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The UAE banks’ exposure to the real estate and construction sector fell as a percentage of total gross loans by 86 basis points (bps) quarter on quarter (QoQ) to 16.7% from 17.6%, according to a report by the consultancy Alvarez & Marsal Inc.
Meanwhile, most banks operating in the UAE saw a rise in profitability in Q2 2023 due to an increase in non-core income and lower impairment charges, said the report issued on Thursday.
The aggregate net income for UAE banks increased marginally by 4.8% QoQ to AED 19.2 billion for the latest period.
Total interest income of top ten UAE banks grew by 9.9% QoQ in Q2, marginally higher than in the previous quarter.
Total operating income increased by 3.2% QoQ in Q2 compared with 3.7% QoQ in Q1. The growth in total operating income was driven by non-interest income which increased by 7.7%
Net interest income (NII) growth slowed to 1.3% QoQ as higher cost of funds weighed, following the UAE Central Bank's hike in policy rates.
Net interest margin (NIM) narrowed by 4bps to 2.7% in the quarter.
Loans and advances increased 2.7% QoQ while growth in deposits slowed to 0.8% in Q2 compared with 6.2% growth in the previous quarter.
The higher profitability was also supported by the decline in impairments by 8.5% on quarter.
(Writing by Brinda Darasha; editing by Seban Scaria)
