UAE banks to record higher profitability and liquidity through 2018: Report
The banks’ cost to income ratio (C/I) improved
UAE banks continue to perform well, with higher levels of profitability and liquidity is expected to remain healthy for the remainder of 2018, according to Alvarez & Marsal.
The report shows that deposits grew at a similar rate (1.41 per cent) as loans & advances (L&A) (1.53 per cent), resulting in a stable loan-to-deposit (LDR) ratio for Q1 2018 with nine of the top 10 banks in the LDR green zone of between 80 per cent and 100 per cent.
The banks’ operating income growth declined from 3.46 per cent in Q4 2017 to -1.37 per cent in Q1 2018 along with non-interest income, which decreased from 31.0 per cent in Q4 2017 to 29.9 per cent in Q1 2018.
Despite a rise in yield on credit, driven by an increased cost of funds net interest margin (NIM) declined with five of the top 10 banks witnessed a decline.
The banks’ cost to income ratio (C/I) improved falling from 34.2 per cent to 32.3 per cent driven by a decrease in operating expenses of 45 basis points (bps), this reversed last quarter’s increase and continued the trend from previous quarters.
The country’s 10 largest listed banks analysed in A&M’s UAE Banking Pulse are First Abu Dhabi Bank, Emirates NBD as well as Abu Dhabi Commercial Bank, Dubai Islamic Bank and Mashreq Bank.
Additionally, the list also includes Abu Dhabi Islamic Bank, Union National Bank, Commercial Bank of Dubai as well as National Bank of Ras Al-Khaimah and the National Bank of Fujairah.
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