Gulf News

UAE bank results highlight recovery

Banks and economy to mutually support post-Covid rebound in the country

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The health of the banking system in a country is a key indicator of its overall economic outlook. The resilience of the UAE’s banking sector during the pandemic and the steady recovery in key performanc­e metrics point to the healthy fundamenta­ls of the sector backed by a sustainabl­e operating environmen­t. With the third quarter 2021 results trickling in, there are clear indication­s that the UAE banks have left the worst behind and are entering a period of healthy growth in assets and profits.

Last week, Emirates NBD, one of the leading banks in the country, reported a net profit of Dh7.3 billion for the nine months of 2021, up 29 per cent year on year. A similar trend was also seen in the financials of Emirates Islamic, with a 358 per cent growth in 9-month profits and Sharjah Islamic Bank reporting a 30 per cent increase.

Rising optimism

The overall trend in the bank results in the last three quarters indicate a gradual pick up in loan growth supported by recovery in both consumer demand and investment demand.

There are clear signs of risk appetite and optimism gaining traction with some of the high frequency economic indicators such as retail sales, real estate transactio­ns, rising demand for travel, tourism and leisure activities showing gains in recent months.

The latest UAE Purchasing Managers’ Index (PMI) data show a robust improvemen­t in business conditions. While private sector activities are on the rise with a marked rise in demand from all key sectors, Expo 2020 is working as a catalyst in recovery and sentiment elevator.

While the healthy banking system in the UAE is supportive of the growth momentum in the economy, banks too are gaining from the underlying strength of the operating environmen­t.

There has been a steady decline in loan loss provisions over the past four quarters, thanks to the huge advance provisions the banks booked in the early days of the pandemic, the liquidity support the banks received from the Central Bank of UAE (CBUAE) and the improving economy.

While the CBUAE is set for a gradual withdrawal of its direct liquidity support and regulatory forbearanc­e measures, a healthy economy and a robust banking system will undoubtedl­y remain mutually supportive to the economic growth momentum.

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