National Bank of Fujairah and Union Arab Bank report record 2013 profit as S&P predicts acceleration of loan growth this year.
UAE banks surge in wake of economic recovery
United Arab Bank and National Bank of Fujairah posted record yearly profit as their loan books were bolstered by a turnaround in the economy. The two are among the first lenders to report their annual earnings.
The economic recovery, which began in earnest last year amid rebounding property prices and improved business confidence, was likely to continue in 2014 as credit growth maintained an upward trajectory, Standard & Poor’s Rating Services said this week.
S&P said its rating outlook for the four banks it covers, National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Mashreqbank and Sharjah Islamic Bank, remained stable. The rating agency pointed to improving non-performing loan ratios following years of deteriorating asset quality as a good indication that business at banks would boom in the coming year as the nation’s economy accelerated.
“Over the past four years, UAE banks have reined in their lending activity as they focused on cleaning up their balance sheets, restructuring large exposures, and improving their funding and liquidity profiles,” S&P said in a note to its clients. “We now see clear indications that credit growth is increasing, particularly in Dubai, a trend that we expect will gradually accelerated in 2014.”
The Sharjah-based United Arab Bank posted a 35 per cent increase in net income, while National Bank of Fujairah (NBF), the lender partly owned by the governments of Dubai and Fujairah, reported a 29 per cent advance in profit. Both banks showed significant improvement in non-performing loans.
NBF’s net profit rose to Dh393.1 million last year from Dh305.8m in 2012, the Fujairah-based bank said. The bank’s loan loss provision dropped to Dh167.6m from Dh173.7m in the same period, an improvement of 3.5 per cent, while the non-performing loan ratio decreased to 4.6 per cent from 7.6 per cent.
“The bank’s focus on its core business, service quality and prudent risk management has enabled it to outperform the industry average for a fourth year running to achieve its best profit ever,” said Sheikh Saleh bin Mohamed Bin Hamad Al Sharqi, the bank’s chairman. “Most importantly, as market sentiment improves, the bank has established a firm foundation and stands ready to leverage the exciting developments in the regional economy for further growth.”
NBF also said that its board had recommended a 25 per cent increase in the dividend payout to 12.5 per cent of the bank’s paid-up capital from 10 per cent in 2012.
Meanwhile at UAB, the bank said that customer loans and advances had grown 40 per cent to Dh15.29 billion in 2013, while customer deposits had surged 49 per cent to Dh15.03bn. Its loan loss coverage ratio stood at 117 per cent and was in full compliance with Central Bank regulations, it said.
“Backed by strong fundamentals and the commitment of our management team in an improving economic landscape, the bank was successful in growing the loan book and customer deposits significantly,’’ said Paul Trowbridge, UAB’s chief executive.