UAE’s Top 10 Banks Report AED 21.5 Billion Income in Q2 2024
During the second quarter of 2024, the UAE’s top 10 banks achieved an aggregate income of AED 21.5 billion ($5.8 billion), driven by increased interest income and reduced impairment charges. This result highlights improved asset quality and a higher return on equity.
Financial Highlights:
Income Growth: The significant increase in interest income and lower impairment charges contributed to the strong income figures.
Deposit Growth: The growth rate for deposits slowed to 0.4%, a sharp decrease from the 5.1% recorded in the previous quarter. This slowdown suggests a deceleration in deposit mobilization.
Loans and Advances: Growth in loans and advances moderated to 3.2%, down from 3.4%, indicating a slowdown in lending activity.
Efficiency and Returns:
Return on Equity (ROE): ROE increased to 20.8%, up from 20.3% in Q1, showing enhanced profitability relative to shareholders’ equity.
Return on Assets (ROA) and Return on Risk-Weighted Assets (RoRWA): Both remained steady at 2.2% and 3.5%, respectively, reflecting stable returns on assets and risk-adjusted assets.
Cost to Income Ratio: The ratio worsened to 28.1% from 27.9% in Q1, indicating rising operational costs relative to income and increased cost pressures.
Net Interest Income (NII): NII grew by 2% due to a higher loan-to-deposit ratio (LDR), benefiting from efficient interest rate management despite stable rates.
Operational Insights:
Credit Outlay: Credit disbursement remained robust, continuing to support economic activity even with slower deposit growth.
Cost of Risk (CoR): CoR reached a multi-year low of 0.3%, with impairments falling to AED 1.3 billion, showing a significant improvement in asset quality and reduced credit losses.
Cost Efficiency: Six of the top ten banks reported worsened cost efficiency. The cost-to-income ratio increased as total operating expenses rose by 1%, outpacing the 0.4% rise in operating income.