Retail banking business in the UAE has endured a challenging economic environment, slow growth, margin pressures and persistent loan impairments for several quarters in the recent past.
In a positive turn of events, several major banks have posted good results in the first quarter of 2017 and lenders are optimistic about a revival of the banking sector in the region.
Abu Dhabi Commercial Bank (ADCB)
Abu Dhabi Commercial Bank (ADCB) on Sunday posted AED1.1 billion in net profit attributable to equity shareholders, marking an eight per cent increase from the AED1.02 billion recorded in the same quarter of 2016.
In a report released on the Abu Dhabi bourse, the bank said the rise in profits was driven by “healthy volumes and a strong non-interest income combined with a well-managed cost base.”
The bank’s profits for the first quarter come higher than analyst expectations, with the Bloomberg consensus at AED1.006 billion for net profits.
Impairment charges in the first quarter jumped ten per cent year-on-year to reach AED386 million amid a rise in impairments paid by banks across the UAE. The bank’s operating expenses remained almost flat year-on-year at AED740 million amid efforts to cut costs.
Meanwhile, ADCB’s net loans and advances rose six per cent in the first quarter to reach AED159.8 billion, as deposits from customers rose ten per cent year-on-year to reach AED162.4 billion. Customer deposit growth outpaced loan growth, resulting in a loan to deposit ratio of 98.4 per cent.
ADCB recorded a 16.1 per cent return on average equity, almost flat from the 16 per cent in the first quarter of 2017.
ADCB’s net interest income was almost flat in the first quarter of 2017 at AED1.41 billion, whereas net income from Islamic financing jumped 47 per cent year-on-year to reach AED221 million.
The bank’s results come amid consolidation in the banking industry, with two of Abu Dhabi’s largest banks, National Bank of Abu Dhabi and First Gulf Bank, having formally merged as of the beginning of April 2017.
Emirates NBD (National Bank of Dubai)
The first quarter results of Emirates NBD point to a strong start in the retail and wealth management (RBWM) business with a double digit year on year growth in total income, supported by a revival in asset growth and improved margins.
Suvo Sarkar, Senior Executive Vice President & Group Head — Retail Banking & Wealth Management at Emirates NBD said: “Our consumer business, in both retail banking and wealth management, grew by 10 per cent in the first quarter of 2017, beating our expectations. This growth is on the back of our growing market share in all customer segments, whether high net worth, mass affluent or small and medium enterprises (SMEs), and strong volume growth in all products, both liabilities and assets.”
The bank’s retail lending book grew about two per cent during the first quarter supported by growth in mortgages. While there has been a slowdown in auto loans as new car sales dropped, personal loans faced lower growth on account of low loan demand and cautious approach by banks.
Cards business is an area where the bank is witnessing a healthy double digit growth, and one in five dirhams in the UAE is spent today on an Emirates NBD debit or credit card. Fee income revenues, whether in foreign exchange, insurance or investments, are also witnessing an above-average growth rate. In the private banking business, flows of net new money continue to be very strong.
On the liability side of business, in the first quarter RBWM’s book continued to grow faster than the market, increasing by five per cent over the quarter, led by growth in low cost Current Account and Savings Account (CASA) balances.
Bank of Sharjah
Bank of Sharjah reported a net profit of AED58 million in the first quarter of 2017, down 28 per cent compared to AED81m for the same period of 2016.
Ahmad Al Noman, Chairman of the Board, said in a statement: “The net profit was affected mainly by an AED21m downturn in the market value of strategic investments, which is expected to be recovered during 2017. While it is too early to predict year-end figures, we expect a sustained performance to meet the budget of 2017.”
Net interest income and non-interest income decreased by seven per cent and 54 per cent respectively compared to the corresponding period of 2016. As a result, the bank’s net operating income declined 16 per cent to reach AED132m in the first quarter of 2017 compared to AED157m in the same period of 2016.
The bank’s total assets at the close of the first quarter of 2017 reached AED28.88 billion, an increase of four per cent over the corresponding period last year. Compared to year-end 2016, assets increased by seven per cent from AED27.09bn.
Loans and advances reached AED16.56bn, up eight per cent compared to the first quarter last year and down 3 per cent from year-end 2016. Customers’ deposits reached AED18.83 billion at the end of first quarter 2017, a decrease of two per cent over the corresponding quarter in 2016.
Net liquidity remains high at AED6.72 billion and capital adequacy ratio remains strong at 21.54 per cent at the close of the first quarter of 2017.