UAE banks to return to full profitability in 12-18 months

As the economy recovers from the Covid-19 pandemic-induced downturn, banks in the UAE will revert to pre-pandemic levels of profitability in the following 12-18 months, owing to higher net interest income and increased economic momentum.

Growth in net interest income, anchored by rising interest rate forecasts and solid economic activity supporting non-interest income, will enhance profitability, according to Moody’s Investors Service in a study released on Monday. Provisioning efforts will lessen.

“The four largest banks’ profitability rebounded to near pre-pandemic levels in 2021, largely reflecting robust non-interest income and softening loan loss provisions,” said Nitish Bhojnagarwala, VP and senior credit officer at Moody’s and the author of the report.

“We expect a full return to pre-pandemic levels of profitability in the next 12-18 months.”

First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, and Dubai Islamic Bank, the UAE’s four main banks, recorded a total net profit of $8 billion in 2021, up 31% from the previous year.