Stock - DFM
Investors are piling into UAE banking stocks, and announcements such as the one from Emirates NBD about a special dividend are just the tonic for further action. Image Credit: Bloomberg

Dubai: Forget about IPOs for a moment – and let’s see what can be done with UAE’s listed banks. Investors on DFM and ADX are doing just that by fuelling stocks of UAE’s biggest banks to 12-month highs or very near it.

And in some cases, to their best prices ever.

Emirates NBD’s stock on DFM did that in the past two days, going past its previous 52-week high of Dh19.2 and hitting Dh19.3. Demand for one of the Top 3 UAE banks was boosted by the announcement of a special divided and taking the full 2023 pay-out to 120 fils for each share. It also helped that the Dubai-based bank reported Dh21 billion in net profit – also its best to date.

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The next round of 2023 financial result announcements from FAB, ADCB and Mashreq too should enthuse investors. Another who will be announcing its 2023 numbers is RAKBank.

But a lot has already been happening with UAE bank stocks in recent days. These have seen:

  1. Mashreq closed Thursday at Dh168.25, close to its 52-week high of Dh170. This is after a 9 per cent gain over this week.
  2. Emirates NBD will start today at Dh18.4 after it had breached Dh19. Analysts say the bank’s stock could be in for some high activity in the coming days.
  3. The UAE mega-bank FAB’s market cap of Dh170 billion is its highest since 2022.
  4. The ADCB market cap of Dh67 billion is best sincesince 2005.
  5. The Abu Dhabi Islamic Bank is Dh11.16 (with a market cap of Dh40.61 billion) and near an all-time high. The stock is up 10.28 per cent in just the year-to-date.
  6. The DIB market cap of Dh45.2 billion is highest in 10 years.

Everyone saw it coming

UAE banks delivering a breakout performance in 2023 with their financials was known to all. What analysts and shareholders were counting on was for the October to December 2023 performance to be just as stellar and then show up in record/near-record profits for the full year.

That’s happening. None of the results announced by the major banks so far show worrying trends. Loan books are good, provisions did drop for most. And the feeling among top banking industry sources is 2024 will deliver a continuation of this.

How did banking stocks do in '23?
The banking sector index on DFM was up 20 per cent in 2023. Real estate stocks did better, up 38 per cent on DFM and 24 per cent on ADX in 2023.

Sentiments rub off on stocks

“Stocks like Emirates NBD remain attractive from a valuation perspective despite their recent rise (with P/E at 14),” said Sameer Lakhani, Managing Director at Global Capital Partners.

“This suggests upside potential - even from current stock price levels. The overall stock market volatility in the short-term has to do with economic and geopolitics. Investors would be well advised to ignore such fluctuations as they seek to build long term portfolios of blue-chip companies.”

Or will there be a bit of profit-taking?

Once the dividend dates are announced and paid off, some of the stocks could be up for profit taking at or around current levels. This could also hold true for the wider DFM index. Ahmad Awni, Head of Noor Capital Markets, says: "The main index could be exposed to some price corrections if traders move to secure their gains.

"The market recorded mixed performances among local stocks as traders reacted to company earnings. Emirates NBD, reported robust earnings, with net profits surging by 65 per cent. Strong earnings and solid local fundamentals could help support the market and maintain the current uptrend overall."

The coming days and the next round of banking results will obviously set the tone.