Operational Definition Of Terms Finance Essay
Union National Bank
Industry Analysis Proposal
Done By: Mariam Al Nuaimi / H00131266
Mona Al Zaabi / H00157915
Presented to Dr. Emerson G. Cabudol
Due Date: 1st of May. 2013
Table of Contents
Chapter 1: Introduction/ Background of the Study
Brief background of the study
United National Bank was established in 1982 as a Public Joint Stock Company. This bank is headquartered in Abu Dhabi and is one of the successful domestic banks in Abu Dhabi. This is the only bank of Abu Dhabi which is jointly owned by Dubai and Abu Dhabi Government. H. H. Sheikh Nahayan Mabarak Al Nahayan is the current chairman of this bank.
Union National Bank employs over 1400 employees in 2012. The total capital of the bank in 31 December 2012 was 17,394,13 DH. Among the top 20 banks in the Middle East region, Union National banks stands at 18th position with the tier 1 capital accounting to 3.4 billion USD. It stands at 234 positions in the world ranking in the banking sector.
Objectives of the study
The objective of this study will allow us to understand how the structure of the industry drives competition which could help us determine the level of its profitability then try to improve it when changes are required. Another objective is to determine the strengths, weaknesses, opportunities, and threats of the corporate to highlight the insufficient competence that can be built on by developing possible solutions and effective plan to solve their problems. Accordingly, these will make us appreciate the complexities of data collection and understanding the relevance of the large amount of information available. Other objectives to be considered for the study are:
To review and analyze the banking industry performance
A research study on the Union Nation Bank, its products, services and financial performance
To facilitate Union National Bank with a report on its future scope and product development.
To help us in understanding the banking industry in the GCC region, scope of the industry in its future progress and growth, along with various products and services that are offered.
Also to provide us an insight for the budding entrepreneurs looking in starting a new venture in the banking industry with the project feasibility and financial performance.
Operational Definition of Terms
Industrial Analysis: Is a market assessment tool which gives information about the complexity of any industry to a business. Under industrial analysis political, economic and market factors are reviewed and analyzed. Major factors included under industrial analysis are supplier and buyer power, status of competitors, government regulations, new market entrant likelihood etc. This tool is used by the business before entering in a service or product market.
Market Analysis: Is the part of industry analysis, which in turn is the part of global environment analysis of the firm. It can be identified through SWOT analysis i.e. strengths weakness, threats and opportunities of the firm.
Demand: Every market consists of both the buyers and sellers, the buyers of the market are willing to buy the goods at certain price and sellers of the market are involved in supply of goods to the buyers. In economics, demand refers to the quantity of the product or service desired by the buyer. The buyer demanded the quantity of product at certain price i.e. the price at which buyer is willing to buy the product, this relationship between the price and quantity demanded is called demand relationship.
Supply: Refers to the amount or quantity of the product produced by the supplier, and is willing to sell it at certain price. It refers to the willingness of the sellers to sell the goods at the certain price and quantity. The relationship between the price and quantity supplied is called supply relationship.
Supply-Demand: Is the gap between Supply and Demand curves of a product. It has four basic laws of supply and demand by looking at the current quantity and price of the product:
If the demand of a product increases and supply remains constant, then shortage of product occurs, leading to the increase in price of the product.
If the demand of the product decreases, supply remains constant, then surplus condition occurs, leading to lower prices of the product.
If the demand of the product remains constant and supply increases, then surplus condition occurs, leading to low price of the products.
If the demand of the product remains unchanged but supply decreases, then a shortage of product occurs, the company may increase the price of the product.
Marketing Strategy: It’s a long-term strategic process linked to organization’s mission and values with a combination of product, price, promotion, and place for allocating the limited resources and come up with innovative products or services to increase sales, attract and retain customers with creative marketing campaigns and promotional strategies.
Technical Analysis: Evaluating the price and volume movement in the market through studying supply and demand to identify the approaches that can indicate future activity.
Manpower: The total number of available or current employees working on providing services or producing goods for a specific job or task.
Production Capacity: A business enterprise or plant that use current resources in producing a volume of production or goods at a given period of time.
Ownership: An individual who has an authority of owning or possessing something by lawful claim and has the right to enjoy the benefits of it. The property can be tangible or intangible.
Form of Business Organization: The way the business can be organized by partners in which they are liable in this form of business to the extent of their shares in capital. Thus as shareholders, their liability only depends on the value of their shareholdings which largely accounts for the success of this form of business organization.
Staffing Pattern: A grouping of workers employed in an industry that has different skills and abilities to provide services or produce goods at a competitive level to support economic development.
Trade Associations: Members of an organization engaged in a particular business or trade to promote their collective interests like retail and wholesale.
