The UAE’s 10 biggest lenders increased profitability in the second quarter of this year, as their loans and advances grew amid the Covid-19 pandemic-driven economic slowdown.
The banks posted a 21.2 per cent jump in combined net profit for the April-June quarter, compared to the first quarter of the year. Profits were helped by lower provisioning and tighter cost controls, Alvarez & Marsal (A&M) said in its UAE Banking Pulse for Q2 2020 on Wednesday.
However, net interest margins (NIM) fell during the second quarter, driven down by all-time low interest rates. The outlook for the third quarter also remains subdued, as lower oil prices and a rise in provisions for bad loans are likely to weigh on profitability as Covid-19 continues to cause uncertainty.
“The profitability of the UAE banks in second quarter rebounded as cost optimisation measures and lower provisioning supported income,” Asad Ahmed, A&M managing director and head of Middle East Financial Services, said. “UAE lenders are among the most profitable globally, bolstered by a mix of sound liquidity, strong capitalisation, low levels of non-performing loans, and a substantial proportion of non-interest-bearing deposits.”
While the Central Bank of the UAE expects a pickup in corporate credit demand during the third quarter of this year, the recovery would likely be fragile, he said.
“In the forthcoming quarters, it may be beneficial for banks to introduce efficiency-boosting measures and increase their focus towards digitisation to save costs and support the bottom-line.”
The report looks at the key performance metrics of the country’s 10 largest lenders – First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, Dubai Islamic Bank, Mashreq Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Ras Al-Khaimah and Sharjah Islamic Bank.
Lenders across the globe are facing a tough operating environment, making provisions for expected loan losses as the global economy slides into its deepest recession since the 1930s. JPMorgan, the biggest US bank, set aside $10.47bn (Dh38.4bn) to cover bad loans, which halved its second quarter profit. HSBC, Europe's largest lender, also reported a 57 per cent decline in its second quarter profit earlier this month and warned loan losses may climb to as much as $13bn.
Despite these headwinds, loans and advances and deposit growth for UAE lenders improved in the second quarter. Total loans grew 1 per cent during the quarter and deposits rose 1.1 per cent. DIB outperformed its peers with double-digit loan growth of 11 per cent, while Mashreq outshone in terms of deposit-taking, achieving 11 per cent growth.
The banks' combined loan-to-deposit ratio remained broadly unchanged at 87.7 per cent during the period, according to the report that was co-authored by Saeeda Jaffar, A&M managing director and head of Middle East. Operating income took a hit for the second consecutive quarter, declining 9.2 per cent from first three months of 2020 as all income streams weakened.
Net interest income dropped 7.3 per cent and net fee income fell 23 per cent, as restrictions on movements in the country during the second quarter curtailed new business, according to the report.
NIM also fell by about 24 basis point to 2.29 per cent because of the sharp decline in interest rates. Nine of the top 10 banks reported lower margins during the period. The lenders' combined cost-to-income ratio continued to improve, though. It reached 33.4 per cent as operating expenses fell by about 11 per cent as banks focused on optimising their expenses, the report said.
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
How Filipinos in the UAE invest
A recent survey of 10,000 Filipino expatriates in the UAE found that 82 per cent have plans to invest, primarily in property. This is significantly higher than the 2014 poll showing only two out of 10 Filipinos planned to invest.
Fifty-five percent said they plan to invest in property, according to the poll conducted by the New Perspective Media Group, organiser of the Philippine Property and Investment Exhibition. Acquiring a franchised business or starting up a small business was preferred by 25 per cent and 15 per cent said they will invest in mutual funds. The rest said they are keen to invest in insurance (3 per cent) and gold (2 per cent).
Of the 5,500 respondents who preferred property as their primary investment, 54 per cent said they plan to make the purchase within the next year. Manila was the top location, preferred by 53 per cent.
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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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
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
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Global state-owned investor ranking by size
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United States
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China
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UAE
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Japan
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5
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Norway
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Canada
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Singapore
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Australia
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Saudi Arabia
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South Korea
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The Bio
Favourite holiday destination: Either Kazakhstan or Montenegro. I’ve been involved in events in both countries and they are just stunning.
Favourite book: I am a huge of Robin Cook’s medical thrillers, which I suppose is quite apt right now. My mother introduced me to them back home in New Zealand.
Favourite film or television programme: Forrest Gump is my favourite film, that’s never been up for debate. I love watching repeats of Mash as well.
Inspiration: My late father moulded me into the man I am today. I would also say disappointment and sadness are great motivators. There are times when events have brought me to my knees but it has also made me determined not to let them get the better of me.
Three ways to get a gratitude glow
By committing to at least one of these daily, you can bring more gratitude into your life, says Ong.
- During your morning skincare routine, name five things you are thankful for about yourself.
- As you finish your skincare routine, look yourself in the eye and speak an affirmation, such as: “I am grateful for every part of me, including my ability to take care of my skin.”
- In the evening, take some deep breaths, notice how your skin feels, and listen for what your skin is grateful for.
The Bio
Favourite place in UAE: Al Rams pearling village
What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft
Your favourite type of pearl: All of them. No pearl looks the same and each carries its own unique characteristics, like humans
Best time to swim in the sea: When there is enough light to see beneath the surface
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
General%20Classification
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Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Company%20profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Letswork%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202018%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%3Cbr%3E%3Cstrong%3EFounders%3A%20%3C%2Fstrong%3EOmar%20Almheiri%2C%20Hamza%20Khan%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20co-working%20spaces%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20%242.1%20million%20in%20a%20seed%20round%20with%20investors%20including%20500%20Global%2C%20The%20Space%2C%20DTEC%20Ventures%20and%20other%20angel%20investors%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%20about%2020%3C%2Fp%3E%0A
Five ways to get fit like Craig David (we tried for seven but ran out of time)
Start the week as you mean to go on. So get your training on strong on a Monday.
Train hard, but don’t take it all so seriously that it gets to the point where you’re not having fun and enjoying your friends and your family and going out for nice meals and doing that stuff.
Think about what you’re training or eating a certain way for — don’t, for example, get a six-pack to impress somebody else or lose weight to conform to society’s norms. It’s all nonsense.
Get your priorities right.
And last but not least, you should always, always chill on Sundays.
Results
5pm: UAE Martyrs Cup (TB) Conditions Dh90,000 2,200m
Winner: Mudaarab, Jim Crowley (jockey), Erwan Charpy (trainer).
5.30pm: Wathba Stallions Cup (PA) Handicap Dh70,000 1,400m
Winner: Jawal Al Reef, Richard Mullen, Hassan Al Hammadi.
6pm: UAE Matyrs Trophy (PA) Maiden Dh80,000 1,600m
Winner: Salima Al Reef, Jesus Rosales, Abdallah Al Hammadi.
6.30pm: Sheikha Fatima bint Mubarak (IFAHR) Apprentice Championship (PA) Prestige Dh100,000 1,600m
Winner: Bainoona, Ricardo Iacopini, Eric Lemartinel.
7pm: Sheikha Fatima bint Mubarak (IFAHR) Ladies World Championship (PA) Prestige Dh125,000 1,600m
Winner: Assyad, Victoria Larsen, Eric Lemartinel.
8pm: Sheikh Zayed bin Sultan Al Nahyan Jewel Crown (PA) Group 1 Dh5,000,000 1,600m
Winner: Mashhur Al Khalediah, Jean-Bernard Eyquem, Phillip Collington.
