The Banking Executive Magazine - August 2021

Top UAE Banks' RoE TOP UAE BANKS' ROE BACK AT PRE-PANDEMIC LEVELS AS ECONOMY REBOUNDS The UAE banking sector’s perform- ance improved in the second quarter of 2021 with the top ten lenders showing a healthy rebound in prof- itability and balance sheet metrics. Return on Equity (RoE) was back at Q4 2019-levels and loans and ad- vances (L&A) showed improvement, according to a report from Alvarez & Marsal (A&M). Aggregate RoE improved from 9.8 percent in Q1 2021 to 10.9 percent in Q2021, for the first time in the last five quarters, as net income in- creased 11.5 percent QoQ to 9 bil- lion dirhams ($2.45 billion). As economic conditions continued to improve, an increase of 2.8 per- cent QoQ in operating income cou- pled with a 9.3 percent drop in im- pairment charges compared the pre- vious quarter drove the growth in profitability. The L&A increased by 1.9 percent QoQ, after declining for three con- secutive quarters. “Dubai’s mortgage market has indicated robust signs of improvement, with the number of mortgage issuances almost doubling between December 2020 and June 2021,” the report said. The asset quality of the UAE banks also stabilized overall after deterio- rating in 2020. Three out of UAE’s top ten largest banks, including Emi- rates NBD, Mashreq and RAK Bank, have a coverage ratio of over 100 percent. “The banks have shown that they are better positioned than before in man- aging stress in their balance sheets in view of higher capital buffers, im- provement in recoveries and improv- ing profitability. The lower provisioning by banks underlines an improved credit outlook for the sec- tor,” the report said. The report analysed First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank (Mashreq), Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Fujairah (NBF), National Bank of Ras Al-Khaimah (RAK) and Sharjah Islamic Bank (SIB). the BANKING EXECUTIVE 18 ISSUE 152 AUGUST 2021