UAE Banks’ Combined Income Drops $5.53 Billion in Q3
On the back of higher impairment charges, the combined net income of the UAE’s 10 largest listed banks fell 5.5% q-o-q to $5.53 billion in the third quarter of this year, Dubai-based management consultancy Alvarez & Marsal said in its UAE Banking Pulse report.
Net Interest Income (NII) rose 1.5% q-o-q, but growth was sluggish, driven by a 50 bps reduction in the CBUAE benchmark interest rate, and a drop in the loan-to-deposit ratio (LDR), the report said.
In Q3 of 2024, loans & advances (L&A) grew moderately (+3.5% q-o-q) and retail lending contributed the most to this growth with an increase of 4.9% q-o-q. Deposits increased at a faster pace (+3.9% q-o-q) mainly driven by higher time deposits (+5.6% q-o-q).
Consequently, LDR decreased by 0.3% points q-o-q. The benchmark interest rates were cut by 50bps by CBUAE in Q3 of 2024, however, the NII grew by 1.5% q-o-q. Higher non-interest income (+7.4% q-o-q) supported total operating income (+3.5% q-o-q).
Profitability was affected by higher impairment charges (+124.9% q-o-q) resulting in lower Net Income which declined 5.5% q-o-q. As a result, RoE and RoA contracted 223bps and 16bpsq-o-q, respectively.
“The UAE banks may witness some loan restructuring or refinancing as the year progresses. CBUAE continues to anchor its benchmark rate to the US FED and hence the monetary policy is expected to be expansionary,” the report said.
Challenges Persist
Oil economy continues to face challenges with price fluctuations and fallout of geopolitical developments in the region. Non-oil activities remain well supported by both private consumption and business investment.
In October this year, IMF revised its FY-2024 GDP growth outlook upwards to 4% from 3.5% projected in April 2024. FY-2025 growth outlook is also revised upwards to 5.1% from 4.2%
Strong growth is expected in non-oil sectors due to robust activity in the tourism, construction, manufacturing, and financial services along with steady crude prices sectors.
The UAE’s average Q3 of 2024 PMI further decreased to 53.9 compared to 55.1 in Q2 of 2024. Business activity and new orders increased at a slower pace, while input costs rose at the fastest pace in a year.
The US FED rates were cut by 50bps q-o-q to 4.75%- 5% levels during the quarter and lowered further by 25 bps to 4.50%-4.75% in its November meeting. FED is anticipated to lower interest rates to a range of 4.25%-4.50% by end of FY-2024.
CBUAE also lowered its base rate in line with Fed to boost business conditions amid easing inflationary pressures. EIBOR decreased by 16bps to 4.8% during Q3 of 2024.
Top 10 UAE Banks
The ten largest UAE banks in terms of assets are; First Abu Dhabi Bank ($330 billion), Emirates NBD ($260.28 billion), Abu Dhabi Commercial Bank $173.92 billion), Dubai Islamic Bank ($89.63 billion), Mashreq ($69.26 billion), Abu Dhabi Islamic Bank ($60.6 billion), Commercial Bank of Dubai ($38.17 billion), RAK Bank ($22.84 billion), Sharjah Islamic Bank ($20.36 billion), , and National Bank of Fujairah ($15.93 billion).
