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The top 10 banks in the UAE report strong operational and financial performance in 2022, with a 31% rise in net profit, professional services firm KPMG said in a new report.
Cost-to-income ratios also improved by an average of 1.8% for the year, with banks maintaining adequate capital levels well above minimum regulatory requirements, according to KPMG’s annual UAE Banking Outlook report, which examines relevant themes and trends affecting the country’s banking sector.
The report also found that total banking assets rose 10.6 percent year-on-year, driven by strong growth in deposits, loans and advances.
With growing demand for digital financial services and rapid adoption of fintech solutions enhancing customer experience and industry competitiveness, the UAE banking sector has a promising outlook this year and is expected to hold a stable outlook until 2023, the report added.
Abbas Basrai, Partner and Head of Financial Services, KPMG Lower Gulf, said: “The UAE’s dynamic economy and its favorable business environment have attracted significant foreign investment, with banks benefiting from the UAE’s large pool of capital and high-net-worth clients being attracted. Factors contributing to the stability of the sector One of the main factors is the government’s commitment to regulatory reform. The measures taken by the UAE Central Bank to strengthen the governance framework have increased transparency and accountability.”
Increased compliance costs for banks to manage risks associated with regulatory reform are increasing, according to research by KPMG. From 2019 to early 2022, organizations in the Middle East will see a 63% increase in compliance team size. The UAE accounts for a significant portion of the projected total cost of financial crime compliance at $4.2 billion by early 2022 at $1.7 billion (40%). Compliance functions are expected to implement technology platforms to maintain and monitor regulatory obligations, enable compliance risk assessments, warn of potential non-compliance incidents, and allow action plans to be tracked.
As part of the research, KPMG partnered with social media analytics firm DataEQ to analyze the key drivers of consumer satisfaction at the UAE’s leading banks. Net sector sentiment improved from last year – based on 96,321 tweets tracked between 1 January and 31 December 2022 about seven UAE banks. The UAE banking sector has an industry value of -7.4%, which is 7 percentage points higher than the industry value of -7.4% last year -14.4%.
To compete in a dynamic environment, UAE banks are embarking on a digital growth strategy focused on cloud adoption; expected to deliver benefits including scalability, flexibility, faster time-to-value and cost-effectiveness. Consumer demand is also pushing banks to offer tech-enabled services beyond traditional banking. Banks in the UAE, especially large banking institutions, are exploring Metaverse as a new channel to deliver financial services to customers and connect with the larger banking ecosystem.
Customer service generates the most negative conversations on social media; the biggest pain points for customers are slow turnaround times, unresponsiveness, and staff capacity issues. The 2023 study identified downtime overtaking perceptions of business conduct as the biggest risk factor as customers complained about their inability to access online banking, mobile app failures and ATM malfunctions.
Fighting financial crime remains a major challenge for the banking industry, and the deployment of machine learning (ML) and artificial intelligence (AI) for financial crime detection is also expected to accelerate. Advances in technology and data will also lead to new approaches to know your customer (KYC) and customer due diligence (CDD) over the next decade. – trade arab news agency
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