UAE banks had a good quarter: UAE-listed banks recorded the highest deposit growth in 1Q 2024 among GCCbanks, with deposits growing 5.6% y-o-y to USD 803.2 bn, according to Kamco Invest’s GCC banking sector report (pdf). Total deposits for listed GCC banks hit a record USD 2.45 tn, up from USD 2.4 tn in 4Q 2023, according to the report.

Emirati banks’ lending grew 2.7% y-o-y to USD 568.4 bn, the second highest in the GCC after Saudi banks, which saw a 3.5% increase to USD 689.7 bn. GCC listed banks’ lending grew 8.1% y-o-y, reaching USD 2.2 tn in 1Q 2024.

Gross credit in the UAE banks grew by 1.1% in the first two months of 2024, reaching AED 2 tn by the end of February. This growth was driven by an increase in domestic credit, which offset a decline in foreign credit in February, reversing the trend from January when foreign credit rose and domestic credit was flat, the report reads.

UAE-listed banks also led the region in return on equity (RoE) during the quarter, achieving an RoE of 16.9%, with Saudi and Qatari banks following at 12.8% and 12.7%. This marks the largest y-o-y RoE increase, driven primarily by increased income and a relatively smaller rise in total shareholders’ equity.

The UAE led the pack among GCC banks in 1Q 2024 with a net interest margin of 3.49% on the back of ample liquidity and modest asset growth, according to the report.

UAE banks also recorded the largest decrease in impairments among GCC banks in 1Q. Overall, the GCC banking sector experienced its lowest impairments in five years during the quarter, with aggregate impairments totaling USD 2.27 bn, a 34.4% decline from 4Q 2023.

A LOOK AT THE REGION-

The GCC banking sector as a whole maintained stable bottom-line performance, showing q-o-q growth of 11.8% and a y-o-y growth of 10.5%, reaching USD 14.4 bn in 1Q 2024.

However, elevated interest rates impacted GCC banks for the first time in 12 quarters in 1Q 2024, with both interest income and non-interest income declining, according to the report. Total interest income was flat at USD 50.5 bn, with a 4.3% yield on credit. Total bank revenue for GCC-listed banks also dropped to USD 31.4 bn during the quarter, the first decline since 1Q 2021.

Operating expenses for GCC banks dropped to USD 12.5 bn during the quarter, down 4.5% from the previous quarter’s record high. However, the cost-to-income ratio for GCC banks slightly rose to 40% in 1Q 2024, mainly due to “higher costs for the twelve-month period.” Qatar had the lowest ratio at 38.2%, followed by the UAE and Saudi Arabia at 38.4% and 39.4%, respectively.

Tags: