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UAE banks witness strong profitability in Q3

UAE banks' impairment charges decreased by 11.7% in the third quarter when compared to the second quarter

According to international professional services firm Alvarez and Marsal, the top banks in the United Arab Emirates saw strong profitability in the third quarter of this year, driven primarily by an increase in non-interest income and a decrease in impairment charges.

According to a consulting firm’s analysis, the banking industry in the United Arab Emirates saw increased profitability in the third quarter, primarily due to a 15 percentage point increase in total operating income from the previous quarter and a two percentage point increase in non-core income over the same period.

UAE banks’ impairment charges decreased by 11.7% in the third quarter when compared to the second quarter. As a result, the cost of risk improved by 10 basis points every quarter, reaching 0.6% in the third quarter, according to nine of the ten banks surveyed, the report stated.

The conclusions come from an examination of the financial results by Alvarez & Marsal of the top ten financial institutions in the United Arab Emirates, such as Abu Dhabi Commercial Bank, Emirates NBD, and First Abu Dhabi Bank. Along with the Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Ras Al-Khaimah, and Sharjah Islamic Bank, the study also includes Abu Dhabi Islamic Bank, Dubai Islamic Bank, and Mashreq Bank.

“This report showcases a robust third quarter for the UAE banks, buoyed by a higher interest rate environment and a meaningful reduction in impairment charges,” Asad Ahmed, managing director and head of Middle East financial services at Alvarez & Marsal said in a statement.

“Lenders are benefitting from healthy liquidity conditions supported by high oil prices, foreign capital inflows and moderate credit demand amid rising interest rates,” he added.

The report also stated that corporate and wholesale borrowings accounted for the majority of the 2% quarter-over-quarter growth in loans and advances given by these banks in the second quarter of this year.

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