GoDubai
  
  
  
  
Citylife > Press Release
  Home Contact us Add to Favourites
Most Recent Postings
More Press Releses
Featured Sections

Event Finder
A daily roundup of exhibitions, promotions and other events in Dubai and the rest of the Emirates.
Submit an Event
Latest Dubai Press Releases >>

 
  Share
  • Sector continues to perform well with higher profitability 
  • Bank loan growth picks up pace even as deposits fall 
  • Tightening liquidity expected in near to medium term over shrinking net interest margins (NIMs)
 
Dubai, United Arab Emirates - 20 June 2019:  Leading global professional services firm Alvarez & Marsal (A&M) today released its latest UAE Banking Pulse for Q1 2019, which shows that the UAE banks are generating healthy earnings despite tougher economic conditions. The fundamental theme in the three-month period ending March 2019 is a surge in profitability, underpinned by increase in loans and advances, and a stabilised yield on credit. 
 
After steady growth over the last 18 months, this trend was reversed in Q1 2019. The report finds that overall operating income has risen significantly from Q4 2018 driven by non-interest income, off-setting decrease in interest income. Decrease in cost-to-income-ratio (C/I) is in line with seasonal trends, driven by decreased quarterly costs and increasing quarterly revenues (lower costs compared to Q1'18 reflect the impact of cost cutting). 
 
Alvarez & Marsal's UAE Banking Pulse compares the data of the nine largest listed banks in the UAE, looking at the first quarter of 2019 (Q1 2019) against the previous quarter (Q4 2018).
 
The prevailing trends identified for Q1 2019 were as follows:
 
1. Loans and advances for the top nine banks grew at a faster rate (1.54 percent) than deposits, which was negative (-0.67 percent) after six consecutive periods of increase. Overall loans to deposit ratio (LDR) increased to 88.3 percent with eight of top nine banks in the LDR “green zone” of between 80 and 100 percent. Liquidity is expected to continue to be stable in 2019.
 
2. Operating income growth increased significantly on the back of a rise in non-interest income following increased lending activity
 
3. A downward trend of Net Interest Margin (NIM) continued in the quarter due to an increase in cost of funds, stabilised yield on credit, and rise in LDR. Six of the top nine banks witnessed a decrease in NIMs. Liquidity has tightened based on a decrease in deposits and an increase in cost of funds
 
4. Seven of the top nine bank' cost-to-income (C/I) ratio decreased from 33.5 percent to 31.5 percent, reversing last quarter's increase. This was due to the surge in operating income, combined with some banks reducing sales and general administrative costs. After a quadruple rise in 2018, the overall C/I ratio decreased.
 
5. The upward trend in cost of risk continues from Q4 2018. The climb is driven by a corresponding increase in net loan loss provisions, although four banks decreased their cost of risk. Coverage ratio continuing the downward trend.
 
6. Return on equity (RoE) maintained high levels despite the increase in cost of funds and a fringe increase in operating income. This resulted at the expense of stabilised yield on credit and increased adequacy ratio (CAR). Six out of nine banks exhibited an increase in RoE.
 
Alvarez & Marsal's report uses independently sourced published market data and 16 different metrics to assess the banks' key performance areas, including size, liquidity, income, operating efficiency, risk, profitability and capital.
 
The country's nine largest listed banks analysed in A&M's UAE Banking Pulse are First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank (Mashreq), Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Ras Al-Khaimah (RAK) and the National Bank of Fujairah (NBF). 
 
OVERVIEW
 
The table below sets out the key metrics: 
 

CATEGORY

METRIC

Q4 '18

Q1 ‘19

Size

Loans and Advances Growth (QoQ)

0.50%

1.54%

Deposits Growth (QoQ)

1.77%

-0.67%

Liquidity

Loan-to-Deposit Ratio (LDR)

86.4%

88.3%

Income & Operating Efficiency

Operating Income Growth (QoQ)

1.29%

3.09%

Operating Income / Assets

3.50%

3.55%

Non-Interest Income / Operating Income

29.4%

32.6%

Yield on Credit (YoC)

7.13%

7.12%

Cost of Funds (CoF)

2.12%

2.18%

Net Interest Margin (NIM)

2.51%

2.44%

Cost-to-Income Ratio (C/I)

33.5%

31.5%

Risk

Coverage Ratio

114.2%

110.1%

Cost of Risk (CoR)

0.80%

0.84%

Profitability

Return on Equity (RoE)

14.81%

15.56%

Return on Assets (RoA)

1.82%

1.91%

Return on Risk-Weighted Assets (RoRWA)

2.56%

2.69%

Capital

Capital Adequacy Ratio (CAR)

17.23%

17.39%

Source: Financial statements, investor presentations, A&M analysis

A&M Managing Director and Middle East Office Co-Head in the firm's Strategic Performance Improvement Practice, Dr. Saeeda Jaffar, was the lead author of the report. It was co-authored by A&M Head of Financial Services Asad Ahmed, along with Neil Hayward, Managing Director and Middle East Co-Head, who specialises in turnaround and restructuring.

