At a time when many banks were struggling for their survival, BKK achieved remarkable performance by posting BD 27.1 million profit and maintaining liquidity position above 25% of the total assets with capital adequacy ratio above 20%.
The bank did not lay off employees since the start of the financial crisis and is optimistic about the future. It is all about having the right leadership that took the right decisions and conservative measures at tough times. AbdulKarim Ahmed Bucheery, Chief Executive of BBK explained in an exclusive interview with BUISNESS LIFE that despite the current crisis BKK has registered relatively good profits in 2008. He spoke about his bank’s future expansion plans and prospects in the region and expressed his opinion on the banking sector in Bahrain, in view of the worldwide financial squeeze and how various banks were affected. Bucheery also gave his opinion regarding the effect of the global economy on the GCC and MENA region.
BL: How have you been dealing with the financial crisis so far?
AbdulKarim Ahmed Bucheery: BBK like any other banks has been witnessing the effect of the crisis since 2007. During the difficult year of 2008, our bank is proud to have achieved good results. We have persevered and added value to the shareholders’ investments. We had $71.9 million of profit and distributed some of that as dividends and the rest we kept as strategic reserve. The Bank was able to achieve that impressive profit thanks to the continued strong core business activities, mainly consumer and retail banking activities in particular in Bahrain and Kuwait. We also have branches in Mumbai and Hyderabad, India and a representative office in Dubai. Our corporate business contributed handsomely to our profits as we are very well known for our corporate business in Bahrain and other countries. So thanks to all our activities, we have been able to weather the storm and achieve profits. We are geared to continue our growth and profits despite the crisis. Let’s just hope that the crisis will come to an end soon.
BL: did you achieve these remarkable financial results?
AbdulKarim Ahmed Bucheery: These results were helped by a strong shareholder support, the work and dedication of our staff and our successful efforts in exiting some potential problematic investments and exposures at the right time. Of course we have been caught by the crisis, but given the bank strength and with the support of its shareholders and the Central Bank of Bahrain and the countries where we work in like the Central Bank of Kuwait and India we have been able to mitigate the downside of these problems and we have prudently provided for the impaired assets, Additionally, we benefit from the support of our customers, who continued to support us with their deposits and liquidity, which allowed us to go on with our financing plans. All these reasons played a part in achieving these positive results. It is definitely the support of the whole team. Furthermore, we have been fortunate to timely fill in all our critical vacant positions at our top management level. Additionally, we worked very hard with the support of the board to improve the benefits of the employees, such as payment of an additional salary, general adjustment to the pay level, introduction of education assistance allowance for all employees, enhancement of the staff saving scheme and introduction of several incentive schemes particularly for people working at the branches, amongst many other benefits. Aided by these initiatives we have been able to maintain our staffs and continue the momentum of growth.
BL: What are the plans of BBK for the year 2009?
AbdulKarim Ahmed Bucheery: It will be a year of consolidation and preserving the qualities of the various classes of assets. We will try to avoid any further deterioration of these qualities. Additionally, we need to stop any loss generating line of businesses. So with our close relationship with our clients we will try to limit any possible problem in our corporate sectors, and increase our growth in the other lines. We are also planning to modernize and expand our network of branches. We were the first to implement the concept of financial malls. We have four of them up and running and we will open several new ones in 2009. We should have 7 financial malls by the end of the year to cater to our clients’ needs. Additionally, we own our credit card company, CreditMax which possesses 60% market share of issuing and acquiring business. We are doing very well in here but we have reached saturation in Bahrain and we should start expanding outside Bahrain in the GCC or the MENA region. We also strengthened our Islamic investment activities in order to diversify our income flow. In short, we are diversifying and adding new business to preserve our growth in the years to come.
BL: Are you considering expanding into China?
AbdulKarim Ahmed Bucheery: For the time being we are concentrating on areas that we know best. We will not expand in far away countries where we have little knowledge about their markets and business acumen. There are many excellent opportunities in the GCC and MENA region. Once we are big enough to expand outside these areas we might consider expanding in China. Meanwhile, we are lucky to have started our business in India many years ago. Especially that these days it is very difficult to get a license to open a commercial bank in India. Our license alone is worth a lot of money. So our presence in India is very profitable and there are many opportunities there to grasp.
BL: Do you have any plans to acquire or buy any other bank or businesses?
AbdulKarim Ahmed Bucheery: It has always been a strategic direction for the Bank to think in this direction to grow the size and penetration of our Bank. Hence we will not disregard any such opportunities that may come our way. For the time being, we have enough on our plate to grow organically and strengthen our existing business. There might be some good opportunities, because of the current crisis and the depressed prices. We have been receiving many offers and business proposal to acquire companies in Europe and Asia for need of liquidity. But we are not after that. We have our shareholders’ capital, and we have our responsibility towards them and we are not going to scatter this capital on cloudy opportunities. We need to make sure that the business we pursue is relevant to the purpose of our company, which is to provide commercial banking service to the retail sector of Bahrain and any other countries in which we think we can make headways.
