Dubai, UAE – UAE banks experienced a significant surge in profitability during the first quarter of 2023, according to the latest United Arab Emirates (UAE) Banking Pulse report released by global professional services firm Alvarez & Marsal (A&M).
The report highlights a 35 percent increase in profits compared to the previous quarter, attributed to improved cost efficiencies and reduced impairment charges. The rise in non-core income further supported this growth.
In Q1’23, customer deposits witnessed a remarkable growth rate of 43.5 percent, surpassing the growth of loans and advances (L&A). This trend marked the highest deposit growth in the past four quarters, indicating a shift amidst monetary tightening. L&A growth saw a moderate increase of 2.0 percent quarter-on-quarter (QoQ), while deposits rose by 6.2 percent QoQ.
Net interest income (NII) witnessed a slight uptick of 0.4 percent QoQ, and the overall net interest margins (NIMs) remained stable at 2.8 percent for the quarter.
The report also indicated an improvement in overall asset quality, with the non-performing loan (NPL) to net loans ratio decreasing by 16 basis points (bps) to 5.4 percent.
The top lenders in the UAE reported higher profitability, with a 5.9 percent increase in return on equity (RoE) QoQ, reaching 19.3 percent. Return on assets (RoA) also reached a new level not seen in the past four years, increasing to 2.2 percent.
A&M’s UAE Banking Pulse provides an analysis of data from the ten largest listed banks in the UAE, comparing the Q1’23 results against Q4’22. The report evaluates various key performance areas such as size, liquidity, income, operating efficiency, risk, profitability, and capital, using independently sourced published market data and 16 different metrics.