Dubai: RAKBank has closed the first-half of 2024 with a ‘record’ net profit after tax of Dh1.1 billion, up a healthy 21 per cent. Overall income came to Dh2.3 billion, up 87 per cent, while deposits cleared Dh58.5 billion, up 19.4 per cent.
The RAKBank growth numbers are in line with what leading UAE banks have booked for H1-24.
Lending to businesses in the UAE has seen no slack in the first-half, according to RAKBank’s CEO, even though borrowers will have noticed the heightened talk about the first interest rate cuts since March 2022 from the US Fed (and which will be mirrored in the UAE).
One reason for the demand is that competition among UAE banks have already seen loans offered to clients at lower rates.
“What you see happening is margin compression,” said Raheel Ahmed, CEO. “Which is brought on by customer demand on banks to provide loans at slightly lower interest rates, or even better rates, to them. “Bank’s spreads on what they would have made three years ago from lending to what they get now have come down.
“You need to get more competitive in the market to get the same levels of business. “So, what the UAE banking sector is seeing is stiff competition, high demand (for loans) and aggregation, which has led to a flattening of margins.”
RAKBank’s margins currently are at 4.5-4.6 per cent, off from the peak of 4.9 per cent.
Pulling in new SME business
The bank saw around 10,000 new account openings by SMEs in the first-half of 2024. Of these, 56 per cent are brand new startups, according to Ahmed.
“Of the lending we do, almost 35-40 per cent are to companies who haven’t had any debt in the past, at least in the UAE,” the CEO added.
The Ras Al Khaimah headquartered bank portfolio credit quality ‘remains robust, with the cost of risk at 1.7 per cent against 2.6 per cent in H1-23. This was ‘supported by benign credit environment and shift in business mix towards secured low risk assets’.
The balance-sheet crossed Dh80 billion at the end of June.
Unlike some of its peers in the industry, RAKBank’s focus will remain on its domestic operations rather than seek new growth from overseas markets, whether through stake buys or on its own.
“Being a medium-sized bank, there’s still a lot of opportunities in the UAE,” said Ahmed. “Having said that, we continue to evaluate. Our priority is to keep modernising our technology stack, our data stack, so that if we find something attractive, then we can have a look at it.”
Elections and geopolitics
In the second-half of the year, attention will be fixed on what’s happening elsewhere and how this would shape local and regional economies.
“We remain watchful of the geopolitical dynamics shaped by elections affecting 72 per cent of the world’s population, ongoing military conflicts, and economic indicators in major economies like the USA and China,” said the bank in a statement.
“However, the UAE economy remains resilient on the back of oil prices, real estate, trade and tourism. We approach the second-half of 2024 with confidence…”
