Future of banking is AI-driven and ADIB is ready to evolve, CEO says

Mohamed Abdelbary is convinced that how banks serve their customers today will be radically different in a decade. He is relying on generative artificial intelligence to transform Abu Dhabi Islamic Bank into what he says will be much more than a bank.

The chief executive, who took the helm at Abu Dhabi’s biggest Sharia-compliant financier in October, is not shying away from investing big in building the bank’s AI capability, which will also help in boosting its market share.

“I would say probably 25 per cent of my annual total cost goes to innovation and technology,” Mr Abdelbary told The National. “It is a big spend,” considering the bank's total cost layout at the end of last year was about Dh3.6 billion ($1 billion).

The ultimate goal is to turn the bank into a financial institution that doesn’t just sell products but provides fit-for-purpose financing schemes, tailor-made for its clients, with the help of Gen AI.

“What does it mean in real terms? It means that the way banking will operate in the future will be different from where we are today, and you have to [make a] start today,” Mr Abdelbary says. “I don't want to sell a product to a client which I want to sell, but I want to offer a product the client needs and for me to do that, I need the power of data and intelligence.”

ADIB, like its regional and global peers, is investing heavily in AI as financial institutions try to grab a bigger share of business through data analytics and new generative AI learning models.

Globally, the financial sector's spending on AI is projected to increase to $97 billion in 2027 from $35 billion in 2023 at a compound annual growth rate of 29 per cent, according to data from Statista.

Vision 2035

The departure from the traditional one-size-fits-all approach of developing products and selling to the mass market is part of the bank’s short, medium and long-term “three-pillar approach”. ADIB’s one-year strategy deals with annual budget cycles, its five-year corporate plan addresses specific strategic targets, while its Vision 2035 programme identifies the bank’s long-term objectives.

In October, the bank announced the launch of ADIB Ventures as part of its long-term strategy. The new platform is set to speed up the bank's technology evolution through emerging FinTech. It will also launch pilot programmes and proof-of-concept projects to test and implement new technology for Islamic banking.

“The overarching plan is the 10-year strategy, which is our compass ... the North Star. That's where the bank is heading," Mr Abdelbary says.

ADIB's tech investments in the past two years have partly gone into creating a unit called The Ace at its headquarters, which houses a team of 15 data scientists and analysts, “who are the brains behind all this”.

“The Ace unit is not alone and we have what we call a digital lab, which has approximately 300 people … so it's a heavy investment and we are very proud to have our own in-house lab,” he adds. “The more I know or have information about the needs of my clients, the more I will be able to tailor my focus on how to serve them better."

Market share and financing growth

Investment in technology will also help ADIB solidify its position amid cut-throat competition where Islamic as well conventional financial institutions are constantly jostling for market share.

The UAE's banking sector has grown this year by about 8 per cent but ADIB has managed about 19 per cent growth, which means that “we've taken significant market share and capitalised on [growth] opportunities", Mr Abdelbary says.

“In terms of retail [financing book], currently we have 15 per cent market share and in terms of the entire [banking] business proposition, we probably have 5 per cent to 6 per cent market share.”

Generally, the proxy of financing book growth is 1.5 times the expansion of the annual gross domestic product each year and ADIB last year grew three times that amount, he says.

“For you to maintain that momentum, you would need a differentiating factor. If everything is extrapolated in that manner, you think that in the next 10 years’ journey, that 15 per cent [growth] … could inch more towards 18 per cent or 20 per cent,” he adds.

In the first nine months of this year, ADIB group net profit after tax and zakat grew 24 per cent annually to Dh4.6 billion ($1.25 billion), while its revenue surged by 19 per cent to Dh8 billion on strong business volumes.

Its asset base grew by 21 per cent to Dh222.6 billion at the end of September. ADIB's balance sheet has expanded by Dh98 billion in the past five years at an annual growth of 12.4 per cent, according to the bank's latest earnings report.

The bank’s gross customer financing increased 19 per cent annually to about Dh140 billion, with financing across government and public sector enterprises accounting for about 32 per cent of the growth, the bank said in October.

