By Sarah Townsend
Emirates NBD and others saw encouraging interest income despite pressures
The four largest banks in the UAE will see robust profits in the next 12 to 18 months despite pressure on fees and commision income, a Moody’s report states.
Moody’s Investors Service said First Abu Dhabi Bank (FAB), Emirates NBD, Abu Dhabi Commercial Bank and Dubai Islamic Bank reported a combined net profit of AED6.7 billion ($1.8 billion) in the second quarter of this year – driven by higher net interest income.
Aggregate net profitability was broadly flat versus the same quarter in 2016, but fell 3.5 percent quarter-on-quarter, also partially driven by a decline in fee and commission income, Moody’s said.
However, the report forecast that profitability at the four banks would remain “solid” through 2018 as the economic climate improves.
Nitish Bhojnagarwala, a vice-president at Moody’s: “Profitability was supported by higher yields on loans and stable funding costs, which drove higher net interest income, despite sluggish economic growth due to current oil prices.”
He added: “Operating expenses across the four banks were down by 6 percent relative both to the previous quarter and to the second quarter 2016.
“Over the next 12 to 18 months, we expect broadly stable cost to income ratios as the banks continue to invest in technology offsetting cost-cutting gains.”
The report noted that provisioning charges at the banks showed a “mixed trend”, with Emirates NBD and FAB showing improving pattern, while ADCB and DIB posted weakening trends.
“We expect a modest rise in provisioning charges in the coming quarters, driven by the sluggish economic growth,” added Nitish.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.