UAE’s top four banks expected to maintain profitability

The UAE’s top four banks have performed well in the second quarter of this year on the back of higher net interest income and lower provisioning for bad loans and are forecast to maintain “stable” profitability into 2019, according to a new report.

First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank and Dubai Islamic Bank posted a combined 21 per cent year-on-year increase in second quarter net profit to Dh8 billion, Moody’s Investors Services said in a report released yesterday.

“We expect core profitability for the large UAE banks to remain broadly stable over the next 12-18 months, as interest earnings hold steady at current levels,” said Nitish Bhojnagarwala, vice president – senior credit officer at Moody’s.

The four lenders posted higher profits in the second quarter due to a 10 per cent year-on-year increase in net interest income as banks repriced loans in the wake of interest rate increases.

Banks also recorded a 27 per cent year-on-year drop in loan loss provisions, Moody’s said.

Operating costs increased 8 per cent year-on-year as lenders invested more in technology.

The banks’ cost to income ratio was stable at 30 per cent in the second quarter and is likely to remain so over the next 1218 months “as their technology investments begin to yield results.”