24 January 2018

RAKBank gives out more credit and brings in more revenue

RAKBank posts a large increase in profits for the quarter as lending increases, but it may face difficulties in repeating these gains as new regulation dulls the potential for retail lending - with video.

An aggressive push for credit cards, motor insurance and prepaid cards saw a sustained increase in gains at RAKBank during the first three months of the year.

Net profits for the first three months of 2011 increased 28.5 per cent to Dh293.1 million, with RAKBank's retail banking operations accounting for 95.5 per cent of the bank's revenue during the period.

Graham Honeybill, the bank's general manager, said: "The bank's first quarter result reflects the growth in the bank's customer base across a wide range of personal and small business segments which is emphasised by our continual focus on excellent customer service."

The bank's underlying strength improved as it issued more credit, with net loans and advances increasing 4.7 per cent to Dh17.1bn.

Net interest income rose 19.4 per cent to Dh445.1m, while income from fees and commissions rose 34.8 per cent to Dh186.6m.

However, with new regulations from the Central Bank on retail lending limiting the size and fee on personal loans coming into effect next month, the bank may be forced to change tactics in an effort to replicate these profits in the months ahead.

John Tofarides, a banking analyst at Moody's Investors Service, said: "The impact will be moderate and the bank will find other ways to continue and have a strong profitability, although they're probably going to be hit on the fees and commissions."

The bank would be able to cover the loss of fee income by raising interest rates at some point, he added.

The Central Bank also recently prohibited cold-calling members of the public to market financial services, a move which is expected to hurt RAKBank's ability to attract new customers.