Dr. Jaffar commented: “Overall the profitability for the UAE banks has increased. This stems from increased operating income, reduced costs and increased balance sheet leveraging, offset by an increase in cost of risk. This very much reflects the funding cost pressures that continue to impact the banks amid increased competition for deposits and tighter liquidity, consequently leading to lower net interest margins in Q1 2019.” 

“Whilst it is possible that liquidity could tighten in the coming months, we continue to maintain a balanced view towards the sector, with a focus on asset quality and improving profitability. The tightening could also help banks readjust business models now shaped by new financing-cost realities,” she concluded. 



Posted by : GoDubai Editorial Team
Viewed 5118 times
Posted on : Thursday, June 20, 2019  
Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of GoDubai.com.
Previous Story : United Arab Bank named CX Innovator at Genesys G-Summit Middle East 2019
Next Story : Emirates NBD highlights commitment to preserving marine biodiversity on World Ocean Day
Email this article Print this article

Share this article with your friends and followers
NewsVine

Comments

Back to Top  
Most Viewed Press Release posted in the last 7 days
Move Aside C-beauty, K-beauty and J-beauty - There's a New Trend in Town and It...
Inglot Cosmetics Partners With Cartoon Network for Limited Edition “The Powerpuf...
Autumn/Winter 19: Step out in the latest styles with City Centre Deira and City ...
Think LUNETTE for an earth-friendly period
ACE launches its new and inspirational Outdoor collection
Dress for Diwali With the Rack by Kachins
Restoration by Parmigiani Fleurier -The Yusupov Egg
Chain Reaction
Sandro Launches Evening Capsule Collection
‘A Gift of Gold' offers at Malabar Gold & Diamonds
Celebrate guilt-free shopping to your fullest!
Handbags and Gladrags
VAIO returns to Middle Eastern in partnership with Nexstgo
Eighth World Championship title in all categories for Tissot Ambassador Marc Marquez
Unifonic empowers business to capitalize on instant messaging apps to engage wit...
New Strategic Partnership with Hewlett Packard Enterprise to help accelerate Abu...
MBRU and King Saud University in Saudi Arabia join forces to enhance academic co...
His Highness Sheikh Hamdan Bin Mohammed Bin Rashid Al Maktoum Challenges the Cit...
Peugeot Boxer 4x4 Concept Revealed
Saudi Arabia's Ministry of Energy highlights enhanced cybersecurity credentials ...
Dubai Land Department welcomes Saudi Minister of Housing
Hazzaa AlMansoori Undergoes Medical Experiments at Stars City as part of His Sci...
During a press conference to announce the completion of preparations of Summit t...
Victoria Beckham Eyewear Debuts New Collection for Fall 2019
Team Abu Dhabi Stars Chase Double World Title Boost in China
Saif bin Zayed unveils first floating Smart Police Station
Al Tayer Motors launches New Ford Escort in the UAE
Headline: UAE all set for 10th edition of Annual Investment Meeting
The S Hotel Al Barsha reveals five new food and beverage offerings
Sofas for Lavish Lounging from 2XL Furniture & Home Decor
Save the Children Jordan launches TREE program “Transforming Refugee Education t...
Microsoft introduces team-empowering Surface Hub 2S to UAE market at GITEX Techn...
GITEX hosts global AI expert, international CEOs and honours retail, smart city ...
Leading public, private sector organisations line up to sponsor World Tolerance ...
Caparol Paints completes two decades of success, innovation and sustainability i...
Ajman Opens the Largest Private Academic Hospital in the Region
Dubai Cares unveils ground-breaking Early Childhood Development (ECD) solutions ...
Cambridge Assessment English witnesses a huge demand for OET (Occupational Engli...
Aquaplex with an eye on the future expansion of Specification sales, launches ne...
Halloween Celebrations at Le Meridien Dubai Hotel and Conference Centre
HE Hamad Obaid AlMansoori: Hazzaa has shown excellent health condition
Hazzaa AlMansoori reveals post flight details in a press conference
SCCI and UOS Announce Doubling of the Financial Value of Sharjah Chamber's Award...
du, NXN, & TELUS Health Collaborate to Optimise the UAE Healthcare Sector
Focus Softnet Launches its Artificial Intelligence Platform - AIFA at GITEX 2019
du, Nokia & SRTIP Sign a Strategic teaming Agreement to Bring Sharjah's Knowledg...
Hazzaa AlMansoori's return to the UAE is scheduled for Saturday 12th October
Nesma collaborates with Hytera for IoT-enabled mission critical communication te...
Ups Flight Forward Attains Faa's First Full Approval for Drone Airline
A new model for the ladies enriches the Corum AC-One collection with luscious fe...