On Dubai's busiest thoroughfare, Sheikh Zayed Road, the white, orange and blue shop front of Sharjah Islamic Bank's gleaming new branch stands out among the soaring apartment blocks, furniture shops and car dealerships that mirror the Gulf state's growing wealth.

Faced with weaker corporate loan books and an uncertain global economic outlook, Gulf Arab banks are vying for space in prime locations across the Gulf as they seek to expand their retail branch networks to service increasingly prosperous domestic clients.

At a time when fee-generating corporate business, including capital markets activity and mergers and acquisitions, is limited and, where present, restricted to international names, local banks are refocusing on traditional banking services for growth.

Most banks in the region are focusing to get a steady source of revenues from retail banking and a steady source of customer growth, said Suvo Sarkar, general manager of consumer and elite banking at National Bank of Abu Dhabi (NBAD) . His bank aims to open 10 branches a year until 2015, expanding its branch network, now covering 12 countries, to 150.

Some 85 percent of bank executives in the Gulf said their banks plan to invest in retail operations over the next three years, according to survey by consultancy firm Accenture.

But as banks expand, a growing talent shortage is creating intense competition for staff. That threatens to derail growth in the retail market and is sending banks' labor costs sharply higher as they try to keep up with pay increases in the public sector.

Fresh graduates want the more high-profile jobs available in corporate banking, which are seen to offer a more exciting career path. Meanwhile, government policies aimed at boosting local participation in the economy are drawing local citizens to the public sector.

Most banks seem to be hiring, but at the front end (in)business development, people involved in revenue building, said Islam Shikoh, recruitment manager at Dubai-based lender Mashreq .

The war for that talent is pretty intense and it's getting more intense as the market picks up.

BETTER BENEFITS

Banks in the Gulf Cooperation Council (GCC), comprising the United Arab Emirates (UAE), Bahrain, Kuwait, Oman, Qatar and Saudi Arabia, have always had to compete with the public sector for local employees, with the latter seen to offer higher wages, shorter hours and better benefits.

It is definitely tough competition, said NBAD's Sarkar. We believe though that we provide broader and longer-term career opportunities and a much more entrepreneurial culture.

The political unrest of the Arab Spring has prompted governments to ramp up spending to head off social problems, including raising public sector salaries, putting pressure on banks to follow suit.

Many banks in Qatar, including Qatar National Bank , increased salaries for Qatari employees by 60 percent last year after the government raised wages for state employees by at least that amount.

In the UAE, the government doubled the wages of some public sector workers last month to mark the 40th anniversary of the country's founding.

Many GCC governments have often publicly recognized the need to get a higher proportion of nationals in the private sector, but massive pay increases in the public sector are counterproductive to this aim, said Toby Simpson, managing director of The Gulf Recruitment Group in Dubai.

In Saudi Arabia, a bank with more than 500 employees must ensure that at least 49 percent are locals or face possible fines and visa restrictions, according to Accenture, under a policy that stipulates quotas for companies' local hires. It was tightened last year.

The focus on local employment is creating retention issues, not just in banking but across the economy, with nationals regularly moving around.

The head of Saudi retailer Fawaz Abdulaziz Alhokair Co <4240.SE> told Reuters in October that 60 percent of staff at his firm broke their contracts to move to another company after a short period of time.

We have our national program which helps to monitor the training our Emirati staff receive, but once the effort is put in then retention is a challenge as with a limited pool, a lot of banks want to hire them, said Mashreq's Shikoh.

Retail banks have devised incentives to woo and retain high-caliber employees in addition to attractive remuneration packages, including the chance to study for masters' degrees and fast-track career programs to managerial positions.

It's like you have created a business class for the internal staffing program, Shikoh said.

Despite such efforts, retail banking will always struggle to compete with corporate banking in offering graduates an attractive career.

I'd always pick investment banking over retail, said one Omani at a major bank. At the end of the day, it's a more high-value product and it is more international, rather than locally driven.

ISLAMIC BANKING BRIGHT SPOT

The one bright spot for the retail banking sector is in niche areas such as Islamic banking or ladies banking - where branches are staffed exclusively by women for a female-only clientele. They are enjoying a rebound in hiring after years of struggling to attract enough staff.

A few years ago, Islamic banking faced lots of difficulties in recruiting people as the graduates leaving university weren't aware of Islamic finance, Adnan Ahmed Yousif, chief executive officer of Bahrain's Al Baraka Banking Group said.

Now, the situation has completely changed as you have too many names. Many universities, both here and in Europe, have started to include Islamic banking in their finance qualifications and you have graduates from Islamic courses too.

The number of female graduates in the region is also rising, helping boost the talent pool. National Bank of Abu Dhabi says more than 50 percent of its latest graduate intake were women.

With Europe's banking sector in the doldrums and financial institutions laying off bankers in developed markets, retail banks in the Gulf might provide an attractive prospect for expatriate bankers looking for work.

I moved here a little over four months ago and I've already had four or five friends contact me from home asking about relocating as the job situation is so dire right now, said one American banker now working in Dubai.

But securing a job offer is not assured. Increasingly, retail banks in the region are looking for people with wider experience in marketing and sales or specialist IT skills, rather than banking, as they seek to develop their customer base.

Today we have people from very diverse backgrounds who have no experience in banking but have experience in customer service or technology, selling or product packaging and marketing for the consumer industry, Sarkar said.

The recruitment game before was, how many years have you been in banking? but we have moved away from that.

(Additional reporting by Amran Abocar)

(Editing by Jodie Ginsberg and Susan Fenton)

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