Dubai: UAE Banks Financial Results for First Six Months of 2021 Show Sustained Improvement in Profitability Supported by Cost Efficiencies, Improved Asset Quality and Gains in Income Streams other than interest.
The overall gains in banking results for the first half of the current year compared to the same period last year confirm improving economic conditions supporting credit growth and credit quality with a lower cost of funds.
Abu Dhabi Commercial Bank (ADCB) announced a net profit of 2.52 billion dirhams for the first half of 2021, up 76% compared to the same period in 2020.
For the second quarter of 2021, the bank declared a net profit of 1.4 billion dirhams, up 14% year on year and 25% over one quarter.
“The growth in net profit is the result of an increase in a diversified revenue stream, disciplined cost control and a prudent approach to risk management,” said Khaldoon Al Mubarak, chairman of the ‘ADCB.
Mashrek, a leading bank, reported net profit of MAD 85 million for the first half (S1) of 2021. The bank’s operating profit increased by 1.4% compared to the previous year to reach 2.9 billion MAD due to the improvement in fees and commissions.
The ratio of non-interest income to operating income of the Mashreq improved to 49.8%, from 47.1% in the first half of 2020.
The operating profit at 1.6 billion dirhams is an increase of 4.6% compared to the first half of 2020 due to the increase in operating income and the reduction in operating expenses.
“By recording a net profit of 85 million Dh in the first half of 2021, I think we are fortunate to have been guided through the pandemic and its far-reaching impacts by national leadership who took proactive measures to protect business interests, jobs and the economy. stability, ”said AbdulAziz Al Ghurair, Chairman of Mashreq Bank.
Bankers confirm that operating conditions have improved significantly, paving the way for accelerated loan growth.
While the ADCB declared net loans of MAD 237.8 billion, up 1% sequentially and 0.5% down compared to the end of 2020, Mashreq loans and advances increased by 8% to reach MAD 77.3 billion.
The National Bank of Fujairah (NBF) and Sharjah Islamic Bank, which reported first half net profits of Dh76.2million and Dh289.5million, respectively, maintained their lending growth, confirming the improvement of economic conditions.
“The current economic outlook shows signs of a return to growth thanks to the UAE government’s measures against the consequences of COVID-19,” said Dr Raja Al Gurg, vice president of the NBF.
Sustained cost savings
The first round of banking results for the second quarter of 2021 confirmed that improving economic conditions have gained ground, supporting bank profitability.
The first quarter results of most of the UAE’s major banks had shown improved operating conditions characterized by better non-interest income, cost savings and a significant reduction in loan loss provisions supporting the profitability.
The ADCB reported a 180 basis point improvement in the cost / income ratio to 34.8% from the previous year. While the Mashreq reported a 2.7% drop in operating expenses, NBF saw operating expenses cut 5% year-on-year in the first half of 2021.
Although overall provision levels have remained high, impairments are declining. The ADCB declared depreciation charges of 1.38 billion dirhams for the first six months of this year, down 46% year-on-year. The NPL ratio was 5.86 percent. NBF has established net provisions for depreciation of Dh 425.7 million for the six-month period ended June 30, 2021, down 6.7% compared to Dh 456.3 million for the corresponding period of 2020.
Despite the overall improvement in asset quality matrices, banks continued to maintain a cautious approach to provisions. The provision for Mashreq loans and advances in the first half of the year reached 5.3 billion Dh The provision for depreciation in the first half of 2021 amounts to 1.5 billion Dh against 978 million Dh in 1H 2020, reflecting a policy of prudent provisioning.
An analysis of the results of the 10 largest banks in the UAE in the first quarter of 2021 by Alvarez & Marsal (A&M) showed that the banks are on the road to recovery with the economy.
“The UAE banking sector saw a dramatic improvement in profitability in the first quarter, and the trend is expected to continue for the following quarters,” said Asad Ahmed, Managing Director of A&M.
The Targeted Economic Support Program (TESS), which the UAE Central Bank extended until June 2022, is expected to help dampen banks’ asset quality and ease strain on their balance sheets until the second quarter. 2022. “