Higher interest rates and a broad-based recovery of the UAE’s economy from the Covid-19 pandemic-induced slowdown are expected to boost the profitability of the UAE lenders, Egyptian investment bank EFG Hermes has said.
The expected 300-basis points (bps) rise in US interest rates will drive up the net interest income of lenders, the bank said in a report on the UAE banking sector.
A 25 bps rate increase translates into a net interest margin expansion of about 5 bps and earnings per share growth of 3 per cent for lenders.
“We remain positive on UAE banks going into year end,” EFG Hermes analysts Shabbir Malik and Omnia Kadry said.
“There are macro tailwinds in the short term — positive spillover from the Qatar World Cup to the hospitality and aviation sectors, and in the medium term — visa reforms and net-zero transition, [with] earmarked capex [capital expenditure] of Dh600 billion ($163bn).”
The US Federal Reserve in September increased the policy rate by 75 bps, its fifth rate increase this year. The rate increase came after consumer prices rose by 8.3 per cent in August, exceeding economists' expectations of 8.1 per cent and well above the Fed’s 2 per cent target.
Consumer prices moved marginally lower to 8.2 per cent in September, paving the way for two more 75 bps increase in the Fed policy rate, which is expected to climb to 4.4 per cent by the end of this year.
Lenders in the GCC, where most central banks peg their currency to the US dollar, are the beneficiaries of rising interest rates.
The aggregate net profit of the UAE's 10 largest banks increased more than 24 per cent, quarter on quarter, boosted by a significant jump in their net interest income, professional services consultancy Alvarez & Marsal said in August.
The cumulative net income for the three months to the end of June climbed to $3.43bn as total net interest income for the banks grew 19.5 per cent at the end of the April-June quarter, the consultancy said in its UAE Banking Pulse report.
Although the UAE banking sector’s aggregate net interest margin (NIM) improved to 2.3 per cent, it remains below the pre-pandemic levels of 2.6 per cent, A&M said.
The NIM improved by 26.1 bps, quarter on quarter, underpinned by higher benchmark rates.
There are macro tailwinds in the short term — positive spill over from the Qatar World Cup to the hospitality and aviation sectors, and in the medium term — visa reforms and net-zero transition.
EFG Hermes
In February, S&P Global Ratings estimated a 15 per cent increase in net income and 1.4 percentage-point rise in return on equity for UAE banks for every 100 bps increase in the interest rate.
The UAE’s sharp economic rebound is also underpinning the profitability of lenders, EFG said.
The Arab world’s second-largest economy is set to expand by 5.4 per cent this year, according to the UAE Central Bank.
Emirates NBD forecasts that the economy will expand 7 per cent in 2022, due to a higher estimate for the energy industry's output and the “robust growth” of its non-oil sector, setting up the country for its fastest annual expansion since 2011, when output grew by 6.9 per cent.
While rate increases are positive for net interest incomes of lenders, “after a certain point, they can impact bank’s deposit mixes and asset quality”, EFG Hermes said.
Higher rates can encourage depositors to migrate funds from current accounts and saving accounts (Casa) to term deposits that pay interest.
“Corporations and institutions are likely to be more nimble in switching funds,” EGH Hermes analysts said.
“We expect banks with retail-biased deposits to have stickier Casa as their deposits are composed of more granular and less rate-sensitive customers.”
UAE currency: the story behind the money in your pockets
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
Biography
Her family: She has four sons, aged 29, 27, 25 and 24 and is a grandmother-of-nine
Favourite book: Flashes of Thought by Sheikh Mohammed bin Rashid
Favourite drink: Water
Her hobbies: Reading and volunteer work
Favourite music: Classical music
Her motto: I don't wait, I initiate
Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster with a decades-long career in TV. He has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others. Karam is also the founder of Takreem.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
Facebook | Our website | Instagram
Match info
Huddersfield Town 0
Chelsea 3
Kante (34'), Jorginho (45' pen), Pedro (80')
Huroob Ezterari
Director: Ahmed Moussa
Starring: Ahmed El Sakka, Amir Karara, Ghada Adel and Moustafa Mohammed
Three stars
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
Things Heard & Seen
Directed by: Shari Springer Berman, Robert Pulcini
Starring: Amanda Seyfried, James Norton
2/5
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
Global state-owned investor ranking by size
1.
|
United States
|
2.
|
China
|
3.
|
UAE
|
4.
|
Japan
|
5
|
Norway
|
6.
|
Canada
|
7.
|
Singapore
|
8.
|
Australia
|
9.
|
Saudi Arabia
|
10.
|
South Korea
|
Mohammed bin Zayed Majlis
HOW%20TO%20ACTIVATE%20THE%20GEMINI%20SHORTCUT%20ON%20CHROME%20CANARY
%3Cp%3E1.%20Go%20to%20%3Cstrong%3Echrome%3A%2F%2Fflags%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3E2.%20Find%20and%20enable%20%3Cstrong%3EExpansion%20pack%20for%20the%20Site%20Search%20starter%20pack%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3E3.%20Restart%20Chrome%20Canary%3C%2Fp%3E%0A%3Cp%3E4.%20Go%20to%20%3Cstrong%3Echrome%3A%2F%2Fsettings%2FsearchEngines%3C%2Fstrong%3E%20in%20the%20address%20bar%20and%20find%20the%20%3Cstrong%3EChat%20with%20Gemini%3C%2Fstrong%3E%20shortcut%20under%20%3Cstrong%3ESite%20Search%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3E5.%20Open%20a%20new%20tab%20and%20type%20%40%20to%20see%20the%20Chat%20with%20Gemini%20shortcut%20along%20with%20other%20Omnibox%20shortcuts%20to%20search%20tabs%2C%20history%20and%20bookmarks%3C%2Fp%3E%0A
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
UAE currency: the story behind the money in your pockets
Schedule:
Friday, January 12: Six fourball matches
Saturday, January 13: Six foursome (alternate shot) matches
Sunday, January 14: 12 singles
UAE currency: the story behind the money in your pockets
The struggle is on for active managers
David Einhorn closed out 2018 with his biggest annual loss ever for the 22-year-old Greenlight Capital.
The firm’s main hedge fund fell 9 per cent in December, extending this year’s decline to 34 percent, according to an investor update viewed by Bloomberg.
Greenlight posted some of the industry’s best returns in its early years, but has stumbled since losing more than 20 per cent in 2015.
Other value-investing managers have also struggled, as a decade of historically low interest rates and the rise of passive investing and quant trading pushed growth stocks past their inexpensive brethren. Three Bays Capital and SPO Partners & Co., which sought to make wagers on undervalued stocks, closed in 2018. Mr Einhorn has repeatedly expressed his frustration with the poor performance this year, while remaining steadfast in his commitment to value investing.
Greenlight, which posted gains only in May and October, underperformed both the broader market and its peers in 2018. The S&P 500 Index dropped 4.4 per cent, including dividends, while the HFRX Global Hedge Fund Index, an early indicator of industry performance, fell 7 per cent through December. 28.
At the start of the year, Greenlight managed $6.3 billion in assets, according to a regulatory filing. By May, the firm was down to $5.5bn.
What is a black hole?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now