Interpreting Middle East Economic News and Analyzing Market Trends

Another UK bank flip-flops on its Mideast strategy

A man walks out of Barclays Bank in Dubai

Source: Reuters

 

Barclays is the latest UK bank to consider changing its Middle East strategy.  Earlier this year we reported on HSBC’s poor strategy in the Middle East.  This comes as two other UK banks exited the UAE market; Lloyds and RBS.

  

Barclays Plc is conducting a strategic review of its retail banking operations in the United Arab Emirates which could lead to a sale of the business, according to two sources familiar with the matter.

Britain’s fourth-largest bank by market value confirmed on Tuesday it was holding the review of the UAE retail business but did not provide any further comment. The sources spoke on condition of anonymity as the matter is not public.

Foreign banks in the United Arab Emirates face increased competition from local lenders that are cash-rich and do not face the same capital issues as their Western counterparts. They can lure top talent from international banks and are offering more sophisticated banking services to clients

The industry is crowded – the UAE central bank’s website lists 51 commercial banks operating in a country of about 8 million people, 23 of them local banks and 28 foreign lenders

Some British banks have already exited retail banking in the Gulf state. In 2010, Abu Dhabi Commercial Bank, a part state-owned lender, bought the retail banking operations of Royal Bank of Scotland in a $100 million deal.

HSBC Holdings bought Lloyds Banking Group’s onshore retail, corporate and commercial banking business in the UAE last year.

The source said any sale was most likely to interest local banks in the region.

The internal review is still at a preliminary stage and no decision has been made on the outcome of the study, the sources said. No outside consultants or financial advisers have yet been hired to find potential buyers.

Barclays’ corporate banking, private banking and investment banking activities in the UAE are not part of the review, according to the sources. In the Middle East, Barclays has retail banking operations in Egypt aside from the UAE.

The review also does not encompass the bank’s Egyptian retail operation, which is a much larger and profitable business than in the UAE, according to the sources.

Read the full article from Reuters.

 

UK banks should not be singled out here.  European banks in general face tough decisions as their home markets are in poor shape.  Their strategy so far has been to leave non-core markets, which means any market outside of Europe is under review.

 

Barclays management may still be reviewing the decision, but it already seems to be a foregone conclusion that they will exit the UAE market.  Expect more European banks to review their operations in the region as well.