The Business Year

Michel Accad

KUWAIT - Finance

Branching Out

CEO, Al Ahli Bank of Kuwait (ABK)


Michel Accad became CEO of ABK in May 2014, after having successfully led the turnaround of Gulf Bank, another Kuwaiti lender, and its return to profitability following the 2008 crisis. Prior to that, from 2006 to 2009, Accad was the Assistant Chief Executive of Arab Bank, based in Amman. Before moving to Arab Bank, Accad spent 27 years with Citigroup, which he joined in 1979. His last post with Citi was Managing Director and CEO for the Middle East and North Africa Division (MENA), a Unit that spanned 10 presence countries and contributed over USD1 billion to Citi’s bottom line. He obtained his MBA with honors from the University of Texas at Austin in 1978.

"We were the first Kuwaiti bank to have a presence in the UAE."

What have been the key developments at ABK over the past year?

There are two key developments that stand out. Last year, we had identified our target, Piraeus Bank Egypt, and started negotiating. The acquisition of the bank took place in November 2015 after about six months of negotiations, a record time for such a transaction given all the processes and regulatory approval requirements. We have traditionally been a local bank with only a marginal presence in the UAE, but due to our operational expansion to Egypt, we have technically doubled our branches and staff and become more of a regional bank. On the operating side, we are continuing the solid trend of the past couple of years. For the first half of 2016, we achieved top-line revenue of KWD44 million, slightly ahead of last year. To be fair, this growth was a bit below our expectations, but remains faster than the market. The low oil prices have reduced business activities and, consequently, led to a decreased demand for loans and investments. This has obviously impacted the banking sector, but we have been able to maintain some limited but reasonable growth. The other big change was the launch of our new strategy, where we aim to differentiate ourselves through “simplification.” The truth is that nobody likes to go to a bank and do a transaction as it has become a headache, and there is a vast range of new requirements. In this regard, it is important that banks have a clear vision and strategy, which need to be articulated and communicated in simple terms so that people can understand it, live it, and own it; that has been one of our Bank’s key strengths, which is a clear set of core values, vision, and strategy. Our vision is “reimagining a simpler bank,” and everything we do is about making life simpler for our customers; and our core values are “transparency, integrity, simplicity, and excellence.” These are key concepts that everyone here can understand and, more importantly, live by. It is that single-minded focus that probably explains the relative success that we’ve had. Aside from that, we have shifted our focus more toward the top line (i.e. the longer term), rather than the bottom line (i.e. this or next quarter). The top-line revenue growth is critical for the long term and, over time, we believe that the bottom line will eventually and automatically follow. In the short term, however, the bottom line may be distorted by the impact of the one-offs, such as precautionary provisions, but over time such distortions will normalize and correct themselves.

Is ABK looking to expand operations to other GCC countries aside from the UAE?

We were the first Kuwaiti bank to have a presence in the UAE, starting in the late 1960s. However, we never really focused on the business there, but rather on serving our Kuwaiti customers in the Emirates. However, our activities in the UAE have doubled over the past two years, despite the difficult environment that Dubai and Abu Dhabi have been facing. Overall, the GCC is a calmer and less turbulent business environment, which is why GCC growth is lower than the growth that you would expect in places like Egypt and Turkey, which have higher risk and therefore also higher growth potential. But it is not the political or economic risk that prevents us from entering new markets, but rather our recent large acquisition of Piraeus Bank. It is important to walk before you run, and we are not aiming to enter new markets in the next few years, unless of course an opportunity we cannot refuse comes knocking on our door! Now that we have a presence in three key countries in the Arab world, our aim is to grow organically in Kuwait, the UAE, and Egypt. In terms of revenue and profitability, Egypt and the UAE make up 10-15% of our net income, and ideally that share could reach 25% rather quickly. That is where the focus should be, taking advantage of what we have rather than adding more things.

To what extent is ABK involved in financing current large-scale infrastructure projects?

We are excited but are somewhat frustrated that those projects are not coming as fast as we hoped. We have built a corporate finance and project finance team within ABK from scratch, with people who have the ability to structure complex, non-recourse types of loans and facilities for the financing of these types of projects. We have helped on a couple of bids and the submission dates were deferred, but this is a huge potential for banks. Some of the transactions could be financed through bonds, while others would be better financed through syndicated loans and so on. Each has a different aspect, but we are fully prepared with a formidable team in place and are looking at every opportunity be it in the education, housing, health, water, waste management, and power sectors. The last three sectors mentioned above are sectors of particular interest, but we look at every single one of those development projects. On some projects, we make a conscious decision that we do not want to get involved, either because the margins are too low for the risk we take, or because we believe that the proposed financing structure is not tight enough. However, we still decide to participate in many of the projects that we look at, but we generally would want to participate as a lead arranger in most of the cases. We have the technical capabilities, credit appetite, liquidity, and capital.

What are your expectations for the year ahead?

The first half of the year was generally difficult for the banking sector due to the depressed oil prices, as this translated into slower business investments and demand for loans. My expectation is that this will continue over the next several quarters, although we still hope next year would be better. However, all the indications so far seem to indicate that things will continue to be relatively difficult through 2017. But everything is relative: when Europeans say it is difficult, then it means a drop in GDP, and in China when people say things are difficult then instead of growing at 10%+ they are growing under 7%. Here when we say things are difficult, we still mean that the growth rate will be positive, albeit fairly anemic. That is my view, and when the situation is difficult, it requires the bank to be more proactive and take more provisions, which inevitably will impact the bottom line. This year will not be a great year for banks, and I hope that next year will be better; but realistically, I do not count on a full recovery next year.



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