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Most UAE banks are expected to post higher net profit in the third quarter of 2022, supported by higher interest rates and lower provisions.
Their performance improved significantly in the first half of 2022 due to lower risk costs and higher interest rates. The central bank’s Targeted Economic Support Programme (TESS) has helped overcome risky lending pressures related to COVID-19, despite improved operating conditions due to higher oil prices and a modest recovery in the non-oil sector.
Most GCC central banks, including the UAE Central Bank, have reflected in a series of rate hikes by the Federal Reserve this year to curb inflation, widening banks’ net interest margins (NIM).
NIM is the difference between the loan interest income and the deposit payment. It is a key indicator of a bank’s profitability.
Bahrain investment bank SICO said in its third-quarter results preview that Dubai Bank will “report from a lower base for net interest margin expansion, while Abu Dhabi Bank is likely to report strong loan book growth supported by deposit accumulation” by Emirates Bank.
All UAE banks are expected to report “a modest rise to a fall in provisions”, SICO said.
SICO’s profit forecast for the UAE’s top banks is as follows:
Emirates NBD: Net profit was AED 3.16 billion, up 26% year-on-year, as lower provisions supported improved revenue.
Abu Dhabi Commercial Bank: Net profit was AED 1.58 billion, up 24% year-on-year, due to higher interest and fee income.
Abu Dhabi Islamic Bank: Net profit of AED 709 million, up 44% year-on-year, supported by higher fee income and lower provisions
Dubai Islamic Bank: Net profit was AED 1.49 billion, up 24% year-on-year, thanks to lower provisions and higher interest income.
However, Abu Dhabi First Bank, the UAE’s largest bank by total assets, is set to report a 25% drop in third-quarter net profit to AED2.88 billion, weighed down by a sharp drop in trading revenue.
(Reporting by Brinda Darasha; Editing by Seban Scaria)
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