Dubai: As anticipated most UAE banks have reported strong income and profit growth in 2014 and have entered the first quarter of the year with the apprehension if they can repeat the results in the year ahead.
“It was tough last year, competition was stiff, but there was growth, very, very good growth. But we are headed for average growth in the face of tough competition,” said Alex Thursby, CEO of National Bank of Abu Dhabi (NBAD) reflecting the overall mood of banking sector.
NBAD beat analyst forecasts as it reported a 27.6 per cent rise in fourth-quarter net profit and its full year net profit was up 18 per cent at Dh5.57 billion compared to the previous year. The bank said its growth last year was driven primarily by strong fee income growth across all lines of business, solid loan growth, increases in deposits and CASA [current and savings accounts] as a per cent of deposits, and solid gains in the investment portfolio.
NBAD’s net interest income (NII) including income from Islamic financing was up 8 per cent Dh7.018 billion in 2014. Non-interest income grew 18 per cent to Dh3.39 billion last year as net fees and commission income grew 25 per cent to Dh2.31 billion in 2014.
“NBAD reported robust growth in bottom-line mainly due to strong growth in net interest and non-interest income and a decline in provisions,” said Naveed Ahmad, Senior Manager, Research Group Global Investment House.
Top bankers say that credit growth could moderate this year as private sector credit demand is likely to slowdown along with a potential slowdown in GDP growth as result of recent sharp decline in oil prices. But most CEO’s believe that it is still possible to maintain credit growth of 8 to 10 per cent this year.
AbdulAziz Al Ghurair, CEO of Mashreq said the impact of oil prices on the economy will not be as dramatic as the global financial crisis. “I don’t see mass exodus of people or companies reducing their staff causing the kind of panic we saw 5-6 years ago during the financial crisis. We have been watching the consumer spend during the last two months, and we haven’t seen any dramatic decline,” Al Ghurair told Gulf News.
Mashreq group a net profit of Dh2.4 billion, up 33 per cent as compared to 2013 with a loan growth in excess of 15 per cent.
Decline in provisions, strong growth in non-interest income streams and improved asset quality were underlying performance drivers most UAE banks.
Abu Dhabi based First Gulf Bank (FGB) topped the net profits in 2014 with Dh5.66 billion, up 18 per cent compared to Dh4.77 billion in 2013, marking the 15th consecutive year of net profit growth for the bank.
Double digit loan growth of 11 per cent combined with strong improvement in asset quality boosted the bank’s bottom-line. The non performing loans (NPL) ratio was at 2.5 per cent in 2014 down from 3.3 per cent in the previous year.
Abu Dhabi Commercial Bank (ADCB) reported a full year net profit of Dh4.2 billion, up 16 per cent compared to 2013. The bank’s total assets crossed Dh200 billion mark this year. The bank’s operating income grew 3 per cent to Dh7.52 billion while net fees and commission incomes were up 25 per cent to Dh1.24 billion. Bank’s Islamic banking business remained a prime driver of growth, with Islamic financing assets (gross) up 5 per cent and total Islamic deposits up 15 per cent over 2013.
Emirates NBD’s full year net profits were up 58 per cent last year to Dh5.1 billion as total income grew by 22 per cent to Dh14.4 billion. Net interest income grew 17 per cent toDh9.5 billion as asset growth was focused on higher margin retail and Islamic products, while the bank’s liability profile improved thanks to current and saving account (CASA) growth.
The bank’s balance sheet strengthened further in 2014 thanks to an improvement in the capital, liquidity and credit quality ratios. The Bank’s Impaired Loan ratio improved significantly to 7.8 per cent in 2014. This improvement was due to the bank’s reclassification of its Dubai World exposure, the writing-off of fully provided retail loans and an increase in recoveries and repayments on the back of an improved economy. Further conservative provisioning of Dh5 billion helped boost the impaired loan coverage ratio to 100.3 per cent reaching the bank’s target coverage level.
“A good surprise came in the form of the upgrade of Dubai World’s exposure to performing status, which wiped our 310 bps from the NPL ratio. Another 170ps over the third quarter was wiped out by writing off retail loans (Dh4.4bn) against which 100 per cent was already provided. Resultantly, the bank’s NPL coverage ratio jumped from 70.3 per cent in the third quarter to 100.3 per cent at the year end,” said Global Investment House’s Ahmad.
