National Bank of Abu Dhabi and FGB both reported another record year of earnings in 2014, with profits for each topping Dh5.5 billion.
The emirate’s two largest lenders overcame declining margins from corporate loans and focused on squeezing profits out of businesses such as asset management and trade finance.
The banks also upped their game in selling loans to individual customers and small and medium-sized enterprises where the margins are higher because of the elevated risk over corporate loans.
That strategy is likely to continue as lower oil prices put pressure on deposits made by big government companies and which will intensify competition among lenders who are pumping out products such as high-yielding credit cards and unsecured personal loans.
“We are moving our balance sheet increasingly towards retail and commercial and the wealth side of the business and that is simply because we get better returns and better margins and we believe that particularly in retail we are massively underweight,” Alex Thursby, the chief executive of NBAD, said in a conference call with investors after the earnings were released.
“But our loan growth in the wholesale side, particularly relationship loans, have actually decreased. That is deliberate.”
NBAD, the largest bank in the UAE by assets, said net income in the fourth quarter of 2014 jumped 28 per cent to Dh1.37bn. For the whole year, profit rose 18 per cent to Dh5.57bn from 4.74bn in 2013.
Meanwhile, FGB, which had the highest profit of any UAE lender last year, said its 2014 profit advanced more than 18 per cent to Dh5.66bn from Dh4.77bn in 2013. It did not break out fourth-quarter figures.
For both banks, the 2013 full-year profits had been records.
Elsewhere, Commercial Bank of Dubai said its profit last year rose 19 per cent to Dh1.20bn versus Dh1.01bn in 2013.
NBAD’s non-interest income jumped 17.6 per cent last year to Dh3.39bn from Dh2.88bn as the bank increased its efforts in growing businesses such as trade finance, wealth management and brokerage services. Mr Thursby said that while the bank was open to looking at possible acquisitions, he declined to comment on speculation that it could be interested in acquiring Citibank’s Egypt consumer banking operation that is up for sale.
In the past couple of years, UAE bank growth has been propelled by an economy recovering from the financial crash of 2008.
After years of stagnation, lenders started to stage a comeback in 2012 as government spending on infrastructure trickled down to the wider economy, spurring demand for loans to finance everything from home purchases to corporate expansion.
Last year, the economy is estimated to have grown more than 4 per cent, even after the price of oil fell more than 50 per cent during the course of 2014. As a result, many economists, including those at HSBC and Standard Chartered, have lowered their 2015 growth forecasts for Arabian Gulf countries.
Still, banks are putting their faith in the UAE’s non-oil economy to boost growth.
“2014 is already behind us and we are looking ahead with confidence and optimism,” said Andre Sayegh, FGB’s chief executive.
“We strongly believe that the UAE economy is fundamentally solid enough to absorb the impacts of acute volatility in the commodities market, even in the case of a prolonged downturn,” he added.
“The competitiveness and strength of the UAE economy go far beyond the price of the barrel of oil.”
mkassem@thenational.ae
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