SHARJAH, 23 January 2005 — Commercial banks in the UAE are seen to have performed beyond expectations during the year 2004. Definite annual figures have not been released, but reports quoting senior banking sources in the local press indicate that all banks increased their turnover as well as net profits.
An indication of the high profitability of banks in the UAE is seen in the record dividend offered by three banks to stockholders. The three – Mashreqbank, Commercial Bank of Dubai and Emirates Bank — have announced a record 45 percent dividend for shareholders.
While Mashreqbank’s board has recommended a cash dividend of 35 percent and a stock dividend of 10 percent, Emirates Bank board has recommended a 20 percent cash payout and a 25 percent stock dividend. The Commercial Bank of Dubai has proposed to distribute dividend of 45 percent, on paid-up capital of Dh545.64 million.
The indicative figures also show that banks increased their revenues from fee and investments rather than interest-related activities. An example is Mashreqbank, which had a fee- and commission-related income of about Dh850 million, almost 50 percent of the total revenue it reported during 2004, said a report in Gulf News. Another is the Emirates Bank, which recorded a relatively low figure in the growth of value of its assets while it posted a three-fold increase of that figure in net profits. According to the reports: Mashreqbank posted a 25 percent growth in its net profit to Dh751.1 million.
• Emirates Bank raised its earnings by 57.4 percent to Dh972 million and the bank’s net profit could be the second largest in the UAE banking sector for 2004. The bank posted an increase in the value of assets by 19.3 percent to Dh38.06 billion, while its net profit grew almost three times faster by 57 percent.
• The Commercial Bank of Dubai improved its net profits by 28 percent to Dh351.1 million.
• The National Bank of Abu Dhabi boosted its net profits; no figures have been cited yet, but indications are that its profit would be around Dh1 billion.
• The Abu Dhabi Commercial Bank is likely to post a 10 to 15 percent increase in profits for 2004 in the range of Dh500 million.
• The First Gulf Bank (FGB) has more than doubled its 2003 net profit to Dh244.9 million for 2004. Abdul Aziz Al-Ghurair, CEO of Mashreqbank, told Gulf News: “The economy is in good shape. Government policies are congenial to further growth in the country. Our GDP is set to grow by about 6 percent in the coming years too.”
In a year-end assessment, Standard & Poor’s Ratings Services has said that the creditworthiness of the banking system in the UAE reflects a solid financial profile and improved banking regulation.
“The five largest banks, which make up about one-half of the system, are highly profitable, due to high interest margins, increasing business volume, and low operating costs,” it said.
“They generally have strong financial profiles characterized by a high level of retail deposits, good liquidity, and high capitalization.” The 21 locally incorporated and 25 foreign banks of the UAE banking system make it the second largest in the Gulf after Saudi Arabia, with total assets of Dh367 billion as of Dec. 31, 2003. Updated figures for 2004 are not available.
