RIYADH: The banking sector in United Arab Emirates (UAE) witnessed a record 35 percent growth in net profits to 18.3 billion dirhams ($4.98 billion) during the first quarter of the current year (2023), global professional services firm Alvarez & Marsal mentioned in its report.
The report maintained that the surge in profitability resulted from lower impairment charges, improved cost efficiencies, and increased non-core income.
UAE Banking Sector in Coming Quarters
Commenting on the progress, Managing Director and head of the Middle East financial services at Alvarez & Marsal Asad Ahmad said that this was a robust quarter for the banks in UAE, expecting that the sector would hopefully maintain (with 2.8 percent net interest) gains with the current pace till the end of the year.
“Stable NIMs, lower impairments improving, and cost efficiencies have led to record profits for the banks in Emirates in the current quarter, although we witnessed mixed progress by some banks on the margin front,” he said.
NIM (Net Interest Margins) explains the amount of money a bank earns in interest on loans against the amount it pays in interest on deposits. It is one of the critical indicators of the profitability and growth of a bank.
Amid monetary tightening, the banking sector witnessed a 6.2 percent growth in deposits and a 2 percent increase in loans and advances.
Customer deposits mobilization assisted in performing in a better way the increase in deposits for the first time since the first quarter of 2022, reaching above 43 percent, according to the report.
In addition, the aggregate net interest income of banks in the UAE increased by 0.4 percent quarter on quarter.
According to the report, banks reported higher profitability as return on equity improved by 5.9 percent quarter on quarter to 19.3 percent, and the return on assets also moved to 2.2 percent, reflecting progress not observed in the past four years.
The report also listed the top 10 banks in the UAE, comprising First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, Mashreq Bank, and Dubai Islamic Bank.
