The top banks in the UAE continue to have strong capital positions backed by strong profits, and in the quarter that ended in June 2024, their asset quality further improved.
Leading international professional services company Alvarez & Marsal (A&M) reported in its most recent report on UAE Banking Pulse for the second quarter of 2024 that profitability increased to Dhs 21.5 billion for Q2 2024 due to lower impairment charges (-35.4 percent QoQ) and higher net interest income (NII).
In Q2 of 24 credit demand exceeded deposits mobilised. The top 10 UAE banks saw an increase in aggregate L&A of 3.2 percent QoQ, exceeding the 0.4 percent QoQ growth in deposits. As a result, LDR rose to 75.8 percent, up 2% QoQ.
Because NII growth was offset by lower non-core income, total operating income moderated. While non-interest income fell by 2.9 percent on a quarterly basis, operating income slightly increased by 0.4 percent. In Q2 of 24 the ratio of total operating income to aggregate non-interest income was 32.5 percent.
Six out of the top ten banks reported a deterioration in the cost efficiencies. Cost to income ratio (C/I) deteriorated by 19bps QoQ to 28.1 percent in Q2’24: still below ~30 percent level. Cost efficiencies deteriorated as aggregate total operating income (+0.4 percent QoQ) increased slower than the total operating expense.
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