UAE bank profits seen rising 20% in 2013

Net profit growth at commercial banks in the UAE is expected to accelerate to about 20 per cent in 2013, while Mashreq Bank forecasts its own growth at 40 per cent, the chairman of the UAE's banking federation said on Wednesday.

UAE banks such as Dubai lender Emirates NBD and National Bank of Abu Dhabi posted strong second-quarter earnings thanks to an economic recovery in key sectors such as real estate, and lower bad loan provisions as the UAE recovers from debt troubles at Dubai's state-linked entities.

"Banks here managed to overcome challenging global and regional conditions. We expect banks to report a 20 per cent growth in net profit in 2013," Abdulaziz Al Ghurair, chairman of the banking lobby group and chief executive of Dubai lender Mashreq, told reporters.

Profit growth for banks in the country last year was 15 per cent, Al Ghurair said.

He added that profit at his own bank, Mashreq, was expected to jump 40 per cent this year, revising his February forecast of 10-15 per cent growth. The new forecast is based on "much lower" provisions which the bank expects to book this year, he said.

"The bank is enjoying healthy levels of liquidity and lower levels of provisions. We expect net profit this year to be around 40 per cent and provisions much lower than last year."

Last year, Mashreq reported a 67 per cent net profit increase as provisions dropped to Dh826.5 million ($225 million) from Dh1.2 billion in 2011.

Assets

Total assets of UAE banks grew 8 per cent to Dh1.9 trillion in the first six months of this year, while net profit during the period was Dh13.6 billion, Al Ghurair said.

But local lenders are unhappy with the additional costs they will have to bear in order to implement the United States' Foreign Account Tax Compliance Act (FATCA), which cracks down on offshore tax avoidance by Americans, he said.

"UAE banks are not ready to implement the FATCA. It will cost banks here not less than Dh100 million to get the right systems and infrastructure in place," he said.

"We don't like FATCA and we don't want it, but we don't have a choice."

The US Treasury Department said in July that it would postpone enforcement of the law by six months to give foreign banks more time to figure out how to comply.

FATCA requires foreign banks, insurance companies and investment funds to send the US Internal Revenue Service information about Americans' offshore accounts worth more than $50,000.





 

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