As far as the financial positioning of Abu Dhabi Islamic Bank is concerned, the profitability of the bank has grown on a consistent basis during the past three financial years. Similarly, other financial performance indicators, such as solvency and liquidity position of the bank, have also been satisfactory in the period under consideration. This financial stability and positioning of the bank signifies that it has a promising future ahead and can expand its operations further.
On the other hand, National Bank of Abu Dhabi also performed consistently in the past three years. In fact, National Bank of Abu Dhabi had a better financial position as compared to Abu Dhabi Islamic Bank due to higher levels of profits earned and greater market capitalization. Keeping in view these financial performance trends, National Bank has a potential to become market leader in future provided that its strategies are geared up to this task.
The comparison of financial performance Abu Dhabi Islamic Bank and National Bank of Abu Dhabi reveals that the later has performed better than former (Hashmi, 2011). While reviewing the strategies which are being followed by the two banks currently for the fulfilment and attainment of their goals and objectives, it is observed that both of them are pursuing sustainable growth in the long term which is aligned with the mission and goals of the banks and also exploration of new markets so as expand their operations in different regions. Moreover, other strategies of the two banks include strengthening internal processes and become more competitive (National Bank of Abu Dhabi, 2011; Abu Dhabi Islamic Bank, 2011). Keeping in view these strategies and current financial position of the two banks, following recommendations are given:
Abu Dhabi Islamic Bank
The strategies of Abu Dhabi Islamic Bank are categorised into three strategy pillars, namely “build market leadership within the UAE”, “create an integrated financial services group”, and “ pursue international growth opportunities”. As far as building market leadership is concerned, it can be argued that the bank is following a Laissez Faire approach. For instance, it is stated in the strategies section of the annual report that “ADIB’s retail presence will continue to build towards market leadership” (Abu Dhabi Islamic Bank, 2011). However, letting things develop or build on their own may not lead to attainment of desired objectives and goals of the bank. Instead, concrete steps are required to be taken by the bank such as understanding market dynamics in the UAE banking industry and then formulate appropriate action plans which are aimed at expanding the market share of the bank. Moreover, Small Medium Enterprises (SMEs) are not part of the bank’s strategies and therefore it is recommended that appropriate plans are set out for SMEs in the domestic market. Also, one area of importance which still needs improvement is innovativeness and modernization of banking operations, which would ultimately benefit customers of the bank.
National Bank of Abu Dhabi
The National Bank of Abu Dhabi has formulated various strategies for domestic and international growth of its business and for improvement in the internal processes of the bank. The strategic review of the bank reveals that there is a need to further concentrate on international growth and expansion of bank’s operations and to consolidate in the local Islamic banking market. Although, National Bank of Abu Dhabi has been dealing in Islamic products, but still there is a lot to be done. Apart from this, the bank focuses on improving internal processes and facilitating its customers in many ways. However, one recommendation in this regard is that the bank shall focus on giving up traditional approaches and operating techniques and introduce innovativeness and modernism in its overall banking operations.
Changing the Strategies of Banks
The current strategies of the bank, which have been presented in the annual reports of the two banks, require some changes so as to make them more effective in attainment of goals and objectives set by both banks. As noted earlier, there are some flaws in the strategies of two banks, such as both banks are intensively focusing on international expansion but domestic expansion is not given that much importance in their respective strategies, particularly by Abu Dhabi Islamic Bank.
Changes Recommended in Abu Dhabi Islamic Bank’s Strategies
Abu Dhabi Islamic Bank’s strategies are more market oriented and its dynamics; which in turn implies that the bank and its management expects its growth and expansion consequent to the potentials available in domestic and international markets. The major sectors for which the bank has devised market leadership strategies include private banking, personal banking, business banking and wholesale banking (Abu Dhabi Islamic Bank, 2011). Although, these sectors can be regarded as the domestic sectors which the bank focuses on for expansion, but no particular emphasis or strategy has been presented for targeting the Small and Medium Enterprises in the UAE. It is therefore necessary that the bank incorporates fulfilling the financial needs of Small and Medium Enterprises in its short and long term strategies. Moreover, the bank shall also look forward in promoting its Islamic products for SMEs in a more effective manner (Helfert 2001).
Changes Recommended in National Bank of Abu Dhabi’s Strategies
The strategies of the National Bank of Abu Dhabi include local and international growth and expansion and improvement of internal processes and developing competence in its business processes. From the review of financial performance and results of the strategies followed by National Bank of Abu Dhabi, it is concluded that the bank has done exceptionally well in the domestic banking market and has ensured a solid place in the banking industry (National Bank of Abu Dhabi, 2011). However, the international growth is still a bit of concern. While comparing the international presence of National Bank of Abu Dhabi with other banks in UAE, it is observed that the National Bank stands far behind many other leading banking institutions. Therefore, it is suggested that the bank shall concentrate more on international expansion rather than continued expansion in the domestic market.
