Interview Transcript: “The worst you can do in challenging times is divert from a simple agenda”

Emmanuel Daniel (ED): Ala’a Eraiqat, I’m very happy to have you here to speak with me today in your capacity as chief executive of Abu Dhabi Commercial Bank since 2009. In fact, these numbers of years have given you the chance to build a franchise that you can effectively call something that was built with your own hands. It is a position that you rose up to at the time when the bank was in a position of need, and now you have built a bank that can probably be said that, in the context of the Gulf states, in a position of strength. In a lot of ways, you have done that by keeping focus on a proposition that exists in your mind and I would like to draw from you on that proposition.

Give me a sense of what was in your mind when you were first approached to be chief executive of this bank. You were already working in the bank and you have come from other banks, so you are a banker by profession, but an engineer by training, which then makes your way of thinking a lot more precise and a lot more defined. So, take us on a journey from the time in which you became chief executive of your bank.

Steering ADCB beyond the 2008 global financial crisis

Ala’a Eraiqat (AE): Thank you, Emmanuel. It is always an honour and a pleasure to be with you. ADCB as a franchise has existed since 1985 and the financial crisis of 2008 has, of course, had its toll on not only ADCB or banks in the Middle East, but the world. As a result, I was given the challenge and opportunity to lead my team into the challenging days from 2009 onward. Yes, it sounds much easier reflecting on it right now, but it was challenging days. It was a dark period for the financial industry worldwide, and we had no choice but to go back to the basics.

ED: What was ADCB at that time? By virtue of its balance sheet, what was it?

AE: It was half its balance sheet of today, approximately, or 60% of today, but that –

ED: Composition?

AE: Very similar. It had in terms of corporate, retail, and treasury businesses.

ED: In what percentages?

AE: Almost balanced amongst the three and this continued until today. However, within this composition, we had a lot of international exposure in countries we did not have a presence in and we had a decent level of investments across the globe.

ED: So, your initial job was to clean up all of that external exposure that you did not need.

AE: First, we needed to understand that exposure, which was the really challenging part because it was a moving target and what you today believed was a decent, AAA, good investment grade, tomorrow was completely wiped out. So, it was a daily challenge to understand what was the quality of the portfolio, how it was changing every day. The whole world was changing at a very rapid speed, but then we could not build a strategy for a changing environment. We had to build a strategy for the future. My role was to maintain the discipline and executing that strategy. Stock core business; core geography. It’s as simple as that.

ED: How much of that was you deciding that that’s what you wanted to do and how much of that was the board guiding you?

AE: I believe it was a major collaborative effort. However, these words, which have existed before me and will continue to be after me, those were my guiding principles and I did not leave an opportunity without mentioning them, maintaining them, making sure everybody remained in focus. The minute we got this collaboration or agreement, management and the board on their way forward, it was from that minute my complete passion and job, 100%, to ensure we remained focused.

The worst you can do in challenging times is divert from a simple agenda. Of course, there were all these attractions in picking certain opportunities or making minor alterations here and there. We had, as everybody else would, as long as we maintained the discipline in terms of focus on the core business, which is the UAE market for us, and the core geography, which is the UAE market for us, and the core businesses without getting into areas that we could consider risky.

ED: How much does treasury play into your overall balance sheet in terms of composition, and in terms of contribution to profit?

AE: It changes, of course, from year-to-year based on cost of fund, but our treasury business through managing our funding also contributes a very decent level, an excess of 20% to the bottom line by managing diversity. We do not do a provoke type of investment. We have a limited liquidity portfolio; however, it is regularly impacted directly and indirectly through also maintaining the discipline and reducing cost of fund. Our cost of fund has more than halved over the past few years.

ED: The reason I ask that is that it’s much more difficult to build a bank which is organic, which is closer to the customer, which is slow-growing sometimes, and which is hard work to be competitive. It’s much easier sometimes to see that one big deal come through and it makes your numbers look good and make your board of investors happy. So, what about you helps you to keep to the straight and narrow?

AE: One of our key KPI that we built for ourselves and we measure ourselves against and monitor is not only purely the size. Actually, the size of the balance sheet or the loan book is secondary to the granular growth and the growth of profitability. Over 80% of all growth over the past five years came from what you would consider granular, retail, SMEs, and mid-corporate business. Of course, the logical parts have to be there, but building it this way, it is more sustainable. It is more rewarding. Your cross-sell ratio is better, and, definitely and obviously, it is much more challenging to do so, but guess what? It is far more rewarding, and you can build on it easier going forward.

