UAE bank profits reflect strong economic growth

Bankers are by nature cautious folk, and this time last year UAE bankers warned that their 2003 financial results would probably fall short of 2002. With a war in Iraq in prospect and uncertainty in the air, this seemed a logical conclusion.

Happily 2003 proved not only to be another record year for bank profits in the UAE, but the fantastic growth rates of the early 1990s were not only maintained, they increased in some cases.

The National Bank of Dubai, for instance, posted a 40% hike in profits and gave shareholders a bumper 60% cash dividend, up from the 40% level of recent years.

Mashreqbank also weighed in with another great set of financials, and is about to join Emirates Bank Group as an issuer of international bonds. Even the plodders of the UAE banking sector have delivered good results for 2003.

What the bank results show is that the UAE economy is firing on all cylinders. There is a huge investment going into oil and gas infrastructure development in Abu Dhabi, and some $25-30 billion into real estate in Dubai.

This level of investment spurs economic growth at all levels, and the banks are picking up their share; from the opening of new accounts by the humblest expatriates to fees on commercial loans. There is no magic formula, apart from being based in the UAE.

The bank results are also an early indicator that GDP growth in the UAE may be well ahead of official forecasts which generally trail behind economic reality.

The reality is that the UAE is at the start of a major economic boom that will last a number of years, some say up to 2010. Nowhere else in the Middle East is enjoying the same level of investment, both domestic and foreign.

There are no prizes for guessing what the banks are saying about the prospects for 2004. But we have heard that line before. There is plenty more good news to come, and 2004 should be another outstanding year.