Rosy outlook for the rest of 2018 anticipated by UAE Banks Federation

The UAE’s banking system was “strong and robust” in 2017, with a further uptick in growth expected next year due to rising economic momentum in the country, the UAE Banks Federation said in its latest annual report.

The UAE economy expanded by 1.5 per cent in 2017 due to continued economic diversification, higher government spending as oil prices lifted, and growth in global trade, the federation said in its report.

This had a positive impact on consumer confidence and government deposits and buoyed UAE banks.

Last year was “remarkable... for us,” said Abdul Aziz Al Ghurair, chairman of the UAE Banks Federation, in his foreword to the industry body’s 2017 annual report on Wednesday. “Banks were well capitalised and comfortably liquid, reporting a healthy growth in deposits and a moderating growth in credit and improvement on a number of performance metrics.”

Next year is likely to be another “exciting” year for the UAE banking sector. “Anticipated higher oil prices, VAT revenues, further diversification of the economy and the build-up to Expo 2020 Dubai will lead to a better government fiscal position, higher investments and spending to further drive the economy,” Mr Al Ghurair, who is also chief executive of Dubai’s Mashreq Bank, said.

Banks across most of the GCC are expected to see improved financial performance in 2018 due to an uptick in the regional economy, analysts have said.

In March, Mr Al Ghurair forecast loan growth of 5 to 6 per cent on aggregate for banks in the UAE, compared to 4 per cent in 2017.

The profitability of UAE banks is likely to exceed the growth in 2017 compared with 2016, as lenders reduce the amount of non-performing loans that piled up during the SME debt crisis after the 2014 oil crunch, he said at the time.

The profitability of the top 10 UAE banks increased 6.6 per cent year on year in 2017 while the liquidity ratio improved by 1.3 per cent from 2016 to reach 33 per cent, according to UBF’s annual report.

The federation’s annual report highlighted initiatives it undertook last year.

Among these were the launch of Tasharuk, a cybersecurity intelligence system to counter cyber risks and threats; a compliance assessment to measure banks’ scores across key strands of global anti-money laundering regulations, and an ethical selling framework to encourage more ethical sales practices for banking products, the report said.

In addition, the report included key findings from the Federation’s annual Trust Index survey, already published, which found that 68 per cent of respondents said they had high levels of trust in the UAE banking sector.