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23 April 2024

UAE banks most competitive in GCC: study



Abu Dhabi Islamic Bank (Adib) reports the UAE remains the most competitive banking market in the GCC, a key finding from its proprietary "GCC Banking Competitiveness Report."

The country's population of approximately 8 million is served by 51 banks with more than 840 branches and over 4,000 ATMs, delivering high levels of service, yet lower profitability than its GCC counterparts.

Adib further notes that UAE banks' net interest margin, which is the spread between what banks pay for deposits and what they charge for financing and loans remains the lowest among the GCC, at an average of 2.9 per cent. Saudi banking spreads are currently closer to 3.5 per cent, Qatar at 3.4 per cent those of Kuwait banks are at around 3.2 per cent.

Nevertheless, Adib urges banks across the region to improve their levels of competitive analysis while at the same time raising the level of industry debate. This is necessary, it believes, if they are to ensure their continued strength in the challenging global economic environment and better meet the needs of their customers and shareholders.

Comparing the number one and two banking markets by size in the GCC, the UAE and Saudi Arabia, Andrew Moir, Global Head of Strategy and Finance at ADIB, says: "Despite the fact that the UAE is a bigger banking market in terms of assets, it remains less profitable than that of Saudi Arabia.

"In the UAE, the mix of deposits, low customer charges, the presence of high levels of non-performing assets and competitive dynamics have negatively impacted banking profitability and capital ratios.

"However, lower net interest margin spreads means that consumers in the UAE are getting better rates overall but shareholders are getting lower returns as compared to those in other GCC markets."