UAE’s lenders surpass expectation

Two major banks in the United Arab Emirates (UAE) have reported strong profits for the first quarter, driven by the country’s resilient economy and rising interest rates. First Abu Dhabi Bank PJSC reported profits of AED3.93bn ($1.07bn), slightly higher than the AED3.21bn forecast by analysts. The lender’s net interest income rose 41%, while impairments increased 74% to AED798m. Meanwhile, Emirates NBD PJSC reported profits of AED6bn, over double that of the previous year, with net interest income up 69% to AED7.2bn and impairments down 66% to AED500m.

Despite the pandemic, the UAE economy has been booming, making the country an attractive destination for investors. Backed by wealthy governments and higher oil prices, banks in the Gulf region are now seeking to play a bigger role on the global financial stage. Both FAB and Emirates NBD are looking to invest in digital and data to deliver alternative revenue streams and offset future interest rate cuts.

FAB is predicting growth of 5% on average this year, down from the over 7% seen in 2022. The bank expects GDP growth of just over 4% on average next year. The lender earlier this year explored a bid for Standard Chartered, but it said in a statement that it was no longer considering the offer. Meanwhile, Emirates NBD expects the UAE economy to continue to grow, albeit at a slower rate. The bank’s chief financial officer, Patrick Sullivan, said the bank is “looking to accelerate our international expansion and investment in digital and data”.

Despite global headwinds, the banks predict that the UAE and Saudi Arabian economies will remain robust as the region continues to focus on economic growth and diversification.

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