Dubai: The best-performing banking stocks in the UAE still have lots of room on the upside. First Abu Dhabi Bank (FAB) shares have gained 5.53 per cent in the year so far, on top of a 37 per cent rally it went through in 2018.
In fact, it has been on a winning streak for the past four years, totalling up a jaw-dropping gaining 86 per cent. Meanwhile, Abu Dhabi Commercial Bank shares gained 20 per cent last year, while Abu Dhabi Islamic Bank (ADIB) has put on 32 per cent since June 2018.
“UAE banks are one of the few bright spots within GCC stocks,” said Vrajesh Bhandari, senior portfolio manager at Al Mal Capital. “These stocks have done well and so may have to consolidate at current levels before the next leg up. Hopefully, as the economy gains momentum after summer, that should help loan growth.”
The UAE Central Bank has projected growth of 2 per cent in real gross domestic product (GDP) this year, up from 1.7 per cent in 2018. In the first quarter to March, FAB recorded a net profit of Dh3.1 billion, the highest among UAE banks, which was up 4 per cent year-on-year.
UAE banks have been an attractive proposition for investors as consolidation among banks resulted in synergies and much improved economies of scale. Banks have used that as a means to control costs.
“Traders should not touch their banking investments,” said Issam Kassaibeh, senior analyst with Menacorp. “If anything, they are the safest vehicle of investment, equity-wise. Value is present of course, given the M&A just started and hasn’t had the chance to pay off yet.”
“Emirates NBD is very attractively priced, but do not expect much in the stock unless their foreign ownership is raised,” said an analyst who did not wish to be named.
Emirates NBD shares on the Dubai Financial Market have gained 27 per cent since January 1, building on from the 9 per cent gains seen last year. The stock has been an underperformer compared to FAB. In the quarter to March, Emirates NBD reported a net profit of Dh2.7 billion, up 15 per cent year-on-year.
And then there are DIB shares, which have been surging due to its planned acquisition of Noor Bank. DIB has gained 11 per cent since March and peaked at Dh5.26.
Surging banking shares have resulted in the outperformance of the Abu Dhabi index, which has gained 12.46 per cent in the past one year. The Dubai Financial Market general index has been underperforming regional indices, and shed 9.70 per cent in the past year.