High interest rates have not come in the way of UAE businesses and individuals' loan demand, says ADIB's Mohamed Abdel Bary.

Dubai: Check out any of the 2023 results from UAE banks, and along with the eye-popping profit numbers there would be an additional mention – that these are ‘record’ results. 2023 by all accounts was nothing short of a blockbuster for the country’s blue-chip financial institutions.

It couldn’t be anything else as a resurgent economy fed demand for a range of banking services, from corporate and individual clients alike. Boosting those margins were interest rates that were pegged to some of the highest levels in recent times.

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So, can 2024 deliver another year to remember for banks in the UAE? Place Mohamed Abdel Bary, Group CFO of Abu Dhabi Islamic Bank, as among those bankers with not a doubt as to what the outcome will be.

“When you look at ADIB’s activity in second-half 2023, when interest rates shot up to their peak, we had one of our best quarters during October-December,” said Bary. “We got to see no slackness in loan demand.

“That for me suggests that not just us, the wider UAE banking industry has got a good tailwind behind it in 2024.”

"When you look at ADIB’s activity in second-half 2023, when interest rates shot up to their peak, we had one of our best quarters during October-December.” - Mohamed Abdel Bary of ADIB

ADIB numbers stack up well

On the profit side, ADIB got everything right in 2023. A gain of 45 per cent pushed the bottom-line to Dh5.2 billion, and boosted its EPS (earnings per share) to Dh1.28 (up 40 per cent). The bank also announced a 71 fils a share dividend payout.

On profit margin growth too, ADIB did it neatly – 4.5 per cent from a 94 basis point bounce.

Prepared for rate cuts

ADIB will not be alone in saying the current interest rate levels had helped with the margin improvements. But if rates get cut – and they will, only the when is not known – UAE banks still have plenty left over to see in another round of growth.

Which is why Bary says that ADIB is ‘quite fortunate in having a balance-sheet that provides a natural hedge if and when interest rates go down’.

“Our financing book is a good mix of long- and short-term financing, and our CASA (current account savings account) portfolio is efficiently priced.

“This is what gives me the confidence to say that 2024 can be just as good for ADIB…” And its peers in the banking sector.

Banking industry sources say that apart from more loan growth, the chances of some of the current ones turning ‘bad’ are rated as minimal. Banks by and large have stuck to prudent provisioning of their current risk profile.

More plans overseas?

ADIB’s fairly well covered as far as its non-UAE operations are concerned, with those in Saudi Arabia, Egypt and its interests in the UK providing some significant heft to assets and revenue generation possibilities.

“We are always waiting for the right time to do more in overseas markets,” said Bary. “There are always discussions to this effect within our management. The operations in Egypt and Saudi Arabia are already big, and there ways to extend the footprint there.

Property companies

Outside of its core banking operations, ADIB’s portfolio features two real estate companies – Burooj Properties (into development and related services) and MPM Properties (with more than 20,000 units under management).

“These two companies are adding some real value to the ADIB franchise,” the Group CFO said. “The way we see it, they will continue to create value and helps us reach out to such a sizeable consumer base. Don’t see the need to hive or sell off the property units.”

Clearly, ADIB does not have any plan to head in the direction its Abu Dhabi peer – ADCB - did selling its property assets recently. ADIB does things its way…