UAE banks to maintain steady growth
REVIVAL IN CREDIT DEMAND TO SUPPORT LOAN GROWTH ABOVE 5%
The UAE’s banking sector maintained steady growth in spite of volatility across global markets and regional challenges and it is expected to deliver strong profitability in this year and the year ahead, Abdul Aziz Al Ghurair, Chairman of UAE Banks Federation said on the sidelines of sixth annual Middle East Banking Forum yesterday |
The UAE’s banking sector maintained steady growth despite volatility across global markets and regional challenges and it is expected deliver strong profitability in this year and the year ahead, Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation said on the sidelines of the sixth annual Middle East Banking Forum in Dubai yesterday.
Al Ghurair expects the UAE banking sector to maintain loan growth in excess of 5 per cent this year. With most banks having cleaned up the legacy nonperforming assets from their balance sheets and improved asset quality, going forward he expects financial performance of banks to improve.
With economic growth starting to pick up again on the back of higher oil prices and production, as well as increased government spending, Al Ghurair said banks are seeing a revival in credit demand from corporates, government and government related entities (GREs), although overall retail loan growth is expected to remain anaemic.
A recent forecast by the Institute of International Finance has pegged the sector-wide loan growth above 6 per cent. The 12-month increase in credit was 3.7 per cent, thanks to improvement in lending to the corporate sector and in deposits 8.4 per cent in September 2018. The acceleration in deposits growth was mainly to the substantial increase in government deposits in the banking system.
Rating agencies and independent analysts confirm a steady revival in the financial performance of UAE banks, thanks to rising interest rates and the improving macroeconomic conditions in the country.
Al Ghurair said improvement in UAE banks’ profitability was driven by higher loan yields and shrinking provisions.
Rating agency Moody’s expects rising interest rates will increase banks’ gross yields as they gradually re-price their loan books. Loans to the corporate and government sectors account for the bulk (74 per cent as of last June) of UAE banks’ loan books.
The Middle East’s banking industry is gaining pace in technology adoption and is catching up with the rest of the world in digitisation, according to experts speaking at the sixth annual Middle East Banking Forum in Dubai yesterday.
Industry leaders said the future of the industry will be more digitised with mobile banking, faster payments and open banking APIs becoming the norm than an exception.
The Forum organised by the UAE Banks Federation (UBF), featured global and regional banking industry experts, regulators and technology innovators.
“The enthusiastic participation of industry regulators, experts and executives is a true reflection of the industry stakeholders’ unwavering commitment to come together and contribute to ongoing efforts focused on futureproofing the regional banking sector,” said Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation.
While the banking sector across the world and in the region is focusing on technology transformation, experts said the adoption of new technologies is no more an option; rather, it has become an imperative for banks and increasingly banks and financial institutions are transforming into technology companies.
Survival strategies
“Embracing change and revisiting business models will become imperative for traditional banks to survive amid the rise of digital technologies, increasing competition from new non-bank entrants and shifting customer demands,” said Brett King, best-selling author of Bank 2.0 and Bank 3.0, and founder and CEO of mobile bank Moven.
Offering a central banker’s perspective on forthcoming
disruptions, opportunities and challenges, Olli Rehn, Governor of the Bank of Finland and Member of the Governing Council for the European Central Bank (ECB) highlighted in his keynote address how the financial industry is going through a major transformation driven by the emergence of new technologies. “The pace at which changes are happening in the industry, it is crucial to find the right balance between regulation and innovation in order for consumers and banks to benefit from new possibilities,” said Rehn.
Going through the current rapid pace of changes, industry experts said banks should work towards a financial architecture that supports sustainability in the economy.
“Sustainable finance is increasingly becoming important and lenders and investors must contribute to local and international efforts towards creating a more sustainable global economy by incorporating environmental, social and governance principles into their decision-making,” said Daniel Klier, Group Head of Strategy and Global Head of Sustainable Finance, HSBC.