Sharjah's United Arab Bank is among a group of smaller, northern emirates lenders to capitalise on difficult times for Dubai's major banking players.
Small is beautiful in UAE banking sector
Quirkiness is a virtue, says Paul Trowbridge, the chief executive of United Arab Bank (UAB), as he pulls out the lender's newest Islamic credit card, printed vertically rather than horizontally.
"It's a bit unusual," he says."Not everyone's got it. It's relatively understated - and it's Arabic." In a nutshell, that describes the bank's attempts to sell itself during a year of rapid expansion.
The lender based in Sharjah has tried to stand out through high-profile events such as enlisting Fabio Cannavaro, a former captain of the Italian national football team, to open its branches.
UAB's small size means it has to work hard to get noticed, Mr Trowbridge concedes, but the bank's advertising blitz is paying off.
The bank expanded its loan book by 45.6 per cent to Dh8.0 billion (US$2.12bn) last year and plans to maintain the pace of expansion with four branch openings this year, taking its total to 22.
But there are other factors that allowed the bank and other peers from the Northern Emirates to grow rapidly last year.
For one thing, Dubai's banking sector had one of the toughest years on record.
Dubai Bank was rescued by the emirate's government in April and then sold for just Dh10 to Emirates NBD, the biggest bank by total assets in the UAE.
And Dubai banks' share of total lending shrank, allowing for smaller lenders to grow rapidly.
Emirates NBD expanded its loan book by 3.5 per cent to Dh203.1bn. But excluding loans gained through its forced acquisition of Dubai Bank, its lending actually declined by 0.6 per cent.
At Emirates Islamic Bank, Emirates NBD's Sharia-compliant subsidiary, lending fell by 11.3 per cent to Dh12.9bn during the year, despite an earlier statement from the bank that it would resume "aggressive" lending.
Mashreq, Dubai's second-biggest conventional lender, reported a fall in total lending of 8.5 per cent to Dh37.6bn during the year. Meanwhile, Dubai Islamic Bank's lending dropped 9.7 per cent to Dh51.5bn by the end of the year.
With the exception of Dubai Islamic Bank, all of the Dubai-based lenders reported a fall in total assets.
"One of the reasons why [UAB's] assets have grown is that when the market hit a big downturn… other banks shut up shop," says Mr Trowbridge.
That move had opened up opportunities for smaller lenders, such as National Bank of Fujairah (NBF), to specialise in niche markets such as precious metals. "We took some early decisions in 2008 and 2009 that probably put us slightly ahead on the provisioning side," says Vince Cook, the bank's chief executive. "We're probably over the hump.We're not out of the woods yet, but we're not seeing it get worse."
The bank is seeking to expand its specialisation. It also intends to establish a division focused on lending to small and medium enterprises.
NBF plans to open two to three "significant outlets" this year, taking its total to a maximum of 14.
Other banks from the Northern Emirates have also grabbed market share.
Ajman Bank's Islamic loan book grew by 15 per cent to Dh3.2bn as it added four branches, taking its total to 12 by the end of last year.
The bank, which was founded in late 2008, avoided the bad-debt problems that have plagued many other lenders, says Mohamed Amiri, the acting chief executive.
"Our lending portfolio has also shown remarkable growth, and while we still may not be quite near where we want to be, we certainly are in the right direction," he says.
RAKBank expanded its total lending by 12 per cent last year to Dh18.3bn.
Credit growth among these Northern Emirates lenders is expected to outpace the UAE average by a comfortable margin when full-year lending data from the Central Bank is revealed.
Many of the UAE's smaller banks had missed out on Dubai's boom and are now under pressure from management to expand rapidly, says one banker, who asked not to be named.
What remains to be seen is whether these lenders will be able to avoid repeating the mistakes made by Dubai's banks.
UAB, for example, has sought to extend home financing to UAE nationals or committed owner-occupiers who expect to remain in the Emirates for the longterm.
The bank has sparked a price war on mortgages with teaser rates that have undercut the rest of the sector, dragging international banking giants such as Standard Chartered and HSBC into competition.
But some banking chiefs, such as National Bank of Fujairah's Mr Cook, are unconvinced that this approach can be as profitable in the UAE as in other markets. He points to the link between visas and properties among expatriates. This can affect their ability to repay mortgage loans if they lose their jobs.