Now is the time when many banks and companies begin to report their financial results for 2014. In the financial services sector, Emirates NBD and Mashreq both reported on Sunday — the results were impressive.
Emirates NBD, the largest bank in the UAE both in terms of its branch network and total income, reported net profits of Dh5.1 billion for the last year — an increase of 58 per cent on its profit levels of 2013. Mashreq reported a net profit of Dh2.4 billion for 2014 — up an impressive 33 per cent over 2013 results.
What is interesting to note is that both these banks reported better quality and stronger performing loan portfolios, with under and non-performing loans down significantly. This decrease can likely be attributed to a stronger regulatory environment as a result of rule changes implemented by the UAE Central Bank on loan-to-property ratios and a maturing borrowing market as a result of the implementation of an effective credit bureau to eradicate borrowers’ ability to seek loans from multiple sources.
The results also reflect that the tailwinds that followed from the global financial crisis are now well and truly gone, with financial institutions in a strong position to spur growth.
If the lessons of the past five years are to be truly learnt, however, then one must say that strong growth depends on a robust business environment. If there is a fault with banks and their levels of profits, it would mean that they come up short in providing loans and incubator funds to small enterprises, the lifeblood of growth.
