Dubai: Asset quality, liquidity and capital adequacy levels of UAE banks remained strong in the first quarter of this year despite a challenging business environment characterised by a sharp decline in oil prices and a strong dollar that affected some key business sectors such as tourism, hospitality, retail and to some extent real estate and construction.

Most banks continued the trend of decline in impairment losses in the first quarter of this year with significant improvement in the non-performing loans (NPL) ratio on account of a decline in NPLs and an increase in the size of balance sheets.

Dubai Islamic Bank’s (DIB) impairment losses declined to Dh136 million, compared with Dh195 million for the same quarter of 2014. DIB’s non-performing loans (NPL) ratio improved to 7 per cent at the end of the quarter compared to 8 per cent at the close of 2014.

Impaired financing ratio also improved to 5.5 per cent, from 6.5 per cent at the end of 2014. While the cash coverage ratio improved to 81 per cent, compared to 78 per cent at the end of 2014, overall coverage, including collateral at discounted value, now stands at 135 per cent. At the close of the quarter, DIB’s capital adequacy ratio stood at 17 per cent.

For Abu Dhabi Commercial Bank (ADCB), NPL ratio and provision coverage ratios were 3.2 per cent and 134.1 per cent, respectively at the close of the first quarter. ADCB’s capital adequacy ratio (CAR) was 19.49 per cent during the period, compared to 21.03 per cent the year-end 2014. The bank’s Tier-1 ratio was 15.73 per cent as compared to 17.01 per cent as at the end of last year.

Emirates NBD’s balance sheet strengthened further in the first quarter of the year, thanks to an improvement in the liquidity and credit quality ratios. The impaired loan ratio improved further during the quarter from 7.9 per cent to 7.8 per cent as the bank actively managed its existing stock of impaired loans while the impaired loan coverage ratio strengthened to 103.9 per cent.

The bank’s cost-to-income ratio improved by 3.4 per cent year on year to 28.1 per cent. During the quarter, the impaired loan ratio improved to 7.8 per cent from 7.9 per cent at the end of 2014. The impairment charge in the first quarter was Dh1.08 billion was lower by 14 per cent compared to the same quarter last year, boosting the coverage ratio to 103.9 per cent.

Mashreq’s non-performing loans (NPL) remained stable at Dh2.7 billion in March 2015, leading a NPL-to-gross loans ratio of 3.7 per cent at the end of March 2015. Net allowances for impairment for the first quarter of this year were Dh196 million as compared to Dh251 million in the same period last year.

Total provisions for loans and advances reached Dh3.4 billion, constituting 131 per cent coverage for NPLs at the close of the first quarter.

“We continue to benefit from an ongoing strong balance sheet, stable earnings and healthy liquidity. The importance of these fundamentals cannot be overstated. They enable us to put substantial resources into innovating and perfecting the market-leading products which our name is now synonymous with,” said Mashreq’s CEO, Abdul Aziz Al Ghurair.