National Bank of Ras Al Khaimah has reported an increase of about 47 per cent in its second-quarter net profit, boosted by a surge in interest and non-interest income amid the UAE's continued economic momentum.
Net income for the three months to the end of June rose to Dh450.5 million ($122.8 million), the highest quarterly earnings since 2015, RAKBank said on Tuesday in a filing to the Abu Dhabi Securities Exchange, where its shares are traded.
Total income for the reporting period climbed by about 40 per cent to Dh1.12 billion.
A more than 47 per cent rise in the lender’s net interest income and proceeds from Islamic financing to Dh828.4 million boosted the quarterly profit.
However, non-interest income at the end of June slipped by more than 14 per cent to Dh287.8 million.
“Some of the good fiscal and monetary policy decisions that the government and the central bank took during the last few years, they are all holding the economy in a very good stead,” RAKBank group chief executive Raheel Ahmed told The National in an interview.
“Clearly, the macro indicators are very conducive for financial institutions to do well. We are seeing that across all our segments and all our customer base.”
Banks in the UAE, as is the case with their regional peers, are beneficiaries of a rise in interest rates.
Most central banks in the six-member GCC peg their currencies to the US dollar and follow the Federal Reserve's moves on interest-rate increases.
The Fed has aggressively increased its benchmark policy rates over the past several quarters in an attempt to bring inflation down to its 2 per cent target range.
It is expected to increase its benchmark rate by another quarter of a percentage point this week and raise it again by the same amount at least once more this year.
The Ras Al Khaimah lender, which more than doubled its first-quarter net income to a record level, said the strong earnings momentum in the second quarter was driven by the continued economic momentum in the Arab world’s second-largest economy.
The UAE's economy has bounced back sharply from the coronavirus-induced slowdown on the back of higher oil prices and measures to mitigate the effects of the pandemic.
After growing by 7.9 per cent in 2022, the most in 11 years, the economy is expected to expand by 3.9 per cent this year and 4.3 per cent in 2024, according to the UAE Central Bank.
The profitability of the four largest banks in the UAE is expected to improve this year, with interest rates still on the rise amid continued economic growth, Moody's Investors Service said in March.
While the UAE economy continues to show positive momentum and growth, the lender remains “cautious about the global macro environment and the downstream impact of rising interest rates and inflation on our customers”, Mr Ahmed said.
RAKBank said its net income for the first half of this year surged by about 71 per cent to Dh900 million.
“We have never achieved this much profit in our history. The previous record which was much lower was in 2015 and similarly on top-line income growth, it is the highest … income that we have,” he said.
“So, it's much, much more than the pandemic and pre pandemic levels.”
Net interest income and proceeds from Islamic products reached Dh1.6 billion during the six-month period.
Non-interest income rose by Dh133.6 million to Dh572.1 million, driven by a Dh96.1 million gain in forex and derivative income.
Provisions for credit losses climbed by 80 per cent on an annual basis to Dh494 million.
The ratio of net credit losses to average loans and advances for the reporting period was 2.6 per cent, higher than the 1.5 per cent recorded at the end of the first half of 2022.
Assets at the end of June climbed to Dh71.9 billion, an 8.3 per cent rise from the end of last year.
Loans and advances rose 4.6 per cent in the year to date to about Dh40 billion, and customer deposits for the reporting period rose to Dh49 billion over the same period, the lender said.
“Our existing customers continue to increase their trust and engagement with us,” Mr Ahmed said.
“Our deposits grew by 19 per cent year on year with robust growth in operating accounts. Spends on our cards are up 20 per cent. Our digital banking was accessed over 21 million times in H1 [up 15 per cent] and digital transactions have grown [by] over 10 per cent.”
The bank continues to follow its “ambitious transformation plan” that it has been putting in place since last year and is investing heavily in diversifying its business mix.
RAKBank is investing up to Dh600 million until 2026 as part of its strategy to increase the digitalisation of its services and develop new business lines as it looks to broaden its revenue base and boost growth, Mr Ahmed told The National in February.
“The idea is to be the digital bank with a human touch and be the most personalised bank in the UAE and in the region,” he said on Tuesday.
“We want to be very individualistic in our approach and we want to be very customer-led in our approach, as opposed to product-led.”
