DUBAI, Feb 2 (Gulf News): The 2013 full-year financial results of the United Arab Emirates (UAE) banking sector highlights strong loan growth led by retail and consumer banking and improved profitability on account of sustained decline in non-performing loans and improving economic conditions.
Banks in the UAE had stopped lending almost completely in 2008-2012 as they shifted their focus to cleaning up their balance sheets and improving their funding profiles. During this period, compound average nominal growth in credit to residents was a meagre 2.3 per cent annually, well below the 13.2 per cent average nominal yearly GDP growth rate during that period.
From last year, there were visible signs of a revival in UAE banks' loan portfolios. According to central bank data, in the first nine months of 2013, gross system loans increased by 7.5 per cent and the amount of personal loans had risen by 9.3 per cent. With the full year results most banks declared leading banks have reported double digit credit growth for the full year
"We now see clear indications that credit growth is increasing, particularly in Dubai, a trend that we expect will gradually accelerate in 2014," said Timucin Engin, associate director, Financial Services Ratings, Standard & Poor's Ratings Services.
Emirates NBD, the biggest bank by assets, reported a net profit of Dh3.3 billion with the bank's net interest income for the year up by 18 per cent to Dh8.13 billion, largely driven by across the board loan growth.
Customer loans in 2013 (including Islamic financing) amounted to Dh238.3 billion, an increase of 9 per cent from the end of 2012. The bank posted strong growth in new underwritings across all business segments with 10 per cent growth in gross loans in 2013, which saw a marked improvement in loan spreads.
"Over 2013, loan spreads improved as retail volumes increased in this higher yielding business, coupled with increased margins from the Egyptian business and a positive impact from the drop in Emirates interbank offered rates," said Surya Subramanian, group chief financial officer of Emirates NBD.
Most Abu Dhabi-based banks reported strong growth in profits for the year. National Bank of Abu Dhabi announced Dh4.73 billion net profits for 2013, up 9.3 per cent from Dh4.332 billion reported in 2012 with net loans and advances surging 11.7 per cent to Dh183.8 billion in 2013.
"National Bank of Abu Dhabi reported lacklustre bottom-line on a drop in net interest margins, lower investment income and foreign exchange gains, more than offset by lower cost of risk and improved fees and commission income generation," said Jaap Meijer, director of Equity Research at Arqaam Capital.
