A new regulatory broadside from the Central Bank is probably the last thing investors in Abu Dhabi Islamic Bank (ADIB) want to hear about as the lender prepares to report earnings next week.
It is hoped the Central Bank will seek a more consensual approach to regulations on mortgages and structured products, which may be less disruptive to lenders than limitations on personal loans, car financing and credit cards that came into effect in May.
Nevertheless, ADIB is expected to be among the lenders worst affected by the regulations, which capped the charges that could be applied to personal lending and placed limits on how much individuals could borrow.
ADIB, which earned 72.5 per cent of its total revenue from its retail business in the first quarter of the year, is in an unenviable position. Fully three quarters of its loan book is composed of retail lending.
Net fees and commissions across the bank's business accounted for Dh111.8 million in the first quarter of this year, almost double the income from the same period last year, according to the bank's financial statements.
ADIB's stocks rose 1.74 per cent yesterday to Dh3.50 a share.
But the personal lending regulations are likely to have a big impact on the bank's margins, says Janany Vamadeva, a financial analyst at AlembicHC.
ADIB is hardly alone in being affected: banks' income from fees across the sector ballooned last year, she said.
"In 2010, when lending wasn't going up, a lot of banks did revise their fees upwards to compensate," she said.
"When we did the calculations, we found ADIB would be the worst hit of the banks we cover when it comes to fee income."
However, Ms Vamadeva said ADIB was expected to reap some benefits from its participation in government infrastructure projects.