The total net income for UAE banks increased by 5.6% quarter-on-quarter (QoQ) to 20.3 billion dirhams ($5.53 billion) in the third quarter of 2023 on higher net interest income (NII), Alvarez & Marsal (A&M) said in its latest banking report.

NII grew strongly by 5.5% QoQ on higher rates, while total interest income rose 11.4% QoQ. All the banks reported an increase in NII except Abu Dhabi Islamic Bank (ADIB), which recorded a decline of 1.3% QoQ.

Furthermore, net income was supported by an 11.7% QoQ decline in the impairment charges for the July to September period.

According to the report, deposits grew faster, by 3.9% QoQ, compared to a growth of 2.4% QoQ for loans and advances. However, the share of current account savings account (CASA), which is low-cost deposits, declined to 49.5% in Q3 2023 from 50.3% in Q2 2023.

The Central Bank of the UAE (CBUAE) increased interest rates in line with the US Federal Reserve with a hike of 25 basis points in Q3 2023.

“With inflation still above the target levels, we expect rate cuts only after mid-2024," the report said, adding, "We believe net interest margins of the UAE banks will remain stable for the balance of 2023, before marginal decline next year post the rate cycle reversion."

A&M’s report is based on the data analysis of the 10 largest listed banks in the UAE.       

(Editing by Brinda Darasha; brinda.darasha@lseg.com)