BL: How do you see the banking sector in Bahrain, in view of the worldwide financial crisis?
AbdulKarim Ahmed Bucheery: We have to segregate the financial sector in Bahrain into three classes: the commercial banks, the investment banks and the Islamic ones. I will not comment on the banks I am not familiar with. I will only comment on the commercial banks. The Governor of the Central Bank of Bahrain has expressed his stratification of the situation and liquidity of the commercial banks in Bahrain which continue to be regulated by a very strong central bank. Additionally, the Governor explained that the central bank of Bahrain did not need to intervene as strongly as other central banks because the commercial banking sector in Bahrain is healthy enough. The Governor, has however, made it clear in more than one occasion that in case any commercial bank expresses a need for support, the central bank will not hesitate to step in and support as much as they could. There are several past examples wherein the Central Bank has helped banks that were facing problems. So the central bank has illustrated their readiness to support such banks and help them get back on track. Of course, this only applies to licensed commercial banks. There are other types of banks, however, like investment banks which have not been immune from the crisis but I hope they have good capital adequacy to absorb the problems they have been facing. Nevertheless, some of them have posted lower profits and growth for this year. I am confident, nonetheless, that most of them have the support of their shareholders and capital reserves to weather the storm.
BL: What training do you give your employees to keep them up to date?
AbdulKarim Ahmed Bucheery: We have just finalized the second batch of our retail banking program, in association with Tamkeen, whereby we have hired 20 young Bahrainis to be trained for a period of eight weeks. We are using Capital Knowledge Institute to help with their training in order to disseminate them in our various branches. We are planning to train 3 more batches, to bring the total to about a 100 fresh employees. Furthermore, we are going ahead with our Management Trainees Development Programme and this year we have hired our fifth batch to bring the total to about 87. In addition, we are continuing with our training programs with the BIBF of Bahrain and that of the Darden Gulf Executive Program. So, through all these programs, we are keeping updated with the latest developments happening in the Banking industry. On the other hand, we have not laid off a single employee since the crisis started for crises related reasons. Of course, we have replaced several employees for performance related reasons. We are continuing with our recruitment policy and wherever we find there is a need we will not hesitate to recruit.
BL: What about other banks?
AbdulKarim Ahmed Bucheery: Yes, I understand that some very few banks have laid off a limited number of their personnel but I am sure they have their valid reasons to do so. In the end, this is a free market environment and I don’t think that any employer will find laying off people a pleasant exercise to carry. It is defiantly one of the most difficult experience any employer will have to go through if need be. It will be the last action anyone will resort to and only to safeguard the safety and continuity of the rest of the company’s employees.
BL: What will be the effect of the crisis on the workforce in the GCC?
AbdulKarim Ahmed Bucheery: I think the total workforce in the GCC may reduce in the coming years resulting from the number of mega projects that these countries have to postpone especially the infrastructure projects. As you know, the GCC countries were enjoying high surplus in the past number of years from the high oil prices. However, since the beginning of the year, the prices have fallen to less than $40. Therefore the huge surplus that these countries have been enjoying evaporated to the extent that some countries will have to borrow in order to finance the gaps in their budgets. And definitely many projects will have to be shelved or at least postponed and this will in turn negatively impact the workforce market, limiting the growth of the expatriate and native employment in these markets.
BL: What are the criteria of a good banker?
AbdulKarim Ahmed Bucheery: The most important criterion for a good banker is to be aware of credit risks. I do not think you can call anyone a banker until he has a good sense for credit risk. This criterion is the most important one and can lead the bank to prosperity or to failure. And this stems from awareness, education, good observation and experience. Additionally, network, knowing the products and technicality of these products are equally important aspect for good banking.
BL: How can we stop this crisis from damaging our economies?
AbdulKarim Ahmed Bucheery: Everyone knows the causes of the current crisis and how it affected the world and our region in particular. But the question is how to be aware of any future crises before they hit the region. And my answer to that is simple: risk awareness and full understanding of the product. For example, many risk analysts warned that a crisis will hit the financial sector months before Lehman Brothers went down. So the companies who heeded their calls saved their companies from great losses.
BL: What are the causes behind the stock market meltdown?
AbdulKarim Ahmed Bucheery: Stock markets are strong indicator of the strength of the companies listed therein, but also it’s a lot about the sentiment of the investors. Therefore if people are hesitant and cautious, feeling that a crisis is still brewing they may stop investing notwithstanding the strong fundamental aspects. This will lead to a liquidity shortage in the market and push it further down. Basically the demand and supply theory will prevail. Nevertheless, the shares of some companies that are witnessing good growth despite the crisis were not affected, and even grew last year.
