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Large UAE banks post solid profitability

The five banks reported a solid combined net profit of AED6.8 billion ($1.8 billion) in the fourth quarter of 2016, despite a decline in UAE’s non-oil real gross domestic product (GDP) growth to 2.5 percent in 2016 from a 2012 peak of 6.4 percent, weighed down by weak oil prices. (Reuters)
JEDDAH: The five largest banks in the United Arab Emirates (UAE) posted solid profitability in the fourth quarter of 2016, said a report published by Moody’s Investors Service.
The five UAE banks are Emirates NBD PJSC, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, First Gulf Bank and Dubai Islamic Bank PJSC.
“We expect the five large UAE banks’ core profitability to remain solid over the next 12-18 months,” says Nitish Bhojnagarwala, assistant vice president at Moody’s.
“However, we anticipate pressure from rising funding costs as liquidity continues to tighten, and as banks increase their reliance on wholesale funding,” he added.
The five banks reported a solid combined net profit of AED6.8 billion ($1.8 billion) in the fourth quarter of 2016, despite a decline in UAE’s non-oil real gross domestic product (GDP) growth to 2.5 percent in 2016 from a 2012 peak of 6.4 percent, weighed down by weak oil prices.
“This performance was underpinned by higher fee and commission income from retail and corporate lending services. Overall, the core operating income was stable when compared with Q4 2015 and 2 percent higher versus Q3 2016,” said Bhojnagarwala.
This helped offset a modest increase in operating expenses as well as higher funding costs, which rose to 1.2 percent from 0.9 percent a year earlier due to tightening liquidity conditions.
Impairment charges were also lower for most of the peer group in the fourth quarter, as previous significant increases in loan loss coverage ratios have resulted in adequate financial buffers.
“We expect a rise in impairment charges in 2017, however, driven by the continued economic slowdown,” added Bhojnagarwala.
Overall net profitability in the fourth quarter of 2016 was 2 percent lower than in the third quarter of the same year, and down 5 percent from the fourth quarter of 2015, largely driven by decline in “other” income, including one-off gains, dividends from investments, and other non-recurring income.
JEDDAH: The five largest banks in the United Arab Emirates (UAE) posted solid profitability in the fourth quarter of 2016, said a report published by Moody’s Investors Service.
The five UAE banks are Emirates NBD PJSC, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, First Gulf Bank and Dubai Islamic Bank PJSC.
“We expect the five large UAE banks’ core profitability to remain solid over the next 12-18 months,” says Nitish Bhojnagarwala, assistant vice president at Moody’s.
“However, we anticipate pressure from rising funding costs as liquidity continues to tighten, and as banks increase their reliance on wholesale funding,” he added.
The five banks reported a solid combined net profit of AED6.8 billion ($1.8 billion) in the fourth quarter of 2016, despite a decline in UAE’s non-oil real gross domestic product (GDP) growth to 2.5 percent in 2016 from a 2012 peak of 6.4 percent, weighed down by weak oil prices.
“This performance was underpinned by higher fee and commission income from retail and corporate lending services. Overall, the core operating income was stable when compared with Q4 2015 and 2 percent higher versus Q3 2016,” said Bhojnagarwala.
This helped offset a modest increase in operating expenses as well as higher funding costs, which rose to 1.2 percent from 0.9 percent a year earlier due to tightening liquidity conditions.
Impairment charges were also lower for most of the peer group in the fourth quarter, as previous significant increases in loan loss coverage ratios have resulted in adequate financial buffers.
“We expect a rise in impairment charges in 2017, however, driven by the continued economic slowdown,” added Bhojnagarwala.
Overall net profitability in the fourth quarter of 2016 was 2 percent lower than in the third quarter of the same year, and down 5 percent from the fourth quarter of 2015, largely driven by decline in “other” income, including one-off gains, dividends from investments, and other non-recurring income.

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