* ADIB says deal will give it 110,000 customers
* Will allow it to expand into serving expat customers
* But some high-end customers likely to be reluctant toshift
* ADIB shares ease slightly but up 54 pct year-to-date
* Barclays to focus on corporate, investment banking, assetmanagement (Adds analyst comment on customer numbers, share price)
By Mirna Sleiman and Stanley Carvalho
DUBAI/ABU DHABI, April 6 (Reuters) - Barclays hasagreed to sell its retail banking operations in the United ArabEmirates to Abu Dhabi Islamic Bank (ADIB) for anexpected price of 650 million dirhams ($177 million), ADIB saidon Sunday.
The emirate's largest Islamic bank said it aimed to acquire110,000 customers through the deal, helping it expand intoserving expatriates, who comprise most of the population in theArab world's second biggest economy. ADIB currently has 600,000customers.
Shares in ADIB, which are up 54 percent year-to-date becauseof the bank's growth prospects, fell 0.6 percent in early tradeon Sunday after the announcement of the deal, which is stillsubject to approval by the UAE's central bank.
Around half-a-dozen local and international banks, includingAbu Dhabi Commercial Bank, Commercial Bank of Dubai, Citigroup and Standard Chartered, had expressed interest in buying the Barclays operations, accordingto banking sources.
The British bank had said last September that it wouldoffload its retail portfolio in the UAE including credit cards,mortgages, personal lending and deposit-taking operations.
Some foreign lenders have been withdrawing from retailbusiness in the UAE as they evaluate the reach of theiroperations following the global financial crisis, and in lightof new Basel III rules on capital.
Foreign banks also face intense competition from localbanks, which are enjoying a strong recovery of the UAE economyand real estate market; they have large pools of liquidity todeploy and have targeted retail banking for its higher marginscompared with corporate business.
"The decision to exit the UAE retail banking space, whilenot taken lightly, allows us to focus on our businesses incorporate and investment banking and wealth and investmentmanagement," John Vitalo, chief executive for Barclays in theregion, said in a statement.
"These businesses are strong, performing well, and havesignificant future growth potential."
ADIB's net profit for the whole of 2013 grew 21 per cent to1.45 billion dirhams; loans were up 21 percent to 61.7 billiondirhams, while deposits jumped 23 percent to reach 75.5 billiondirhams.
Islamic banking bans interest payments but involvesstructures that resemble them. Former Barclays customers willnow be asked to convert their credit card accounts, deposits andcustomer loans into Islamic instruments at ADIB.
Sharia-compliant banking is a mainstream business in theGulf and many customers bank with Islamic institutions forbusiness rather than religious reasons. ADIB will offer jobs toall Barclays retail employees and work with the British bank toensure a seamless transition for customers, it said.
Nevertheless, it is not clear that ADIB will be able toacquire all of the 110,000 customers which it projects. Many ofBarclays' high-end customers were attracted by high-end servicesfrom an international bank and may not convert to Islamicbanking, said Tariq Qaqish, head of asset management at Al MalCapital.
"ADIB is eager to grow its retail business further in ahighly competitive market but the issue is how many Barclayscustomers will shift to Islamic banking. Not all clients willshift, and this must be embedded in the price," he said.
In 2010, Abu Dhabi Commercial Bank bought the UAE retail armof Royal Bank of Scotland for around $100 million. Thatincluded three branches of RBS along with 250,000 customers. (Editing by Andrew Torchia)
Barclays (BARC)