‘Digital transformation accelerated in banking sector’

The pandemic-induced circumstances have helped accelerate digital transformation in banking sector, paving the way for some other new trends having big impacts, a top bank executive told Emirates News Agency (WAM).

“The shift in digital transformation in the banking sector was inevitable and was gradually happening, but with the pandemic this shift was accelerated. The change will help banks cope with the new landscape the pandemic has brought forward and reap future gains and profitability,” Varouj Nerguizian, Group CEO of Bank of Sharjah, said in an exclusive interview.

Explaining the related new trends, he said, “One of the biggest shifts has been the ability to work remotely. More and more firms and banks are more flexible when it comes to working from home, which in time can impact overhead costs of the banks.

“Another trend has been to focus on cost cutting. Traditional banks are now looking to reduce their branch networks and manpower,” Nerguizian pointed out.

Asked about the impact of blockchain and cryptocurrency on the banking sector, he said, “blockchain is a revolutionary technology that is not yet fully understood by the banking industry at large. While its application is easy to grasp in certain areas like KYC (Know Your Customer) or the real estate title deed verification, blockchain supposedly allows parties to transact with each other without the need for an intermediary. This raises the concerns of the authorities that would like to monitor the activity,” the top executive cautioned.

However, he believes that enterprise blockchain [private blockchain operated in a closed network] could be an easier initiative between banks as consensus would be limited to known and trusted parties.

“I personally believe blockchain technology and by extension cryptocurrency is here to stay and impossible to regulate at large. However, in UAE, jurisdictions like ADGM [Abu Dhabi Global Market] and DIFC (Dubai International Financial Centre) have come up with crypto regulations and might in time be a significant part of the banking landscape as we move forward,” Nerguizian said.

Talking about tackling frauds targeting digital banking customers, the CEO said, “We have built layers of security and implemented a multifactor authentication system, combining technology and old-fashioned phone calls to confirm transactions.”

Regular awareness campaigns are conducted through all media platforms and other channels to continuously educate the customers on how to protect themselves and prevent cybercrimes, he noted.

A fraud awareness campaign organised by the UAE Banks Federation (UBF) has been very effective as it detailed the immediate actions to be taken by customers if they fall prey to a scam.

“Having all banks communicating the same message will certainly enhance awareness, which is essential now as the digital banking services have increased during COVID-19 pandemic and so have the fraudsters.”

Apart from this aspect, the UBF has been playing a larger and important role by raising the concerns of the banking industry with the monetary authorities, reviewing existing or forthcoming regulations and proposing changes for their better application, Nerguizian pointed out.

“UBF in this respect is very active and has done a great job by raising the standard in the banking and financial services industry and has a significant impact on the economic development of the UAE.”

Talking about the measures taken to ensure seamless services during the global pandemic, the CEO said, after enforcing the health protocol for the safety of the staff and customers, “we immediately took advantage of the Standards for The Targeted Economic Support Scheme (TESS) initiated by the UAE Central Bank (UAECB) and applied it fully to assist eligible customers.

“We, moreover, initiated our own additional deferral package for other deserving customers. To raise and benefit from the UAECB liquidity windows, we initiated liquidity through the subscription to eligible Sukuk of Government of Sharjah,” the top executive explained.

About the measures to support the Small Medium Enterprises (SMEs) that are backbone of the economy, Nerguizian said a good part of the proceeds that were raised in cooperation with UAECB in the form of TESS and the BOS [Bank of Sharjah] component were offered to SMEs.

“But SMEs remain more vulnerable than mid corporate clientele. The impact of this support will only crystallise in 18 months provided there is no resurgence of COVID or a (new) variant,” pointed out the CEO.

Meanwhile the Sharjah Islamic Bank (SIB) recorded net profit of Dhs514.1 million for the year ended in Dec.31, 2021, an increase of 26.7 per cent compared to Dhs405.8 million for the same period in 2020.

The Bank also reported Dhs850.7 million in operating profits , an increase by 21.9 per cent, compared to Dhs697.7 million in the previous year.

Despite the partial recovery from the repercussions of the COVID-19 pandemic, the Bank continued its hedging policy to face the challenges resulting from the operational conditions that the global economy is still going through. Consequently, the Bank has reported Dhs244.5 million in the net impairment provisions, which has decreased by Dhs11.3 million, compared to Dhs255.8 million for the previous year.

The growth of the Bank’s net profit indicates strong performance across all the business units of the Bank. As a result, the net income from financing and investment products increased by 12.4 per cent, or Dhs120.3 million, to Dhs1.1 billion for the year of 2021, compared to Dhs1 billion for the same period of 2020. While net fees, commissions and other income increased by 16.8 per cent to Dhs333.2 million, compared to Dhs285.2 million for the same period of 2020.

The SIB maintained general and administrative expenses at the same level with a slight change compared to previous year amounting Dhs576.8 million for the year ended 2021 and Dhs561.5 million for year ended 2020.

The statement of financial position of the Bank showed an increase in total assets by 2.5 per cent to reach Dhs55.0 billion as at Dec.31, 2021, compared to Dhs53.6 billion as at Dec.31, 2020.

The Bank continues to maintain a strong liquidity ratio for future opportunities, as it reached Dhs14.3 billion, or 26.1 per cent to the total assets, compared to Dhs11.2 billion, or 20.9 per cent of the total assets at the end of the previous year. Financing to deposits ratio reached 75.4 per cent, which reflects the strength and stability of liquidity position of the Bank.

WAM