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Top UAE banks are expected to see their aggregate earnings for Q2 2024 decline on both yearly and quarterly bases, said CI Capital in a preview of MENA bank sector performance.
The banks under the brokerage's coverage include First Abu Dhabi, Abu Dhabi Islamic Bank (ADIB), Abu Dhabi Commercial Bank, Emirates NBD and Dubai Islamic Bank.
The decline in aggregate earnings for the UAE banks is largely due to weaker performance by heavy-weight Emirates NBD as its Turkish operations pressure blended net interest margins (NIMs) year-on-year (YoY) and as cost of risk (CoR) normalises from its low levels in Q2 2023, and from the net reversals in Q1-2024, analysts, including Sara Boutros, said.
"In the UAE, we flag ADIB as we expect it to outperform on NIMs, benefiting from delayed asset repricing, further supported by controlled opex and CoR," the report said.
In MENA, 80% of banks under coverage by CI Capital Research are expected to deliver YoY earnings growth in Q2 2024. Aggregate net income is set to grow by 1.5% YoY in the quarter and 5.8% YoY for H1 2024.
Among Saudi Arabian banks, Saudi Awwal Bank (SAB) was the brokerage's top pick as the lender "continues to benefit from the higher-for-longer interest rate environment, capitalising on its liquid balance sheet, healthy funding structure, and solid cost control".
Among GCC peers, Saudi banks are forecast to deliver the highest YoY earnings growth for the quarter of +8.2%.
For Egyptian banks earnings growth is set to rise 27.5% YoY boosted by strong NIMs amid rising interest rates, more than offsetting the normalisation of non-interest income and the rise in provisions.
On a sequential basis, the latter two factors will drive the anticipated drop in earnings (-20.5%).
"We look for slower loan and deposit growth rates, compared to 1Q24, which was boosted by a one-off adjustment to the banks’ FCY-books following the EGP movement in Mar-24. We look for a slowdown in LCY-denominated lending, in line with 1Q24 trends, as the higher policy rates weigh down on credit activity."
Among Egyptian banks, CI Capital flagged the shariah-compliant Abu Dhabi Islamic Bank-Egypt (ADIB-E) as the outperformer within its Egypt banks’ coverage, as it benefits from higher NIMs as well as lower YoY provisions.
Among Kuwaiti banks, which are expected to deliver +8.1% YoY earnings growth for the quarter, National Bank of Kuwait is picked as the best play, posting approximately 19% YoY growth in net income.
(Reporting by Brinda Darasha; editing by Seban Scaria)
