UAE’s top banks beat estimates as economy boosts earnings

Two of the United Arab Emirates’ biggest banks posted a first-quarter profit that beat estimates as rising interest rates and the country’s resilient economy helped to boost business.

Profit at First Abu Dhabi Bank PJSC’s was 3.93 billion dirhams ($1.07 billion), slightly higher than the 3.21 billion dirhams analysts had expected.

The number was down from a year earlier because that period included a one-time gain from the sale of a stake in its payments business.

Excluding that, profit jumped 70 percent year-on-year, it said in a statement Thursday.

Net interest income jumped 41 percent and the lender said that all of its business segments grew over the period.

It also attracted 80 billion dirhams of deposits during the quarter, but impairments jumped 74 percent to 798 million dirhams.

FAB, as the bank is known, earlier this year said it had explored a bid for Standard Chartered Plc but that it was no longer looking an offer. In the statement, Chief Executive Officer Hana Al Rostamani said the lender is looking to “shape the future of banking in the UAE and the broader region.”

Shortly afterwards, Dubai’s Emirates NBD PJSC said its first-quarter profit more than doubled to 6 billion dirhams, exceeding analysts’ expectations of 4.84 billion dirhams.

Its net interest income jumped 69 percent to 7.2 billion dirhams, while impairments fell 66 percent to 500 million dirhams.

Bigger role

The UAE economy has been booming after the government’s handling of the coronavirus pandemic. The country has become an attractive place for investors looking for a place to park their wealth.

Boosted by higher oil prices and backed by wealthy governments, banks in the Gulf region have been seeking to play a bigger role on the global financial stage.

“Higher income enables us to accelerate our international expansion and investment in digital and data, which will deliver alternative revenue streams and offset against the impact from expected future interest rate cuts,” ENBD’s chief financial officer Patrick Sullivan said in the statement.

Looking ahead, both banks expect the UAE economy to continue to grow but not at the current rate.

FAB predicts growth of 5 percent on average this year, compared with over 7 percent in 2022. Next year, it forecasts real GDP growth of just over 4 percent on average.

“Despite the global headwinds, to which the GCC will not be immune, we expect the economies of the UAE and Saudi Arabia to remain robust as the region continues to focus on economic growth and diversification,” the bank said.