RAKBank's biggest strengths remain its entrenched presence in the UAE's retail banking space. Image Credit: Gulf News Archives

RAKBank’s net profit increased 72 per cent year-on-year to Dh500 million at the end of June, and the remarkable gain was driven by a 3 per cent increase in interest income and 58 per cent reduction in impairments due to improving economic conditions.

As a result, the EPS grew from Dh0.18 to Dh0.32, while the cash balance improved by 33 per cent to Dh5.2 billion compared to H1-2021. RAKBank’s reputation as a retail banking franchise is underpinned by product innovation and a strong technology base. This allows the bank to continue to withstand competitive pressure from mergers by the larger UAE banks.

There is also the expanding wholesale banking services, and the FX and treasury operations complement its significant retail base and adds to the overall strategy to diversify operations.

Loan impairments increased last year after the pandemic. Its considerable provisions and the loan-loss reserve coverage ratio have been above 100 per cent.

The good capital base and high operating profitability provide additional buffers, and it could also be that the UAE’s growing GDP momentum will help expand the loan book. Additionally, the bank’s large and well-diversified deposit base, with lower levels of customer concentration compared to its many peers, gives it a competitive edge.

RAKBank’s sound financial fundamentals place it in a position to operate in the current and upbeat phase of the business cycle. The current market cap is at Dh8.05 billion, with a P/E of 8.09. The return on equity stands at 12 per cent and the 12-month dividend yield is 4.7 per cent.

The bank offers conventional and Sharia-compliant services to small businesses, retail and commercial sectors, through a network of 27 branches, as well as through multiple platforms. In August, the UAE bank had its credit rating affirmed at A2 by Capital Intelligence, indicating a positive outlook.