UAE Listed Banks Record Highest Deposit Growth in Q1-2024

The UAE-listed banks recorded the highest deposit growth in the first quarter of 2024 among the GCC banks, which grew by 5.6% y-o-y to $803.2 billion, Kuwait-based investment and research firm Kamco Invest said.

In its latest report on GCC banking sector for the month of May, Kamco Invest said that the total customer deposits for listed GCC banks hit a record $2.45 trillion in the first three months of 2024 compared with $2.4 trillion in the previous quarter.

The report, citing data from the central banks in the region, also said that lending by the UAE banks grew 2.7% y-o-y to $568.4 billion, the second highest in the GCC, despite higher borrowing costs, after Saudi Arabia’s banks, which saw a 3.5% increase to $689.7 billion.

The GCC listed banks’ lending grew 8.1% y-o-y, reaching $2.02 trillion in Q1 of 2024, while aggregate net loans reached $1.92 trillion after a sequential growth of 2.3%, the report noted.

Gross credit in the UAE banks grew by 1.1% in the first two months of 2024, reaching $540 billion by the end of February. This growth was driven by an increase in domestic credit, which offset a decline in foreign credit in February, reversing the trend from January when foreign credit rose and domestic credit was flat, the report said.

The UAE-listed banks also led the region in return on equity (RoE) during the quarter, achieving a RoE of 16.9%, with Saudi and Qatari banks following at 12.8% and 12.7%. This marks the largest y-o-y RoE increase, driven primarily by increased income and a relatively smaller rise in total shareholders’ equity.

GCC Region                       

The GCC banking sector as a whole maintained stable bottom-line performance, showing q-o-q growth of 11.8% and a y-o-y growth of 10.5%, reaching $14.4 billion in Q1 of 2024.

However, elevated interest rates impacted GCC banks for the first time in 12 quarters during the quarter, with both interest income and non-interest income declining, according to the report. The total interest income was flat at $50.5 billion, with a 4.3% yield on credit. The total bank revenue for GCC-listed banks also dropped to $31.4 billion during the quarter, the first decline since Q1 of 2021.

The banks in the region also face higher cost of funding in the local market forcing them to look at international markets for debt issuance. A report from Fitch showed that coupon on Saudi banks’ five-year senior unsecured issuance averaging at 5.1% which is well below the three-month SIBOR rate of 6.2%.

Data on fixed income issuance showed regional banks/financial services companies issuing $24.5 billion in US Dollar denominated bonds/sukuk during the first four months of 2024 as against $32.9 billion for the full year 2023 and $16.4 billion in 2022.

The issuances were aimed at financing the steady growth in investments and infrastructure developments plans in the region by diversifying funding sources, the report said.