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)
Updated 14 February 2017
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Large UAE banks post solid profitability

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.


Pak rupee remains under pressure against dollar

Updated 4 min 5 sec ago
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Pak rupee remains under pressure against dollar

  • Exchange companies are required to maintain record of all buy and sell transactions equivalent to $500
  • Dollar supply declines from $3m per day to only $1m as buyer and seller decline to share identification data

KARACHI: The Pakistani rupee remains under pressure against the US dollar in the open market as insufficient dollar inflows couple with further devaluation rumors, currency dealers and analysts say.
“People think that in the coming days the Pak rupee will be further under pressure due to the increasing demand for the dollar, so they start buying, anticipating a dollar shortage,” said Zeeshan Afzal, executive director-research at Insight Securities, referring to the recent hike in the value of greenback against the Pak rupee. which touched PKR119.05 ($1.03) on Friday and closed down at PKR118.70 on Saturday in the open market.
“Perception and real need (demand) drives the currency exchange market in both ways,” Afzal told Arab News.
“In Ramadan the inflow of remittances has declined, demand for the dollar from those going for Umrah has increased,” Muzamil Aslam, senior economist and CEO of EFG-Hermes Pakistan said.
Dr. Miftah Ismail, finance minister of Pakistan, has repeatedly denied further devaluation of the national currency, which has been devalued twice up to 10 percent recently.
However, Aslam believes the rupee will be further devalued, and he sees no way out of the current situation.
Another reason for the weak Pak rupee is that Pakistan’s historic high current account deficit of $14 billion due to increasing imports, insufficient exports, workers’ remittances and other official inflows to create supply-demand equilibrium.
Demand usually comes from the public, investors and importers, Afzal said. “As our imports are more than our exports and other foreign exchange inflows, the pressure on the US dollar keeps mounting.”
Pakistan is also taking steps against money laundering as part of its international commitment to combat terror financing ahead of the Financial Action Task Force meeting in June when Pakistan will be gray-listed.
As part of the measures, the State Bank of Pakistan recently directed exchange companies to maintain a record of the identification documents such as Computerized National Identity Card, National Identity Card for Overseas Pakistanis or passport for all buy and sell transactions in foreign currency equivalent to $500, a minimum threshold in the world.
“The move of the State Bank of Pakistan is aimed at documenting the transactions in order to discourage terror financing, etc,” Afzal said, dispelling the impression that pressure on the dollar was due to the central bank’s initiative.
However, foreign exchange dealers claimed that the decision of State Bank of Pakistan to reduce the threshold from $2,500 to $500 for identification purposes has negatively affected the business of registered exchange dealers.
“Our daily surplus supply of the dollar was around $3 million per day until a week ago, when the central bank’s measures were not enforced,” Malik Bostan, president of the Forex Association of Pakistan, told Arab News. “The supply is now down to only $1 million per day as the currency exchange business has shifted to unregistered dealers.
“There are around 30,000 unlicensed currency dealers all over Pakistan,” Bostan claimed, adding that most buyers and sellers don’t want to share their identification and choose to go to unregistered dealers.
“We have asked the central bank to come up with necessary laws to protect registered currency dealers,” Bostan said.
“Despite facing an adverse business situation, we have assured our support to the central bank to take whatever steps are needed to get Pakistan off the gray list of FATF,” Bostan ensured.
He said that the pressure on the dollar was unusual in the month of Ramadan as increased inflows of the dollar are traditionally witnessed during this period.