“It's almost like a perfect equation for me when I look at all my businesses – retail and corporate, both have done extremely well and we have seen double-digit financing growth,” Mr Abdelbary says.

“If I'll be more specific on retail … it is the fastest growing book in the UAE ... and the reason is that we have a very clear strategy in terms of us bringing the product to the client.”

ADIB, like other Islamic and conventional lenders in the Gulf region, has maintained momentum since bouncing back from the pandemic-driven slowdown, with continued economic growth in the UAE as well as the broader Gulf providing tailwinds.

However, for ADIB to continue on that steep growth trajectory, both in its top and bottom lines, “everything has to fire for us”, Mr Abdelbary says.

Branch network and international expansion

While ADIB plans to aggressively boost its use of technology, it does not want to compromise on its “unique DNA and culture” by cutting the number of branches, a move several of its competitors have chosen to rein in costs.

“There are market dynamics which we understand but ... the branch network for ADIB is a very important part of its culture,” Mr Abdelbary says. “We have no intention of reducing our branch network and if the clients demand more branches, we will definitely consider that despite our evolution on the digital side.”

It also plans to boost the number of branches in Egypt, where it currently operates 70. ADIB has done “exceptionally well in Egypt” and managed to increase its client base to 600,000 from 350,000 in about 18 months. The bank is "definitely" considering the option of increasing its network in the country, he said.

The lender plans to “at least add another 10 branches” in 2025 and also increase the number of ATMs it operates in the Egyptian market, which currently accounts for about 15 per cent of the group's profits.

Expansion in Saudi Arabia is also on the cards and getting a banking licence in the kingdom is among the options the bank is considering, Mr Abdelbary says.

The bank currently operates there through Saudi Finance Company, which mainly focuses on small and medium-size companies and funding to the retail sector. However, the kingdom remains a big market for ADIB as about “30 per cent of the entire wholesale bank book is from Saudi [Arabia]”, he says.

M&A scope

At this stage, ADIB has no plan to expand its international footprint to new markets and remains focused on consolidating its presence in its current markets, both organically and inorganically.

Established in 1997, ADIB now has a presence in six strategic markets including Egypt, Saudi Arabia, Qatar, the UK and Iraq. Apart from its core banking operations, the bank has added several other revenue streams including a property arm, ADIB securities platform, ADIB Capital as well as its insurance business.

The bank is open to mergers and acquisitions, and it is a standing agenda item for the ADIB board to discuss, Mr Abdelbary says.

All opportunities get their “fair share of discussions”, however, for the bank to consider a M&A deal, it has to be “accretive to the organisation”. If it is “just M&A for the sake of M&A, we will not consider it”, he adds.

The Abu Dhabi bank is also open to taking stakes in FinTech companies through its ADIB Ventures platform.

“The additional element which comes under the Ventures is that we can also take equity share in these companies,” he says, without disclosing how much the bank plans to invest in FinTech M&A. “It's sizeable for the ambitions we have.”

More than a bank

Mr Abdelbary, who took on the role of acting chief executive in March, is a seasoned banker with more than 28 years' experience. He held senior positions in banks such as Citigroup, Barclays and Standard Chartered before joining ADIB in May 2020 as group chief financial officer.

His transition from the finance chief to chief executive, he says, was smooth. Having been part of the evolution in the past five years, he hasn’t really felt the pressure with the change of title and responsibilities.

“Opportunities are fantastic … if you ask me that can you write down what are the key measures you would want to see in an economy, I will write what we have today,” Mr Abdelbary says. “All KPIs [key performance indicators] are moving in the direction we would like to see, and most importantly, in a sustainable and consistent way.”

Mr Abdelbary says the plan for ADIB is to build an entire ecosystem, so clients would not have to go anywhere else for their banking and financial needs.

“When you say search, you go to a certain search engine, when you talk about safety, you think of specific cars and when you think about banking, ADIB should first come to mind,” he says. “If you can achieve that, you have achieved your goal.”