The Banking Executive Magazine - February 2022

Top UAE Banks TOP UAE BANKS SET TO SEE PROFITABILITY RETURN TO PRE-PANDEMIC LEVELS Growth in net interest income will drive profitability to pre-pandemic levels at the largest UAE banks in the next 12-18 months, according to a report by Moody's Investors Service. The growth in net interest income will be underpinned by rising interest rates expectations and strong busi- ness momentum supporting non-in- terest income, even as provisioning efforts ease. "The four largest banks' profitability rebounded to near pre-pandemic levels in 2021, largely reflecting ro- bust non-interest income and soften- ing loan loss provisions," said Nitish Bhojnagarwala, a VP-Senior Credit Officer at Moody's and the author of the report. "We expect a full return to pre-pan- demic levels of profitability in the next 12-18 months." The four largest banks,First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank and Dubai Islamic Bank reported a combined net profit of $8 billion for full-year 2021, up 31 percent from the previ- ous year. The recovery was a result of improv- ing consumer confidence as macro- economic conditions in the UAE recovered, particularly given loosen- ing pandemic restrictions, a strong vaccination roll-out and recovering oil prices. Moody's expects continued the pick- up in bottom-line profitability to sup- port the UAE banks' already healthy capital buffers and outweigh the pressure coming from increased lending activity in a context of eco- nomic recovery. Although net profitability has broadly bounced back to pre-pandemic lev- els (in dollar terms), the return on as- sets may not recover for some banks until 2023, the report said. the BANKING EXECUTIVE 16 ISSUE 158 FEBRUARY 2022