Profits of top 10 UAE banks jump 15.1% in Q3 – News | Techy Kings

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The acquisition of quality high margin assets following the higher interest rate regime boosted profitability



Loan and asset growth at UAE banks increased slightly by 0.7 percent, while deposits increased by 5.2 percent QoQ.  Photo for illustration purposes.  - Photo file

Loan and asset growth at UAE banks increased slightly by 0.7 percent, while deposits increased by 5.2 percent QoQ. Photo for illustration purposes. – Photo file

Published: Sat Nov 19, 2022, 6:54 PM

Profits of the top ten UAE banks in the third quarter of 2022 surged on the back of higher core interest income despite a slowdown in loan and advance growth, according to a leading global professional services firm.

Aggregate net interest income (NII) jumped by 12.2 percent quarter-on-quarter while net interest margin (NIM) improved by 18 basis points (bps) quarter-on-quarter (QoQ) supported by higher credit yields following the benchmark rate increase, Alvarez & Marsal (A&M) said in a UAE Banking Pulse report.

Total interest income increased significantly by 27.5 percent as asset quality improved while non-performing loans (NPLs)/L&A fell by 0.2 percent to 5.5 percent in the quarter.

“With stronger economic developments and higher interest rates, UAE banks are reporting better profits. Q3 2022 earnings momentum increased with high margin rates and asset quality acquisitions. We expect the improving trend to continue in the fourth quarter, but remain cautious on the impact of higher rates on retail and corporate borrowers,” said Asad Ahmed, managing director and head of A&M Middle East Financial Services.

Abdulaziz Al Ghurair, chairman of the UAE Bank Federation, predicted positive and robust growth of the UAE banking sector, and predicted that the banking industry will grow faster than the macroeconomic rate with bank revenue, after risk provision, reaching more than $25 billion by 2030, a 50 percent increase compared to current income that creates an excellent financial position. He said UAE banks are well capitalized and profitable, which is a prerequisite for increasing the stability of the sector in the long term.

The 10 largest listed banks analyzed by A&M include First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, Dubai Islamic Bank, Mashreq Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Ras Al Khaimah and Islamic Bank of Sharjah.

Loan and asset growth increased marginally by 0.7 percent, while deposits increased by 5.2 percent QoQ. On balance, while the Q3 interest rate hike had a positive impact on banks, the impact on lending was weaker, despite positive economic activity in the GCC as the International Monetary Fund revised its UAE GDP forecast from 4.2 percent to 5.1 percent in October 2022, the report said.

“Overall, the bank reported higher profits as return on equity improved by 1.3 percent QoQ to 15.1 percent and return on assets improved by 0.1 percent QoQ to 1.7 percent in the quarter, as a result of stronger economic activity, higher interest rates and increases. oil prices,” he said.

The bank’s operating income increased significantly by 8.3 percent QoQ mainly driven by an increase in NII for UAE banks. NII increased significantly by 12.2 percent QoQ. An increase in other operating income of 8.0 percent QoQ was offset by a decrease in net fee and commission income of 7.8 percent QoQ. As a result, aggregate non-interest income declined marginally by 0.1 percent QoQ.

Operating cost efficiency improved for the second consecutive quarter. The cost-to-income ratio improved by 1.0 percent to reach 30.5 percent, mainly due to an 8.3 percent QoQ increase in operating income that exceeded the 5.0 percent QoQ growth in operating expenses, the report said.

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