Financial Analysis: A collection of financial data relating to the stability and profitability of businesses for investment. It involves in focusing on financial statement, balance sheet, and cash flow so as to determine the health of the company.
Sources of Finance: A company that chooses the right source of finance which fits its amount of capital. There are two main sources of finance: Internal and External sources from business’s assets or activities.
The aim of this study is to identify the problems arises in the Bank and explain the areas that should be developed. Also it has importance to determine the success of their business growth from looking at different aspects of analysis including market, technical, management and ownership, and financial.
As it shows bellow in the graph, the sources of data we have, carries both products and services information collected from questionnaires to surveys as a primary data. As for the secondary data, the data collection will come from web-based research to brochures and other documents given by the bank. The research will include statistics, charts, percentages and tables because we want to provide clarity and accuracy as possible as we can despite of the time frame. Therefore we wanted to involve our college to the research as a sample to be surveyed by both employees and students so that eventually we can be able to see a demographic variables of age, gender, educational level and occupation. Also to find out the percentage of customers using the bank in Al Ain Women’s College and their satisfaction with the service.
Scope and limitations of the study
Scope: The areas where the major problems lie in this study were fairly covered with possible solutions pertaining the Marketing and Human Resources issues. We determined some governmental actions and recommendations to help the industry improve their service quality concerning competition, Islamic and non-Islamic banks, human capital, unemployment rate, inflation and so on. Moreover, we identified set of laws and regulations regarding of Banking and Finance on employment, prohibitions, bank deposits, current accounts, bank loans, and bank guarantees. The geographical investigated took place in Al Ain at Khalifa Street with nine employees working in the bank; thus the materials available were mentioned in the methodology.
Limitations: The circumstances that were not considered in this study due to certain reasons are the time frame of study is short, shortage of given materials, limited sources used, and most of all the data gathered from one location only in Al Ain and at a particular branch which is relatively small to save time. However, our expectation for a further study of all the UNB’s in the UAE including abroad would be much of a help for this project to be more likely accurate and could be a powerful source not just for Al-Ain but for the rest of the globe. Also, it would enable us to compare and contrast between the branches and use them for measuring the overall quality of services and performances in each country and put up some effective solutions for less effective operating branches.
Chapter 2: Identification of the industry
Nature and use of products/services of the industry
The bank offers various products and services for the individuals and corporate entities. Individual has products including different types of accounts, credit cards, deposits and investment and savings products. It also offers some services and products for the corporate entities such as registering the company, opening the right account, and make investments. In addition, it offers special services for Al Safwa customers (High net worth individuals) from simple daily banking transactions to lifestyle options such as insurance, retirement and travel arrangements. Also, it offers for them customized accounts, UNB Smart Investor Loan, Platinum Card and Treasury and Investment Services.
The table below shows the products offered for the salaried individuals and the self-employed individuals:
UNB Current Account, UNB Savings Account, UNB call account, UNB Fixed Deposit account & UNB Easy
UNB Current Account, UNB Savings Account, UNB Easy
Classic Card, Gold Card, Platinum Card
Classic Card, Gold Card, Platinum Card
Al Bidaya Loans (For UAE nationals), Expat Salary Loan, Home Mortgage Loan,
House Rent Loan, School Fees Loan, Car Loan
Doctor's Loan, Car Loan, Smart Investor Loan, Home Mortgage Loans
Al Awwal Savings Certificates, Al Awwal multiplier
Al Awwal Savings Certificates
Deposits and investments
UNB Triple Guarantee Deposits
UNB Fixed Deposit Account, UNB Triple Guarantee Deposits, UNB Call Account
Firms in the industry and location of their major operations and relative sizes of firms
There are 23 national banks and 28 foreign banks located in the UAE. The total assets of UAE banking sector is observed to grow and it is the largest in the Arab world.
Union National Bank ranked 8th in the top 15 best performing banks in the UAE in 2013 and 28th in the top 100 Arab banks in terms of total assets, deposits, loans and shareholders' equity in 2010. It is headquartered in Abu Dhabi (Salam Branch) and it has 66 branches across the UAE. In addition, it has a branch in Qatar, Representative Office in China and it is also operating in Kuwait. The recent Financials of 2012-13 show a total asset value of 77,242 million AEDs. This value is only within the branches of UAE.
The main source of revenue for bank in is through the interest it gains on the loans given and the large customer base who deposit their money in the banks.
