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07 January 2020

Al Baraka Bank: Leveraging a robust global network

In an exclusive interview with Banker Middle East, Adnan Ahmed Yousif, President & Chief Executive of Al Baraka Banking Group reviews the group’s 2019 results and how the Shari’ah-compliant bank plans to further bolster and enhance extensive global network.

Adnan Ahmed Yousif, President & Chief Executive of Al Baraka Banking Group

How has 2019 been for Al Baraka Bank? What would you say were the major milestones achieved by the bank last year?

Overall, Al Baraka Bank maintained its healthy financial performance despite the lower-income, which was due to the geopolitical concerns in some of the countries where the banking group operates.

Towards the end of the year, we showed improvement in our revenues, as total operating income of the Group during the third quarter increased by four per cent to reach $235 million, net operating income by one per cent to reach $98 million.

However, Al Baraka's adherence to its conservative approach to set aside hedging provisions for all its units resulted in a 14 per cent decrease in net income attributable to shareholders during the third quarter, to reach $28 million compared to the second quarter of the year.

Similarly, another remarkable milestone is digital transformation. Al Baraka Banking Group has always focused on digitalisation as a top priority and has to its credit, several achievements with the most recent award received by the Group as the Most Innovative Islamic Bank of the Year at the FinX 2018.

The bank also launched the Al Baraka Global API website, a step towards innovation in open banking. The much acknowledged digital-only Islamic bank in Germany ‘Insha’ is now on stream and is providing services to the German market, flooded with locals and expatriates who are eager to partake in the digital-only Islamic banking services.

Al Baraka Banking Group also inaugurated a new fintech company which focuses on e-payments ‘alneo’ in Turkey through its Turkish subsidiary.

What were the main challenges you faced in 2019 and how do you see this panning out in 2020?

As a banking group with a network of subsidiaries, branches and representative offices spreading over 17 countries across three continents, multiple challenges and risks are factored in our business model and we are used to coping with them over the last 17 years.

As part of this, some of our units such as Turkey, Sudan as well as Algeria and Syria saw unstable economic conditions during 2019, but other units such as Egypt, Jordan, Tunisia and South Africa witnessed healthy improvements, which created a balance in maintaining our sustained revenues and operations flow.

What are your priorities for the bank in 2020?

In 2020, the Al Baraka Banking Group will continue to focus on the implementation of the digital transformation strategy, both at the group level and in our banking units. Moreover, we intend to launch a number of initiatives that will highlight the leading role of Al Baraka Banking Group in embodying this transformation.

Additionally, the bank will also continue to focus on expanding our Shari'ah-compliant investment as well as banking products’ base through our banking units and creating greater synergy between them in the areas of compliance— AML / CFT, FATCA, CRS, and other international legislations— to strengthen the Group's position.

In addition, our human resources will be one of our key focus areas. We will continue to provide modern training programmes through Al Baraka Academy both in person and through online modules to all employees of the banking group and its banking units.

One of ABG's main strengths is its extensive global network. How do you plan to further bolster and enhance this unique capability?

The expansion of our global network goes both at the branch network level and with exploring new markets. During the first nine months of 2019, Al Baraka’s units opened six new branches, taking the total number of branches to 703.

The total staff of the group's branches reached 12,695, which reflects the clear role of our units in creating rewarding jobs for citizens in their communities.  This strategy is key for us to continue growing our businesses and profits, at the same time serve wider communities in countries where we operate, taking into account the effect of digital banking.

In terms of regional and international geographical expansion, in December 2017 we opened our Moroccan banking unit, BTI Bank. The unit has started offering various Islamic banking products and services based on approvals being received from relevant authorities.

The bank now has four branches which were opened in 2018 and plans to open 37 new branches by 2022 in various Moroccan cities, supported by ATM banking and online channels.

Furthermore, the Al Baraka is also planning to enter new markets in the coming period through the presence in the Indonesian and Chinese markets, expansion in East Asia, as well as studying the expansion in the continent of Africa through the presence in several countries such as Kenya, Tanzania and Uganda.

ABG partnered with ADIB last year to cross-sell on customer payments and collections. How has this partnership benefitted ABG thus far? Are there similar arrangements with other banks in the pipeline this year?

It is a fruitful partnership and enables both Al Baraka Banking Group and Abu Dhabi Islamic Bank (ADIB) to establish a joint channel to provide their customers with access to wider markets and collaborate on cross-selling in the area of payments and collections.

Al Baraka is a leading provider of Shari'ah-compliant products globally and this agreement with ADIB sets the platform for customer referrals between the two banks, capitalising on our large geographic presence and wide client base.

This approach is in line with Al Baraka Banking's thrust towards greater customer-centricity. Given the success of this partnership, we looking forward to similar arrangements with other banks as well during 2020.

Following an agreement signed with UNEP last year, ABG had pledged to allocate approximately $197 million to finance environmental projects over the course of 2019 - 2020. What projects have ABG financed since? What more is in the pipeline and do you plan to expand this allocation further?

We have already developed our business plan to achieve this target through our units and some of them have already implemented initiatives in their countries. These units will provide financing of over $78 million towards renewable energy projects and over $ 119 million towards enhancing the energy efficiency of existing cooling & electric systems. We have confidence that these targets are achievable.

Through channeling finance for renewable energy and energy efficiency projects, we hope to be able to strengthen efforts towards achieving sustainable development in the countries where we operate while improving the lives of local communities.

We expect that our collective effort with UNEP will help reduce carbon emissions in these countries. In addition, we hope that this financing pledge will encourage other banks to finance renewable and energy efficiency projects in a similar fashion

Looking at the rest of 2020, what major risks do you expect to encounter? How do you plan to manage them?

We believe that the challenges we faced in 2019 will continue in 2020, especially the geopolitical situation surrounding our units’ businesses. 

However, on the other hand, we expect that oil prices will remain firm during 2020 and the Arabian Gulf government spending programmes will push the average non-hydrocarbon GDP growth to 2.6 per cent, thus providing favourable operating conditions for the region's banks.

The ongoing implementation of the new accounting standards such as IFRS9 and Basel 3 will put more pressure on banks’ businesses too. Also, the lower interest rate will start to pressurise banks' net interest margins; but margins will remain strong compared with global peers, given the relatively cheap funding resources.

RELATED STORIES: Abu Dhabi Islamic Bank Al Baraka Banking Group IFRS9 BTI Bank AML CFT FATCA




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