30/11/2017 07:52 AST

Leading UAE banks have reported robust improvement in performance with overall profitability and return on equity (RoE) higher in the third quarter of 2017, according to an analysis of key performance metrics by global professional services firm Alvarez & Marsal (A & M). Almost all of the metrics applied by A & M in their analysis have risen quarter on quarter, suggesting that banks have successfully adapted to the market conditions created by a lower oil price environment, growing their loan books and are continuing to manage their costs sensibly.

The UAE Banking Pulse report analysed quarterly data of the 10 largest listed UAE banks in the third quarter of 2017 against the second quarter of 2017, and identifies prevailing trends throughout the intervening period.

The report uses independently-sourced published market data and 16 different metrics to assess the key performance areas including size, liquidity, income, operating efficiency, risk, profitability and capital.

The banks analysed include 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), Union National Bank (UNB), Commercial Bank of Dubai (CBD), National Bank of Ras Al-Khaimah (RAKBank), and the National Bank of Fujairah (NBF).

The underlying theme this quarter is a rise in profitability, on the back an increase in loans and advances, and a rise in yield on credit. The result was higher levels of interest income and, with costs remaining steady and a lower cost of funding, banks saw higher returns on equity.

“The return to growth which we previously anticipated has now started to be seen, as banks have steadily adapted to the new normality of the current oil price environment. The housekeeping measures which we saw many banks implement last year were on the back of fears that the operating environment would worsen significantly, but it has not turned out to be as bad as was expected,” said Dr. Saeeda Jaffar, a managing director of A & M.

Loan-to-deposit ratio

Loans and advances (L & A) for the top 10 banks grew at a faster rate of 1.26 per cent than deposits at 0.6 per cent, meaning that 8 of the top 10 banks increased their loan-to-deposit ratios. Operating income growth increased on the back of a rise in interest income following increased lending activity; all 10 banks reported growth in interest income.

Net interest margin (NIM) of these ten banks increased from 2.52 per cent to 2.61 per cent on the back of an increase in yield on credit and improved loans to deposit ratio, and also driven by the rise in interest rates; 8 of the top 10 banks improved their NIM.

Yield on credit increased by 8 basis points (bps) in the third quarter compared to the second quarter due to recent rise in interest rates.

Banks’ cost-to-income ratio remained relatively flat from 32.9 per cent to 32.8 per cent, as banks continued to manage their cost bases sensibly; 7 of the top 10 banks reduced their C/I compared to the second quarter of 2017. Overall cost of risk declined, driven by lower provisioning and increased loan portfolios, although four banks actually increased their cost of risk. RoE increased as a result of higher levels of interest income and increased income margins and leverage.


Gulfnews

Ticker Price Volume
SABIC 114.77 5,915,941
Saudi Public Investment Fund signs agreement with Six Flags to create amusement park in Riyadh

05/04/2018

Saudi Arabia's Public Investment Fund (PIF) has signed an agreement with Six Flags to develop and design an amusement park in Riyadh. Six Flags, the world’s leading international amusement park compa

Arab News

Green energy drive will boost KSA employment: Saudi Arabia’s renewable energy chief

05/04/2018

In an exclusive interview with Arab News, Turki Mohammed Al-Shehri explains how an expanding renewables industry will boost employment as well as pave the way for a greener future.

A massiv

Arab News

Dubai house prices, rents drop in first quarter of 2018

05/04/2018

Dubai’s residential property market continued to soften in the first three months of this year, in line with analysts’ forecasts, with rental values recording a more pronounced fall than sales prices

The National

Saudi Arabia lifts GCC index buoyed by strong oil prices

05/04/2018

Buoyed by a strong oil price of $70 per barrel, Saudi Arabia’s Tadawul shot up by over 6 per cent in March 2018, according to Kuwait Financial Centre’s (Markaz’s) recently released Monthly Markets Re

Times of Oman

Banks’ real estate credit at QR147.7bn

05/04/2018

Qatar banks’ combined credit facilities to real estate sector rose by QR17bn to QR147.7bn in 2017. The banks’ credit to various sectors stood at QR911bn at the end of 2017, up from QR839bn recorded i

The Peninsula