Profits at the four largest banks in the UAE grew during the first half of this year as operating conditions improved and impairment charges for bad loans fell further amid continued economic recovery, according to Moody’s Investors Service.
The top four lenders by assets reported a combined net profit of $4 billion in the first half of 2021, a 17 per cent annual increase, Moody’s said in its latest report released on Tuesday.
First Abu Dhabi Bank, the biggest lender by assets in the country, Abu Dhabi Commercial Bank, Dubai’s largest bank Emirates NBD and the UAE’s largest Sharia-complaint lender Dubai Islamic Bank account for more than 77 per cent of banking assets in the country.
“They [the banks] booked lower loan-loss provisions, reflecting the pick-up in economic activity and consumer confidence,” Nitish Bhojnagarwala, a vice president and senior credit analyst at Moody’s, said.
“Easing pandemic restrictions, a strong vaccination roll-out, renewed real-estate activity [particularly within the villa segment] and increased optimism regarding upcoming projects such as Expo 2020, all helped to boost confidence.”
Like their global peers, banks in the UAE, the Arab world’s second-largest economy, faced tougher operating conditions in 2020 as the Covid-19 pandemic disrupted economic momentum.
However, the UAE economy has bounced back strongly and is expected to expand 2.4 per cent in 2021 on the back of its rapid mass Covid-19 inoculation programme and fiscal stimulus and monetary measures, according to the Central Bank of the UAE.
The country’s non-oil economy is expected to grow about 4 per cent this year and next, while overall economic growth is expected to be 3.8 per cent in 2022, the banking regulator said last month.
Moody’s said overall provisions for loan losses of the four banks in the first six months of the year fell 38 per cent. Impairment charges declined in double digits for all four banks, however, coverage for loan losses “moderately declined to still solid levels of 83 per cent”.
Net interest income for the lenders, however, fell 12 per cent for the six months to the end of June, pulled back by lower interest rates that were globally cut to record lows to support the financial industry during the pandemic. The decline was slightly offset by lower interest expenses as banks retired expensive deposits in an effort to reduce funding costs, according to Moody’s.
Non-interest income during the first half, however, increased 17 per cent year-on-year, propelled by investment securities and fee-based activities.
“The aggregate return on assets of the four banks was 1.2 per cent for the first half of the year, up 10 basis points year-on-year, but lower than the 1.7 per cent they achieved in 2019,” the credit rating agency said.
“We expect bottom-line profitability to gradually improve over the next 12 to 18 months as banks ease their provisioning efforts.”
While the lenders recorded a drop in operating costs during the six-month period, further cost optimisation continues to be a focal point amid low interest rate regime. The combined cost-to-income ratio for the four banks remained broadly flat at 31 per cent. While operating costs fell for the group in aggregate, cost efficiencies differed within the group, Moody's said.
All four banks reported "solid capital buffers", supported by stronger retained earnings, lower dividend payouts, and muted growth in risk-weighted assets.
"They [the banks] maintain a cautious approach to lending amid ongoing pandemic uncertainty," Moody's said.
The combined Tier-1 capital ratio of all four banks stood at 15.9 per cent at the end of June, well above the regulatory minimum, while the combined tangible common equity to risk-weighted assets – another measure to gauge capital of a financial institution – stood at 13.8 per cent during the same period, broadly in line with 2020 levels.
"This was despite new central bank regulations requiring UAE banks to increase their asset risk weighting on GCC credit exposures," Moody's said.
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Global Fungi Facts
• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
Sri Lanka-India Test series schedule
- 1st Test India won by 304 runs at Galle
- 2nd Test Thursday-Monday at Colombo
- 3rd Test August 12-16 at Pallekele
UAE currency: the story behind the money in your pockets
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Scoreline
Germany 2
Werner 9', Sane 19'
Netherlands 2
Promes 85', Van Dijk 90'
COMPANY PROFILE
Name: Xpanceo
Started: 2018
Founders: Roman Axelrod, Valentyn Volkov
Based: Dubai, UAE
Industry: Smart contact lenses, augmented/virtual reality
Funding: $40 million
Investor: Opportunity Venture (Asia)
UAE currency: the story behind the money in your pockets
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Monster
Directed by: Anthony Mandler
Starring: Kelvin Harrison Jr., John David Washington
3/5
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
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%3Cp%3E%0D%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E6-cylinder%2C%204.8-litre%20%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E5-speed%20automatic%20and%20manual%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E280%20brake%20horsepower%20%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E451Nm%20%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3Efrom%20Dh153%2C00%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3Enow%3C%2Fp%3E%0A
OTHER IPL BOWLING RECORDS
Best bowling figures: 6-14 – Sohail Tanvir (for Rajasthan Royals against Chennai Super Kings in 2008)
Best average: 16.36 – Andrew Tye
Best economy rate: 6.53 – Sunil Narine
Best strike-rate: 12.83 – Andrew Tye
Best strike-rate in an innings: 1.50 – Suresh Raina (for Chennai Super Kings against Rajasthan Royals in 2011)
Most runs conceded in an innings: 70 – Basil Thampi (for Sunrisers Hyderabad against Royal Challengers Bangalore in 2018)
Most hat-tricks: 3 – Amit Mishra
Most dot-balls: 1,128 – Harbhajan Singh
Most maiden overs bowled: 14 – Praveen Kumar
Most four-wicket hauls: 6 – Sunil Narine
What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Our legal consultants
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
MATCH INFO
Champions League quarter-final, first leg
Tottenham Hotspur v Manchester City, Tuesday, 11pm (UAE)
Matches can be watched on BeIN Sports
THE SPECS
Engine: 3.6-litre V6
Transmission: eight-speed automatic
Power: 285bhp
Torque: 353Nm
Price: TBA
On sale: Q2, 2020
Cases of coronavirus in the GCC as of March 15
Saudi Arabia – 103 infected, 0 dead, 1 recovered
UAE – 86 infected, 0 dead, 23 recovered
Bahrain – 210 infected, 0 dead, 44 recovered
Kuwait – 104 infected, 0 dead, 5 recovered
Qatar – 337 infected, 0 dead, 4 recovered
Oman – 19 infected, 0 dead, 9 recovered
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The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
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The biog
Favourite films: Casablanca and Lawrence of Arabia
Favourite books: Start with Why by Simon Sinek and Good to be Great by Jim Collins
Favourite dish: Grilled fish
Inspiration: Sheikh Zayed's visionary leadership taught me to embrace new challenges.
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RACECARD
6pm Emaar Dubai Sprint – Conditions (TB) $60,000 (Turf) 1,200m
6.35pm Graduate Stakes – Conditions (TB) $100,000 (Dirt) 1,600m
7.10pm Al Khail Trophy – Listed (TB) $100,000 (T) 2,810m
7.45pm UAE 1000 Guineas – Listed (TB) $150,000 (D) 1,600m
8.20pm Zabeel Turf – Listed (TB) $100,000 (T) 2,000m
8.55pm Downtown Dubai Cup – Rated Conditions (TB) $80,000 (D) 1,400m
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10.05pm Dubai Sprint – Listed (TB) $100,000 (T) 1,200m
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
The Settlers
Director: Louis Theroux
Starring: Daniella Weiss, Ari Abramowitz
Rating: 5/5
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
UAE currency: the story behind the money in your pockets
