First Gulf Bank to layoff 10% of workforce, a sign that banks are still struggling in the UAE
- Published on Wednesday, 11 September 2013 09:22
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As part of the plan, the bank will cut nearly 80 jobs at its bancassurance division, a business which mainly involves the sale of third-party insurance products, and about 120 jobs at its credit card business, one banking source familiar with the plan said.
In June, FGB bought Dubai First, the credit card business of troubled investment firm Dubai Group, for $164 million through a bidding process. It is not clear whether some of this month’s job cuts are related to the acquisition.
A second banking source said the job cuts were part of a broader restructuring in which FGB was streamlining operations and removing excess staff in certain departments. FGB plans to strengthen its investment banking division and has been making targeted hires to beef up that department, the source added.
“There is a restructuring exercise going on and the management feels they have deployed excess resources in certain areas. They are refocusing efforts and you see them hiring more on the investment banking side,” the source said.
FGB hired Simon Penney, Royal Bank of Scotland’s former chief executive for the Middle East and Africa, as head of its wholesale banking business in May. Steve Perry, previously Standard Chartered’s head of capital markets for the Middle East, North Africa and Pakistan, is joining the lender as its head of debt markets, FGB said this month.
Separately, two other banking sources said George Abraham, FGB’s head of corporate banking, had left the bank to join Dubai’s Emirates NBD. The sources were not aware of what role Abraham would take at the Dubai lender.
FGB confirmed that Abraham had left but did not comment further. A spokesman for ENBD was not immediately available for comment. FGB posted a second-quarter profit of 1.17 billion dirhams ($318.5 million), up 15 percent from the corresponding period in 2012, thanks to a recovery in key sectors, primarily real estate, and lower provisions as the UAE recovers from debt troubles at Dubai’s state-linked entities. FGB shares have risen 26 percent year-to-date on the Abu Dhabi bourse.
Read the full story from Arab News.In a recovering economy you don’t lay off people in the credit card division, a key growth driver in a recovery. As the economy recovers, consumers go on a buying binge. In FGB’s case, they are doing the opposite, meaning they either have a lot of bad debts in their credit card division that they are not disclosing or that the recovery in the UAE does not include the banking sector. See our earlier post on the state of consumer debt in the UAE, using debt to payoff debt. FGB shares might be up 26% this year but the Dubai market is up over 50% and the Abu Dhabi market is up over 35% for the year. This means that FGB has been lagging and the rise this year can be attributed to the bank riding the wave up in the UAE.