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 Moody’s 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.

Dubai’s Mashreqbank saw its third quarter profit fall 24.8 per cent year-on-year to AED415m (113m) as revenue growth slowed and impairment charges rose by up to 82 per cent from September 2015.

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 (%)
Emirates NBD 1664 -0.5 3614 0.4 729 -11.3
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
Mashreq 415 -24.8 1496 3.7 470 82
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 Dhabi’s 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 GCC’s largest lender.