ED: Are you happy with your cost-to-income ratio? It is actually among the lowest that we see in the market, but are you happy with it? How do you keep it that way without seeing an evolution in your stock?

AE: Cost-to-income ratio does not mean we do not have to invest. I think it is relevant to the bank itself. We have other organisations in our home market which have a much lower cost-to-income ratio, and others who have a much higher cost-to-income ratio. As long as we continue to pay competitively and we continue to invest, it is an indicator; it is not a target result. It’s an indicator of how you’re balancing everything else, and I think it’s a great indicator to demonstrate your efficiency to your shareholders. The reality is that shareholders also care and see the return on equity and return on their investments, which is also one of the highest.

ED: So Ala’a, I have been to your bank. I have actually spoken to your staff, and visited your branches. There is this sense of happiness in your organisation, and a lot of that is attributed to you in your personal leadership style. What is it about the way in which you lead your staff, and the way in which you see the customer that has actually made ADCB perhaps the benchmark institution for service and for productivity in the UAE?

Maintaining high morale in the workplace

AE: On the happiness side it’s a bit at the macro picture and I think happiness is a common characteristic and feeling amongst people living in the United Arab Emirates as a whole. In every benchmark, the UAE have benchmarked highest in the world. Today, we have a Federal Minister look after people’s happiness.

I think that we are so blessed because of our leadership. We live in such a great environment. Then it becomes our individual duty to ensure that is also mimicked and reflected within the organisation. It makes the workplace better, and in a better workplace, better culture, better environment you get a huge list of positive things coming out. It does not mean it lacks discipline or lacks professionalism. On the contrary, this could actually be a major trigger for more professionalism.

Personally, nothing has changed for me with the team we work with. I attribute the success of the bank to a very large group of people. We just happen to be in a certain position ensuring that they are heard and listened to, make sure we also reflect the messages from the board and the management to them correctly. My job is to maintain that quotient. It’s a beautiful thing, and it’s always very rewarding when you see that reflected not only with the results of the bank, but the way the results are coming in.

ED: Something very close to your heart. How did it become close to your heart and how does that work its way back to your bottom line numbers?

Emphasising customer experience and digitisation

AE: We have always believed and everybody knew that sales, you can easily manage it, and it brings you the numbers. Everybody in a financial institution will tell you, “Yes, we believe quality of service will have a positive impact,” and we try here to quantify that. We really try to give a dollar figure or a dirham figure to what a good quality customer experience is, and when I say “good quality” it is a big word. It’s more of what the customer expects or needs from you as a financial institution. I have believed for a long period of time that financial institutions are very similar or becoming very similar, and there are very little distinctions there unless you address the customer experience in a strong way. So, we have done a lot of work with a large number of people within the bank. I’m getting feedback, but our new KPI is measuring it and it became a fact of life. Every single employee has a minimum of 30%, including me, on customer experience management, and it goes all the way to 100% to certain specialised functions.

ED: How does all that change now that we’re moving into a world where customer experience is more electronic, digital and virtual? The customer chooses when he wants to interact with you rather than you choosing when you want to interact with the customer. What do you need to put in place to make sure that customer experience engagement is very high?

AE: First of all, you need to be there for the customer at wherever he wants you to be, whether it’s a branch or a mobile device. Your presence around the client is there, or potential client as needed, and it is not only about having an onboard client. It is about the complete journey from account opening all the way through, hopefully no end to the relationship. Understanding the customer, being very close to them helps you and, with electronic devices, you can still do the same transaction with 10 steps or you can do it with one step. It’s still an electronic channel and a customer chooses to do it, but you can do it in a much more convenient way by altering that need for lower steps. This becomes our duty and this comes from interacting with our customers, understanding what they need and how they need it, and where we can plan that better to make it as efficient and as rewarding to the bank in terms of also cross-selling and sustainability of that. Today, this has resulted in over 50% of our customer deposits are current accounts.

ED: What other goals that you have given yourself, KPIs that you have given yourself, that are even considered as stretched KPIs, that will make you feel that you have created a legacy that is sustainable?

AE: This is a great question because I have continuously stretched myself and my team, they have stretched me, and the board has stretched all of us. I think with a bit of time and a bit more confidence, I do not look at it as a year-end figure result. I believe the bigger reward is the sustainability and continuity of the business going forward. So, it is a journey and I think so far we have had a great eight years, and I believe the journey over the next eight years is a stretch target by itself.