TBY talks to Rob Broedelet, Country Executive UAE at ABN AMRO, DIFC Branch, on the banking sector, advantages of the DIFC, and the local real estate sector.
TBY ABN AMRO has been in the UAE since 1973. What are the specific nature of this market?
ROB BROEDELET ABN AMRO decided that Dubai will serve as our primary platform from where we service our clients from the Middle East, Africa, and also the Asian subcontinent. ABN AMRO came to the Middle East as a trade finance bank as we followed the commercial activities of our Asian clients. We have been active in this region since 1923 when we set up a bank in Jeddah in Saudi Arabia. We then subsequently expanded over the years into corporate finance and structured finance in the region, and we were one of the largest houses bringing bonds to the local market. In 2007 ABN AMRO was taken over by Royal Bank of Scotland, Santander, and Fortis Bank. At that time we had almost 3,000 people working in the UAE and were one of the largest credit card issuers. In February 2010 we set up our new bank in the Dubai International Financial Centre (DIFC), and have been granted a category-one banking license. We are one of only four banks that actually book client accounts in the DIFC. All other banks in the DIFC function as a mere representative office and they book their clients mostly in Switzerland or Singapore. This really sets ABN AMRO apart from the other banks operating in the DIFC.
How did the establishment of the DIFC help your business?
The DIFC has its own infrastructure, while the regulatory environment for us is managed by the Dubai Financial Services Authority (DFSA). The DFSA has a strong team of supervisors and a clean regulatory record. It is a well respected supervisory body internationally and staffed by international professionals. The DIFC also has its own court system. Cases can be heard in the DIFC courts and hopefully resolved fairly quickly. The license application process by the DFSA and the DIFC was a very smooth one.
Traditionally stable locations for investment have been stretched to the limit following the financial crisis. How has that forced you to redefine the quality of your investments?
I think that Dubai has proven to be a stable location despite the financial crisis. And then if we combine the financial crisis with the sociopolitical shifts, or what we now refer to as the Arab Spring, Dubai has shown tremendous resilience and perseverance as a financial center. The DIFC has around 700 companies operating from it, including some 300 banks and wealth management firms. Dubai has derived some benefits from the Arab Spring, as people looked for a more stable place for their investments in the region and decided to come to Dubai. I have not seen any firms leave Dubai because of concerns with the current regional situation. It’s quite the reverse. We’ve seen that a number of banks have brought people in from other regional centers in the Gulf because of the perceived political stability in the UAE. Also, our clients have made their analysis of the UAE’s political situation and continue to feel that the UAE is a very solid and stable environment from which they continue to operate.
The real estate market was one of the worst hit areas during the global liquidity crisis. Do any investment opportunities remain with high-quality dividend yields in this sector?
I do believe so, yes. I think we also have to be bit more precise when we talk about the UAE real estate market. People who invested in UAE real estate before 2007 are likely still making money today. In the commercial real estate sector there is excess capacity, which is simply going to take time to be picked up by the market. The residential real estate sector is all about location, location, location. There has always been, and there continues to be, interest from Europe, Eastern Europe, Asia, and the Middle East to buy properties in the UAE because of the tremendous infrastructure built up over the years coupled with its strategic location on the axis from Africa to Asia. Not to forget the safety on the streets in the UAE. I think that the residential real estate sector has found new pricing levels and reasonable yields can be made. If you expect to make a 12% return on an apartment, forget it, but if you can take 4%–7%, then the market is here.
© The Business Year