UAE banks benefited from higher investment with the central bank, return from services and commissions and slower growth in bad loan provisions to boost net earnings by nearly 4.7 per cent in the first quarter of 2011.
The rise in profits extended income growth through 2011 following a difficult financial period in the aftermath of the 2008 global fiscal crisis and exposure of many banks to regional debt defaults.
Balance sheets of 14 national banks that have issued quarterly results showed their net earnings grew by 4.7 per cent to around 5.72 billion during January-March this year from Dh5.46 billion during January-March 2010.
Compared with the fourth quarter of 2010, the banks boosted income by a staggering 59 per cent as it stood at Dh3.58 billion during that period.
The reports showed the government-controlled Abu Dhabi Commercial Bank (ADCB) sharply rebounded into profits following losses over the past year and recorded the highest income growth of 160 per cent to nearly Dh574 million in the first quarter of 2010 compared with Dh219 million in the first quarter of 2010.
Profit growth stood at 32.7 per cent by National Bank of Fujeirah, 28.5 per cent by National Bank of Ras Al Khaimah, and 27.17 per cent by Emirates NBD.
Annual balance sheets showed the net profits of banks swelled by nearly 10.6 per cent to Dh17.6 billion in 2010 from Dh15.9 billion in 2009.
Their combined assets also rose by nearly six per cent to a record high of around Dh1.29 billion at the end of 2010 from Dh1.21 billion at the end of 2009.
ADCB rebounded into a small profit of around Dh3.8 million last year while National Bank of Abu Dhabi, also controlled by the government, recorded an increase of about 20 per cent to Dh3.6 billion from Dhthree billion.
Most other banks also recorded growth in their net earnings while there was a decline in the income of Emirates NBD to around Dh2.3 billion from Dh3.3 billion and in the earnings of Mashreq and Dubai Islamic Bank to Dh803 million from Dhone billion and to Dh806 million from Dh1.2 billion respectively.
UAE banks suffered one of their worst financial periods in 2009, when their net profits dipped by around 20.6 per cent to Dh14.87 billion from Dh18.71 billion in 2008. The decline was mainly because of massive allocations for loan loss provisions following the 2008 crisis and regional default problems.
In a recent study, Kuwait’s Global Investment House expected better performance by UAE banks in 2011 due to an improvement in the domestic economy and a pick-up in lending that had been stagnant over the past two years due to banks’ tightness and poor private sector appetite for credit.
Analysts said the better performance in the first quarter of this year was a result of higher investment in central bank’s certificates of deposits (CDs), profits from services and commissions and a slowdown in provisioning.
Official data showed CDs issued by the central bank to the UAE’s 51 banks totalled around Dh112.3 billion at the end of March, an increase of nearly Dh18 billion from their level of about Dh94 billion at the end of 2010.
Banks’ deposits with the central bank also surged by around Dh13 billion to climb to nearly Dh79 billion at the end of March.
Central bank figures also showed banks’ provisions for non-performing loans grew by only around Dh1.5 billion in the first two months of 2011 after leaping by nearly Dhfive billion in the previous two months.
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