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Most UAE banks are expected to post higher net profit in Q3 2022, supported by higher interest rates and lower provisioning.
Their performance in first-half 2022 had improved substantially on the back of lower cost of risk and higher interest rates. The central bank's targeted economic support scheme (TESS) helped to tide over the COVID-19 related stress on risky loans even as elevated oil prices and a modest recovery in the non-oil sectors led to an improved operating environment.
The series of rate hikes this year by the US Federal Reserve to curb inflation was mirrored by most GCC central banks, including the UAE Central Bank, widening the net interest margin (NIM) for banks.
NIM is the difference between interest income from loans and what is paid out on deposits. It is a key measure of bank profitability.
Dubai-based banks are set to "report NIM expansion on a low base, while Abu-Dhabi based banks are likely to report strong lending book growth supported by deposits accumulation", Bahrain-based investment bank SICO, said in a preview of Q3 results for UAE banks.
All UAE-based banks are expected to report a "mild rise to decline in provisioning", SICO said.
SICO’s profit estimates for the top UAE banks are:
Emirates NBD: Net profit at 3.16 billion UAE dirhams, up 26% year-on-year, due to top-line improvement supported by lower provisions.
Abu Dhabi Commercial Bank: Net profit at 1.58 billion UAE dirhams, up 24% year-on-year, due to stronger interest and fee income.
Abu Dhabi Islamic Bank: Net profit at 709 million UAE dirhams, 44% higher year-on-year, with the bottom-line supported by higher fees income and lower provisions
Dubai Islamic Bank: Net profit at 1.49 billion UAE dirhams, up 24% year-on-year, earnings supported by much lower provisioning and higher interest income.
However, First Abu Dhabi Bank, the largest lender by total assets in the UAE, will see a 25% dip in Q3 net profit to 2.88 billion UAE dirhams, dragged by significantly lower trading income.
(Reporting by Brinda Darasha; editing by Seban Scaria)
