Abu Dhabi's government-owned Al Hilal Bank is unlikely to break even this year and may slow overseas expansion due to the global crisis but will grow organically in the UAE, the bank's CEO said.

The newest of eight Islamic banks in the UAE, Al Hilal, which became operational in June last year, had previously expected to turn a profit in 2009 and planned to target acquisitions abroad as part of its expansion strategy.

"There has been a sudden change in the economic climate and to be profitable in 2009 requires very bullish economic conditions. It is not as bullish now," Mohamed Berro told Reuters in an interview.

"We will be close to breakeven, not reach profits in 2009," he said.

Despite the economic crisis which began barely three months since the bank became operational, Al Hilal is pushing ahead with local expansion. The bank has opened seven branches in the UAE in the second half of 2008 and will stick to its plans of opening around 10 branches yearly until 2013.

"We are going ahead as per plans to expand locally, that was our priority before the crisis. But we are studying our priorities of expansion overseas. We will not necessarily expand, the climate is not conducive," he said, adding that in such a climate there could be opportunities. "But it is not a priority."    

The Islamic lender with an authorised capital of 4 billion dirhams and a paid-up capital of 1 billion dirhams is owned 100 percent by the Abu Dhabi Investment Council, one of the emirate's sovereign wealth funds.

With funding drying up and competition for deposits getting fiercely intense, Al Hilal will fight to gain its share in the market.      
"But we are not going into a pricing war. We are liquid and we will compete for deposits," said Berro, adding that the bank has tightened lending like most other banks.

"Today, you have to prioritise lending. Liquidity is scarcer and allocating liquidity is really the key challenge and key driver to our lending activities," he said.

But as a government-owned bank, Al Hilal will re-examine and deploy funding from a priority perspective according to the needs of the economy and help it recover, he added.

Al Hilal recently launched its insurance subsidiary, Al Hilal Takaful with a capital of 100 million dirhams, but plans of setting up a real estate subsidiary and a brokerage arm are still in limbo. "We are not sure when these could be launched," he said. -Reuters