EXCLUSIVE-Barclays considers potential sale of UAE retail business

(Updates with reasons for potential sale)

By Dinesh Nair

DUBAI, Aug 13 (Reuters) - Barclays Plc isconducting a strategic review of its retail banking operationsin the United Arab Emirates which could lead to a sale of thebusiness, according to two sources familiar with the matter.

Britain's fourth-largest bank by market value confirmed onTuesday it was holding the review of the UAE retail business butdid not provide any further comment. The sources spoke oncondition of anonymity as the matter is not public.

Under Chief Executive Anthony Jenkins, Barclays is axing atleast 3,700 jobs, reining in pay of senior bankers and closingbusinesses across the group in the face of new regulatory curbson risk.

Since taking the top job in August 2012, Jenkins has haltedspeculative trading in agricultural commodities and closed aprofitable tax advisory unit.

Foreign banks in the United Arab Emirates face increasedcompetition from local lenders that are cash-rich and do notface the same capital issues as their Western counterparts. Theycan lure top talent from international banks and are offeringmore sophisticated banking services to clients.

The industry is crowded - the UAE central bank's websitelists 51 commercial banks operating in a country of about 8million people, 23 of them local banks and 28 foreign lenders.

Some British banks have already exited retail banking in theGulf state. In 2010, Abu Dhabi Commercial Bank, a partstate-owned lender, bought the retail banking operations ofRoyal Bank of Scotland in a $100 million deal.

HSBC Holdings bought Lloyds Banking Group's onshore retail, corporate and commercial bankingbusiness in the UAE last year.

Barclays' retail banking operations in the UAE include itspersonal banking, lending and mortgage services and a creditcard business. The bank has between 500 and 1,000 staff inretail banking but most are outsourced employees and not part ofthe bank's direct payroll, one banking source said.

The source said any sale was most likely to interest localbanks in the region.

"You would expect the local banks to be the most likelybuyers of retail banking business in the region. We have seenthat in the past and most of them are in an expansion mode," thesource said.

The internal review is still at a preliminary stage and nodecision has been made on the outcome of the study, the sourcessaid. No outside consultants or financial advisers have yet beenhired to find potential buyers.

Barclays' corporate banking, private banking and investmentbanking activities in the UAE are not part of the review,according to the sources. In the Middle East, Barclays hasretail banking operations in Egypt aside from the UAE.

The review also does not encompass the bank's Egyptianretail operation, which is a much larger and profitable businessthan in the UAE, according to the sources. (Additional reporting by Stanely Carvalho in Abu Dhabi; Editingby Tom Pfeiffer)