Khaleej Times, Aug 8, 2022 | Muharram 10, 1444
FAB, ENBD rank among top five Mideast lenders as assets of 22 UAE banks hit Dh3.023t
First Abu Dhabi Bank and Emirates NBD, the two largest banks of the UAE, are
ranked among the top five lenders in the Middle East, according to Forbes’ list
of Top 30 Banks 2022 in the region.
As of June 28, 2022, the 30 banks in the Middle East had a total market value of
$586.6 billion and assets worth $2.5 trillion. Gulf banks dominate this year’s
ranking, with 25 out of the 30 based in the GCC. Saudi Arabia and the UAE are
the most represented countries on the list, with 10 and seven banks,
respectively. Qatar follows with four banks, while Morocco has three. Kuwait
follows with two banks, and Egypt, Bahrain, Jordan, and Oman with one each.
According to the latest statistics released by the UAE Central Bank (CBUAE),
total assets of the 22 national banks in the UAE rose to Dh3.023 trillion in the
first five months of 2022, up four per cent (Dh117.3 billion). Assets of
national banks accounted for 87.8 per cent of gross banking sector's assets of
Dh3.442 trillion by end of last May, against 12.2 per cent for foreign banks.
Assets of the 37 foreign banks in the country rose 2.22 per cent (Dh9.1 billion)
to Dh419.4 billion by end of May from Dh410.3 billion in May 2021. In the first
five months of the year, foreign banks' assets grew by Dh3.9 billion or 0.94 per
cent.
In the first half of 2022, all major UAE banks recorded strong earnings on the
back of improving business confidence and conditions in spite of geopolitical
challenges, global recession fears, inflation concerns and economic slowdown of
major economies.
While First Abu Dhabi Bank (FAB), the largest UAE bank by total assets, reported
a 50 per cent jump in first-half net profit to Dh8 billion despite heightened
global market volatility, Emirates NBD, the second largest lender in the
Emirates, reported its highest first-half profit since lender, Abu Dhabi
Commercial Bank posted a 21 per cent increase in first-half net profit to
Dh3.059 billion.
Following a strong first -half, large banks in the UAE anticipate further
improvement in their net interest margins over the course of 2022. FAB saw its
NIM improve in the first quarter to 1.34 per cent from the year-ago 1.21 per
cent, while Emirates NBD Bank’s NIM grew to 2.58 per cent from 2.46 per cent on
the back of an improved loan and deposit mix, according to S&P Global Market
Intelligence data. NIM is a profitability measure that compares interest
generated from loans with that paid out on deposits.
In the Forbes list, Qatar’s QNB Group tops with $300.3 billion in total assets
for the second consecutive year. The UAE’s FAB, Saudi’s Al Rajhi Bank, and Saudi
National Bank follow in a three-way tie for second place. Emirates NBD rounds up
the top five. Together, these five amassed $16.8 billion in 2021 profits,
constituting 49 per cent of the aggregate profits of the 30 banks on the list.
Fitch Ratings expects higher oil prices and rising interest rates to lead to
strengthening profitability for Saudi and UAE banks in 2022–2023. Fitch
calculates that a 200bp increase in interest rates would boost Fitch-rated Saudi
banks’ operating profit by 14 per cent, and their operating profit/risk-weighted
assets ratio by 50bp, on average, based on the banks’ 2021 interest-rate
sensitivities. For Fitch-rated UAE banks, the respective figures are 11 per cent
and 40bp.
During the last monetary tightening cycle in 2015–2018, the average net interest
margin (NIM) for Fitch-rated UAE banks contracted by 50bp, due to tight
liquidity conditions. However, liquidity conditions are considerably more
favourable this time, underpinned by the higher oil prices, and we therefore
expect UAE banks’ NIMs to widen in 2022–2023.
“We expect Saudi banks’ funding costs will ease due to SAR50 billion of
liquidity injections from the Central Bank of Saudi Arabia in June 2022, with
more likely to follow to support strong loan growth. UAE liquidity conditions
are more supportive, helped by modest loan growth. The contrast in liquidity
conditions is illustrated by the sector loan-to-deposit ratios, with the Saudi
ratio at its highest level for at least 15 years and the UAE ratio at its lowest
level for more than a decade,” the rating agency said.
— issacjohn@khaleejtimes.com