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UAE Banking pulse report for Q1 2018

July 2018

July 15, 2018 | 14:30 | Dubai – Alvarez & Marshal’s UAE Banking pulse report for Q1 2018 analyzes performance of banking sector

Comparing the data of the 10 largest listed banks in the UAE, this UAE Banking Pulse report looks at the first quarter of 2018 (Q1 2018) against the fourth quarter of 2017 (Q4 2017), identifying the prevailing trends throughout the intervening period.

Key trends for Q1 2018 were as follows:

  1. Deposits grew at a similar rate (1.41 percent) as loans & advances (L&A) (1.53 percent), resulting in a stable loan-to-deposit (LDR) ratio for Q1 2018, with nine of the top 10 in the LDR “green zone” of between 80 percent and 100 percent. However, on a standalone basis, deposits growth declined. Meanwhile, six of the top banks grew their deposits market share and five grew their L&A market share
  2. Operating income growth declined (from 3.46 percent in Q4 2017 to -1.37 percent in Q1 2018) along with non-interest income (from 31.0 percent in Q4 2017 to 29.9 percent in Q1 2018)
  3. Net interest margin (NIM) declined, despite a rise in yield on credit, driven by an increased cost of funds. Five of the top 10 banks witnessed a decrease in NIM
  4. Cost to income ratio (C/I) improved (falling from 34.2 percent to 32.3 percent), driven by a decrease in operating expenses of 45 basis points (bps). This reversed last quarter’s increase and continued the trend from previous quarters
  5. Cost of risk fell significantly (from 1.04 percent in Q4 2017 to 0.81 percent in Q1 2018), due to decreased loan loss provisions
  6. Return on equity (ROE) and return on assets (ROA) both increased due to a decrease in cost of risk and operating expenses. This came at the expense of a decrease in capital adequacy ratio (CAR). Nine out of 10 banks showed an increase in ROE

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