UAE banks have had to set aside higher loan impairment provisions, reducing profits in many cases.
The banking system overall is resilient, well-capitalised and liquid, according to a recent Moodys Investors Service research note. However, non-performing loans (NPLs) are expected to increase slightly to 5.5 per cent of the total, mainly from small and medium enterprises and retail segments.
A new bankruptcy law, which is now expected to come into force at the beginning of 2017 following a presidential decree, should assist banks dealing with NPLs.
Abu Dhabi Commercial Bank (ADCB) also saw its third quarter net profit fall 16.4 per cent compared to the same period of 2015, to AED1bn. Its revenue growth slowed, while impairments jumped over 400 per cent year-on-year.
Smaller banks also recorded falls in profits, in line with other GCC banking sectors.
National Bank of Abu Dhabi (NBAD), Emirates NBD and Dubai Islamic Bank (DIB) and Abu Dhabi Islamic Bank (ADIB) saw their profit growth stall in a weaker operating environment. All except Emirates NBD increased loan loss provisioning.
|Selected UAE banks Q3 2016 (year-on-year)|
|Bank||Net profit (AEDm)||change (%)||Operating income (AEDm)||change (%)||Provisioning (AEDm)||change (%)|
|First Gulf Bank||1864||31||2814||28||420||5|
|National Bank of Abu Dhabi||1320||-0.5||2684||3.4||287||3.6|
|Dubai Islamic Bank||1006||0.5||2175||14.2||113||74.8|
|Abu Dhabi Commercial Bank||1006||-16.4||2070||2.9||380||476.1|
|Abu Dhabi Islamic Bank||508.9||1.1||1369||6.6||268||38.7|
|Union National Bank||410||-15||902||-6||192||-4|
|Source: Published bank results|
Abu Dhabis First Gulf Bank (FGB) performed best, increasing its quarterly operating revenue by 28 per cent year-on-year to AED2.8bn and its net profit 31 per cent to AED1.9bn. FGB is currently merging with NBAD to create the GCCs largest lender.