* ADIB says deal will give it 110,000 customers
* Will allow it to expand into serving expat customers
* But some high-end customers likely to be reluctant to
* ADIB shares ease slightly but up 54 pct year-to-date
* Barclays to focus on corporate, investment banking, asset
(Adds analyst comment on customer numbers, share price)
By Mirna Sleiman and Stanley Carvalho
DUBAI/ABU DHABI, April 6 Barclays has
agreed to sell its retail banking operations in the United Arab
Emirates to Abu Dhabi Islamic Bank (ADIB) for an
expected price of 650 million dirhams ($177 million), ADIB said
The emirate's largest Islamic bank said it aimed to acquire
110,000 customers through the deal, helping it expand into
serving expatriates, who comprise most of the population in the
Arab world's second biggest economy. ADIB currently has 600,000
Shares in ADIB, which are up 54 percent year-to-date because
of the bank's growth prospects, fell 0.6 percent in early trade
on Sunday after the announcement of the deal, which is still
subject to approval by the UAE's central bank.
Around half-a-dozen local and international banks, including
Abu Dhabi Commercial Bank, Commercial Bank of Dubai
, Citigroup and Standard Chartered, had
expressed interest in buying the Barclays operations, according
to banking sources.
The British bank had said last September that it would
offload its retail portfolio in the UAE including credit cards,
mortgages, personal lending and deposit-taking operations.
Some foreign lenders have been withdrawing from retail
business in the UAE as they evaluate the reach of their
operations following the global financial crisis, and in light
of new Basel III rules on capital.
Foreign banks also face intense competition from local
banks, which are enjoying a strong recovery of the UAE economy
and real estate market; they have large pools of liquidity to
deploy and have targeted retail banking for its higher margins
compared with corporate business.
"The decision to exit the UAE retail banking space, while
not taken lightly, allows us to focus on our businesses in
corporate and investment banking and wealth and investment
management," John Vitalo, chief executive for Barclays in the
region, said in a statement.
"These businesses are strong, performing well, and have
significant future growth potential."
ADIB's net profit for the whole of 2013 grew 21 per cent to
1.45 billion dirhams; loans were up 21 percent to 61.7 billion
dirhams, while deposits jumped 23 percent to reach 75.5 billion
Islamic banking bans interest payments but involves
structures that resemble them. Former Barclays customers will
now be asked to convert their credit card accounts, deposits and
customer loans into Islamic instruments at ADIB.
Sharia-compliant banking is a mainstream business in the
Gulf and many customers bank with Islamic institutions for
business rather than religious reasons. ADIB will offer jobs to
all Barclays retail employees and work with the British bank to
ensure a seamless transition for customers, it said.
Nevertheless, it is not clear that ADIB will be able to
acquire all of the 110,000 customers which it projects. Many of
Barclays' high-end customers were attracted by high-end services
from an international bank and may not convert to Islamic
banking, said Tariq Qaqish, head of asset management at Al Mal
"ADIB is eager to grow its retail business further in a
highly competitive market but the issue is how many Barclays
customers will shift to Islamic banking. Not all clients will
shift, and this must be embedded in the price," he said.
In 2010, Abu Dhabi Commercial Bank bought the UAE retail arm
of Royal Bank of Scotland for around $100 million. That
included three branches of RBS along with 250,000 customers.
(Editing by Andrew Torchia)