UAE banks’ gains ‘fantastic’, set to grow 5% in H2
dubai — Banks in the UAE will post profit growth of around five per cent in the second half of 2017, similar to the first six months as bad loans ease, the head of a local industry group said.
Of the five major banks to publish earnings this quarter, four have reported improved profits thanks to higher net interest income and lower impairments for some of them.
“If you look at the bank results that have come in so far, collectively there is a growth of five per cent,” said Abdulaziz Al Ghurair, chairman of the UAE Banks Federation and chief executive of Mashreq, Dubai’s third-largest lender by assets.
“Despite what you see all around us, if you compare it to the rest of the world, this is a fantastic result,” he added.
Lenders have been adjusting to lower oil prices since June 2014,
The whole economy, the government and the banking industry has accepted the oil price will be around $50, so they have to live with that and is part of their planning Abdulaziz Al Ghurair, Chairman of the UAE Banks Federation
which has moderated double-digit profits and pushed up bad loans for some lenders.
“The whole economy, the government and the banking industry has accepted the oil price will be around $50, so they have to live with that and is part of their planning process,” he said in an interview.
He said banks had set aside full coverage for bad loans in the form of provisions , adding that acted as a “shock absorber” for the banking sector. “We can handle a tough economy but we don’t see it coming in,” he said. The level of business people fleeing the country with unpaid debt had improved dramatically and the level of provisions banks would take in 2017 would likely be around half the level of the previous year, said Al Ghurair.
Economic activity has improved since 2015, when low prices for oil and other commodities and a strong dollar heightened problems for some small businesses. In response, the UBF set up a panel to help struggling business people renegotiate their debt with banks.
As a result of the problems facing SMEs, banks were a lot more cautious about lending to such businesses and had raised their lending standards, he said.
The Central Bank of the UAE last month ordered local banks to stop dealing with the 59 individuals and 12 entities with alleged links to Qatar, as well as applying enhanced due diligence for any accounts they hold with six Qatari banks. —