The table below shows the number of branches in the Emirates:
Salam (head office)
Sheikh Zayed Road
Khalid Bin Walid
Jebel Ali Free Zone
Gold & Diamond Park
Dubai Health Care City
Abu Hail Branch
Sharjah and Northern Emirates
Dibba Al Hasn
Sheikh Khalifa City
Zayed University Branch
Ras Al Khaimah
Khalifa Park Branch
Sh. Khalifa Street
Umm Al Quwain Branch
UAE University Al Ain
Al Arooba Branch
Al Dhaid Branch
Al Jebel Round about
Al Rumaila Branch
Al Ain Mall
Al Qasmi Branch
Al Bawadi Mall
Al Mizyad Branch
The table below illustrates the top 15 performing banks in UAE:
Top 15 banks in UAE
First Gulf Bank
Abu Dhabi Commercial Bank
Commercial Bank International
Dubai Islamic Bank
National Bank of Umm Al Quwain
National Bank of Abu Dhabi
Abu Dhabi Islamic Bank
Union National Bank
Commercial Bank of Dubai
National Bank of Ras Al Khaimah
Sharjah Islamic Bank
Bank of Sharjah
The total market size of the top 30 Arab banks is as shown below as obtained from relbanks.com whose source is diconline.org. The data is as of December 2008:
Shareholders Equity ($m)
National Commercial Bank (KSA)
Samba Financial Group (KSA)
Arab Bank (Jordan)
National Bank of Abu Dhabi
National Bank of Kuwait
Al Rajhi Bank (KSA)
Qatar National Bank
Abu Dhabi Commercial Bank
National Bank of Egypt
Kuwait Finance House
Saudi British Bank
Banque Saudi Fransi
Arab National Bank (KSA)
First Gulf Bank (UAE)
Arab Banking Corporation (Bahrain)
Mashreq Bank (UAE)
Gulf International Bank (Bahrain)
Ahli United Bank (Bahrain)
Dubai Islamic Bank
Audi Saradar Group (Lebanon)
Groupe Banques Populaire (Morocco)
Banque Marocaine du Commerce Extérieur
Commercial Bank of Syria
Gulf Bank (Kuwait)
Blom Bank (Lebanon)
Union National Bank (UAE)
Nature of operations of firms within the industry
The banking system at Union National Bank is centralized. The Central Bank of UAE is responsible of formulating and implementing policies related to banking and finance. It issues regulations from time to time. According to some of their main policies in order to have a sustainable business growth:
Giving the priority to fresh Emirati graduates to be hired since UNB is supporting Emiratization in order to directly impact Emiratization on a national level. Thus the bank is supporting its employees by providing consistent training and development to enhance their skills within the financial services sector and be part of the UNB community.
Another policy called "Open Door" policy which simply means that the employees of all levels are free to discuss their issues with senior managers because the bank wants to place an important image to the public that it is committed to empowering and developing its employees.
Also, ethically it is very important to inform the customers about the terms and conditions of each product and service so they would be aware of any fees and charges required.
Seeing all employees from different levels as one, so they get similar rewards and benefits. They believe every individual within the bank deserves to be valued and recognized regardless of titles, their efforts and commitment to work matter the most.
Chapter 3: Industry problems
Marketing of bank has become competitive due to continuous deregulation.
New rules and regulations of government are redefining the market place. Banks have to design their policies and schemes according to the government guidelines.
Customers demand is increasing as well as their loyalty is also diffusing. Customers have many options to go so they change frequently.
Consumer behavior is also a major problem for the banks; most of the people prefer Islamic banking especially Muslims and they do not use non-Islamic bank.
Due to high competition, this bank is forced to access low cost funds as well as efficiency must be improved to remain in the competition. Thus, this bank is facing pricing pressure and is forced to concentrate on retail assets too.
With many investment opportunities and high return oriented stocks, people in the UAE have found investing in private equity is better than the investing in Banks. Thus banks are coming up with innovative products and services that balance the return and risk portfolio of the investor.
Also, as explained in the above section, the competition in the banking industry is very high. There is large number of banks in the Gulf council with 30 major banks with total assets worth above 15000 million USD. Every bank comes up with innovative products with lesser interest rates and higher returns and hence heavy competition has been seen.
There is lack of experienced banking executives in the UAE. Thus this bank has to hire experienced bank executives from other countries who demand high salary.
Job satisfaction plays key role in determining the outcomes of the organization, as an employee with good job satisfaction will have the enthusiastic attitude to perform well towards organizational goals and means. As mentioned above, job satisfaction depends on technical parameters like the profile, responsibilities and roles, and also on psychological factors or parameters like colleagues, interaction with superiors and so on. As we interviewed some Union National Bank employees, they are not satisfied specially the locals due to the low salaries and benefits and the bank rules and they are planning to leave their jobs.
The UAE, enjoying stable interest rates, location advantage being in Central Asia and with high oil reserves faces server problems with the socio economic factors like unemployment, inflation, law and order and so on.
Unemployment: Unemployment Rate in the United Arab Emirates has reduced to 4.2% in the year 2012 from 4.6% in the last year 2011. Historically, since the year 1985 until now, the average unemployment rate values at 3.12% in the nations of the United Arab Emirates. The highest rate was recorded in the year 2011 in the month of December at 4.6% while the lowest in 1985 at 1.1%. Unemployment rate in the UAE is defined as the number of unemployed people looking for a job to the percentage of the labour force of the company.
