The banking sector is intertwined with the economy, and is interconnected with its developments or fluctuations.
The banking sector supports the economy, which in turn provides the basic lever for the development of banks, and from here comes integration and interconnection.
In the UAE, the steady growth in recent years, supported by strong growth in productive sectors and high oil prices, has been a major support for the banking sector.
In Dubai in particular, strong commercial activities, abundant liquidity, continued momentum in the real estate market, income gains from foreign currencies and strong credit demand have served as a lever to strengthen banks in the emirate.
Fitch, the international credit rating agency, confirmed the certainty and expected that the UAE and the Kingdom of Saudi Arabia will enjoy the strongest return on assets, and that capitalization levels will remain high, which places them in a positive position, compared to their regional and global counterparts.
With most UAE banks announcing record profitability metrics in 2023, Fitch expects strong performance to continue in 2024, supported by wide profit margins, healthy liquidity and a favorable economic environment.
In turn, Standard & Poor’s Global, in its latest report, emphasized the leadership of the UAE’s banking systems in the region, with continued strong credit and profitability growth, and dynamic non-oil growth for the year 2024.
It must be noted that the cost of risks is low in achieving record high profits for UAE banks in 2023, with an estimated average return on the average equity of banks rated by Fitch at about 20% in 2023, so that banks will maintain the average sector profitability standards in 2024. With an average net profit margin of more than 3%.
When analyzing the actual numbers, it is revealed that the results of the banks’ operations in the Emirates exceeded expectations and the levels achieved globally. The net profits of 10 Emirati banks listed on the local financial markets increased by 63%, to 46.3 billion dirhams ($12.6 billion), which reflects their strong financial solvency, strong revenues, and high liquidity, benefiting from the prosperity of the local economy.
The banking sector’s total assets also witnessed an expansion of 10.3% annually, to record 3.9 trillion dirhams (more than one trillion dollars) until the end of the third quarter of 2023. Risks have decreased with the growth of banks’ capital and reserves.
Dubai banks recorded an annual growth of 14.9% to 233.2 billion dirhams ($63.5 billion), according to Central Bank data.
2024-02-26 00:36:05
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