Barclays to sell UAE retail ops to Abu Dhabi Islamic Bank for $177 mln

* 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 to shift

* ADIB shares ease slightly but up 54 pct year-to-date

* Barclays (LSE: BARC.L - news) to focus on corporate, investment banking, asset management (Adds analyst comment on customer numbers, share price)

By Mirna Sleiman and Stanley Carvalho

DUBAI/ABU DHABI, April 6 (Reuters) - Barclays has agreed to sell its retail banking operations in the United Arab Emirates to Abu Dhabi Islamic Bank (ADIB) for an expected price of 650 million dirhams ($177 million), ADIB said on Sunday.

The emirate's largest Islamic bank said it aimed to acquire 110,000 customers through the deal, helping it expand into serving expatriates, who comprise most of the population in the Arab world's second biggest economy. ADIB currently has 600,000 customers.

Shares in ADIB, which are up 54 percent year-to-date because of the bank's growth prospects, fell 0.6 percent in early trade on Sunday after the announcement of the deal, which is still subject to approval by the UAE's central bank.

Around half-a-dozen local and international banks, including Abu Dhabi Commercial Bank, Commercial Bank of Dubai , Citigroup (NYSE: C - news) and Standard Chartered (HKSE: 2888.HK - news) , had expressed interest in buying the Barclays operations, according to banking sources.

The British bank had said last September that it would offload its retail portfolio in the UAE including credit cards, mortgages, personal lending and deposit-taking operations.

Some foreign lenders have been withdrawing from retail business in the UAE as they evaluate the reach of their operations following the global financial crisis, and in light of new Basel III rules on capital.

Foreign banks also face intense competition from local banks, which are enjoying a strong recovery of the UAE economy and real estate market; they have large pools of liquidity to deploy and have targeted retail banking for its higher margins compared with corporate business.

"The decision to exit the UAE retail banking space, while not taken lightly, allows us to focus on our businesses in corporate and investment banking and wealth and investment management," John Vitalo, chief executive for Barclays in the region, said in a statement.

"These businesses are strong, performing well, and have significant future growth potential."

ADIB's net profit for the whole of 2013 grew 21 per cent to 1.45 billion dirhams; loans were up 21 percent to 61.7 billion dirhams, while deposits jumped 23 percent to reach 75.5 billion dirhams.

Islamic banking bans interest payments but involves structures that resemble them. Former Barclays customers will now be asked to convert their credit card accounts, deposits and customer loans into Islamic instruments at ADIB.

Sharia-compliant banking is a mainstream business in the Gulf and many customers bank with Islamic institutions for business rather than religious reasons. ADIB will offer jobs to all Barclays retail employees and work with the British bank to ensure a seamless transition for customers, it said.

Nevertheless, it is not clear that ADIB will be able to acquire all of the 110,000 customers which it projects. Many of Barclays' high-end customers were attracted by high-end services from an international bank and may not convert to Islamic banking, said Tariq Qaqish, head of asset management at Al Mal Capital (Other OTC: CGHC - news) .

"ADIB is eager to grow its retail business further in a highly competitive market but the issue is how many Barclays (Berlin: BCY.BE - news) customers will shift to Islamic banking. Not all clients will shift, and this must be embedded in the price," he said.

In 2010, Abu Dhabi Commercial Bank bought the UAE retail arm of Royal Bank of Scotland (LSE: RBS.L - news) for around $100 million. That included three branches of RBS along with 250,000 customers. (Editing by Andrew Torchia)