The 10 largest listed banks in the UAE saw aggregate net income jump by 85 percent in the first quarter of 2021 compared to the previous three months, according to new research from global professional services firm Alvarez & Marsal.
Its latest UAE Banking Pulse for Q1 said the increase was due to a decline in operating expenses and impairment charges which supported overall profitability.
However, loan and advances continued to contract with a 0.7 percent decrease in Q1 while deposits increased by 1.2 percent, after declining in Q4.
The UAE’s strong fiscal and external positions will continue to support the fundamentals of the banking sector. However, persistent pressure on the real estate sector continues to pose risks for UAE banks, the report noted.
Asad Ahmed, A&M managing director and head of Middle East Financial Services, said: “The UAE banking sector has witnessed a sizeable improvement in profitability in the first quarter, and the trend is likely to continue for subsequent quarters.
“The Targeted Economic Support Scheme (TESS), which the Central Bank of UAE extended until June 2022, is expected to help cushion banks’ asset quality and ease their balance sheet stress through the second quarter of 2022.
“As the economy recuperates from pandemic headwinds, banks’ income streams are expected to remain under pressure, while interest rates are likely to remain historically low. Operating costs and credit loss charges are expected to improve in 2021 compared to 2020 as banks focus on cost efficiency, adopt innovation and gain clarity on the economic recovery.”
The UAE Banking Pulse assesses banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability and capital.
The country’s 10 largest listed banks analysed are First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank (Mashreq), Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Fujairah (NBF), National Bank of Ras Al-Khaimah (RAK) and Sharjah Islamic Bank (SIB).
The report showed that operating income increased by 1.3 percent on a quarterly basis, largely on the back of reduced net interest income but this was partially offset by a 5 percent decline in net interest income due to lower interest rates.
Emirates NBD reported the highest increase in its total operating income of more than 25 percent as fee income grew by 42 percent owing to higher business volumes.
Eight of the top 10 banks reported a decrease in cost of risk as the improved macroeconomic environment led to lower provisioning. Total loan loss provisions decreased 36.1 percent compared to Q4 2020.
Follow us on