Apart from this, another major change suggested in the strategies of National Bank of Abu Dhabi is that the bank shall include Islamic Banking as a major force in its strategies to expand and grow its operations domestically and internationally. In this way, the bank will be able to target conventional banking customers’ market and Islamic banking customers’ market at the same time and may be able to expand its operations on a better rate.
Recommendations for Implementation
Based on the review of strategies of the two banks selected in this report, there are certain weaknesses identified for both banks. On the basis of these weakness and changes recommended in the strategies of the two banks in the previous section, following recommendations are presented for the two banks to be implemented:
Recommendations for Implementation – Abu Dhabi Islamic Bank
Following action plans are recommended for Abu Dhabi Islamic Bank:
|Strategy Factor||Action Plan||Priority System (1 – 5)||Who Will Implement||Who Will Review||How Often Review||Criteria Used|
|Target Small and Medium Enterprises in the UAE||Devise Islamic Products for SMEs for both short term and long term financing||5||Operations and Marketing Department||Head of Operations and Marketing Department||Quarterly||Measurement of Products’ success, designed specifically for SMEs|
|Expanding Islamic products internationally||Target International Consumers for Islamic Products, particularly in South and South-East Asian Markets||4||International Operations and Marketing Department||Head of International Operations and Marketing Department||Quarterly||Evaluating the potential in international markets for Islamic Products|
|Bring Innovativeness and modernization in business operations||Facilitate consumers with online banking facilities and introduce smart consumer based facilities such as shopping cards and online investments evaluation software||5||Information Technology and Corporate Strategy Department||Head of Information Technology and Corporate Strategy Department||Monthly||Consumer surveys regarding the facilities offered|
For Abu Dhabi Islamic Bank, it is pertinent that the bank come up with a strategy for fulfilling SMEs financial needs through Islamic mode. In this regard, the bank shall introduce products for Small and Medium Enterprises which include short term financing and long term financing facilities. Moreover, it is also suggested that the bank market its products aggressively since there are competitors in the market which are already doing the same and targeting SMEs in the UAE. The strategy to be made shall be for next five years and shall aim at expanding bank’s operations for SMEs all over the UAE. The bank shall target major cities like Dubai, Abu Dhabi, Sharjah and Al-Ain in the first two years and shall come up with competitive products. Since the mission of the bank is to become a leading Islamic banking institution in the region, therefore the bank shall capitalize on this statement and market its products’ compliance with Islamic Shariah Law. Apart from this, owing to the tremendous scope of the Islamic banking system, particularly in Muslim world, Abu Dhabi Islamic Bank shall also consider devising appropriate strategies for exploring its place in Islamic banking markets of other countries. The last action plan is that the bank shall bring innovativeness and modernisation in its processes and facilitate its customers by introducing smart solutions for their shopping and banking needs.
Recommendations for Implementation – National Bank of Abu Dhabi
Following are the recommended action plans for National Bank of Abu Dhabi:
|Strategy Factor||Action Plan||Priority System (1 – 5)||Who Will Implement||Who Will Review||How Often Review||Criteria Used|
|International Expansion||Target and explore South-East Asian and African Markets||5||Corporate Strategy, Operations and Marketing Department||Heads of Corporate Strategy, Operations and Marketing Department||Quarterly||Evaluating the potential in international markets for NBAD’s Products|
|Improve Islamic Banking Operations and Network||Target Domestic Consumers for Islamic Products||4||Islamic Banking Operations and Marketing Department||Head of Islamic Banking Operations and Marketing Department||Quarterly||Evaluating the potential in domestic market for Islamic Products|
|Strengthen Customer Relationship and Loyalty||Introduce loyalty programs and strengthen relationship with existing customer base through enhanced services and internal processes||5||Marketing, Information Technology and Corporate Strategy Department||Head of Marketing, Information Technology and Corporate Strategy Department||Monthly||Consumer Switching rate and |
Consumer surveys regarding services of bank
For National Bank of Abu Dhabi, there are three action plans presented in the table above. First of all, considering the potential of National Bank of Abu Dhabi and its financial position, it has been suggested that the bank shall focus on expanding its operations internationally by targeting South Asian region and South-East Asian region. The second action plan relates to improvement in the Islamic Banking operations of the bank on the domestic level, which would involve studying the market more efficiently and offering products which are competitive and successful in a highly competitive Islamic banking market of UAE. The last action plan is related to strengthening the existing customer base of the bank. Since, National Bank of Abu Dhabi has a large customer base, therefore it is pertinent that efforts are made to ensure that this customer base remains loyal to the bank and reduce switching intentions among them by way of offering them better services and loyalty based reward programs.
Abu Dhabi Islamic Bank. (2011). Annual Report 2011. Abu Dhabi: Abu Dhabi Islamic Bank.
Hashmi, M. A. (2011). An Analysis of the United Arab Emirates Banking Sector. International Business & Economics Research Journal , 6 (1), 77-88.
Helfert, E. A. (2001). Financial Analysis Tools and Techniques: A Guide for Managers. New York: McGraw-Hill.
National Bank of Abu Dhabi. (2011). Annual Report 2011. Abu Dhabi: National Bank of Abu Dhabi.