Consumer Behavior: In UAE, most of the consumers believe in Islamic banks. Thus mostly they don’t show their interest in non-Islamic.
Inflation: Inflation rate was observed to be 0.70% in February of 2013. This is the lowest across the world among the large nations. Historically, since the year 1990 until now, the average inflation rate values at 2.2% with an all-time high during the year 2009 in the month of December at 12.3% while least in the month of January 2011 at -1.6%.
Thus these socio economic factors have got significant impact in deviating the interest rates in the banks and affecting the consumers investing or deposit capacity, thus leading to problems in the banking industry.
Chapter 4: Prospects of the industry
Government regulations/Laws affecting the industry
The United Arab Emirates stands at 33rd position on the list of world Banks ranked as per their ease of doing business ratings. It has also scored the best places in the world on measures like trading across borders and ease of registering the bank. It stands at 5th position in international trading and 6th position in the process of ease of registering.
This law governs all the aspects related to employee like their working hours, wages, protection, safety, social care, health, leave, code of discipline, end of service benefits, termination of employee contracts, members of the armed force, employment related accidents, fatalities and injuries.
UAE Company Law
According to Company law of UAE, any person who intend to his business in UAE must register himself in the Commercial Register which is organized by the competent authority which is Municipality of Emirates.
UAE Immigration Law
Immigration law of UAE is in action to control the flow of people from other countries in and out of its border. According to this rule every foreigner must have Visa or visitor visa and there are separate rules and restrictions for these people.
Central Bank of UAE
The UAE Government has appointed Central Bank to monitor all the banks in the Arab regions, their financial positions, rules, regulations, norms and policies. The main responsibility of the Central Bank is to formulate and implement policies related to banking and finance so as to ensure economic growth in more stabilised manner. It is known as "Bank of Banks". In addition to the above roles, it also acts as a Government’s bank and its adviser.
Government of UAE and Central Bank have laid down many laws, regulations and guiding principles that banks have to abide by to avoid any industry oriented problems. In the recent July 2012, Central Bank has passed a guideline for Liquidity damages and regulations at Banks. Similarly in 2011, standard format and principles for provisioning and preparing annual reports, account statements is discussed and circulated.
Also, new reforms and laws brought in by the Government of UAE would also have a significant impact on the banking industry. Interest rate being linked up with inflation rate, consumer price index, export values and so on , get affected due to change to in any these factors.
Banking Law in the UAE
Prohibitions: Banks are not allowed to acquire immovable property for their own account unless it is used for business conduct, housing and amenities for the staff.
Banks should not handle their own shares unless they were involved to debt settlement and must be sold within 2 years from the date of holding the shares.
Bank Deposit: A depositor must know very well that his/her money deposited to the bank will be under a legal power to the bank’s right of set-off. This can be applied to all types of deposits except investment deposits. And if the depositor has multiple accounts, the deposits will be treated separately.
Current Accounts: A certain customer can open his/her account if he/she requests the bank to provide credit facilities and/or issue credits for him/her noting the money paid will remain with the bank. And in case of her/his death, capacity loss or license cancellation by Central Bank, the current account will immediately close.
Bank Loans: A borrower is obligated to repay the loan upon the agreed interest on the payment date(s).
Islamic Banks, Financial Institution, and Investment Companies: In relation to commercial companies, Islamic banks and financial institutions are required to enact public joint-stock company form and acquire a license from the Central Bank in order to start operating and have the authority to provide loans and credit facilities or finance projects; also invest in movable property and accept deposits under the Sharia principles.
Proposed government actions to help solve industry problem
These government rules and regulations are made to control the industries. But sometimes this regulation causes so many problems. Labor law says that a fixed percentage of employees must be local in every industry but government must also consider the qualification and eligibility of local employees. Government should motivate the local people and provide high education at lower cost so that local people get highly qualified and there is no need of hiring foreign people. To motivate the outsiders, government needs to reduce restriction in the laws made for foreigners. Charges of Visa should be reduced and special treatment should be provided to the highly experienced employee. These actions may help the industry in their problems.
The UAE government however, has been a constant support to the banks and vice versa. Both the Government and Banks work in line so that overall economy growth is high and appreciable. When the socio economic factors are disturbed in the 2011 with Euro Debt crisis, the Federal Government of UAE has come forward to support the banking system. A special government committee was prepared to aid the local banks if the crisis spreads over large extent. The banks also supported the government by reducing the exposure in Euro economy and backing the government to ensure the economy growth at 3.5- 4%. In these ways, government of UAE has always shown its support to banks and vice versa working for the economy growth of the nations.