First Abu Dhabi Bank, the UAE’s largest lender by assets, reported a 70 per cent surge in its first quarter net profit, driven by a sharp rise in interest income and sustained momentum across all business segments.
Net profit attributable to shareholders for the three months to the end of March surged to Dh3.9 billion ($1.07 billion), excluding Magnati-related capital gains recorded in the first quarter of 2022, the bank said in a statement on Thursday to the Abu Dhabi Securities Exchange, where its shares are traded.
Net interest income increased by an annual 41 per cent to Dh4.4 billion in the first quarter, total assets increased 21 per cent to nearly Dh1.2 billion, and the bank attracted Dh80 billion in customer deposits in the period.
“Building on a record year in 2022 and prudent actions taken in the fourth quarter of last year, the notable improvement … was driven by sustained momentum across all business segments and product lines, cost and risk discipline, and our proven ability to navigate evolving market conditions,” said Hana Al Rostamani, FAB group chief executive.
“During the period, we remained focused on meeting our clients’ evolving needs, across all segments. Using our scale, specialisation, partnerships, and the transformative power of technology, we are building a bank fit for the future, centred around our customers.”
FAB said its quarterly profit was also supported by a 74 per cent rise in non-interest income to Dh2.3 billion, as continued economic momentum in the UAE boosted performance across all core business.
Most central banks across the globe are continuing to follow the US Federal Reserve's lead on increasing benchmark policy rates. The Fed is trying to bring inflation down towards its target range of 2 per cent and restore price stability amid market turmoil fuelled by recent bank failures in the world's largest economy.
Lenders in the GCC, where most central banks peg their currency to the US dollar, are benefiting from rising interest rates as their economies recover strongly and inflation in the region remains relatively low.
Profitability of the four largest banks in the UAE will continue to grow this year amid rising interest rates and continuing economic momentum, Moody's Investors Service said in March.
After growing 7.6 per cent in 2022, the most in 11 years, the UAE economy is expected to expand 3.9 per cent this year and 4.3 per cent in 2024, the UAE Central Bank said last month.
FAB said its cost-to-income ratio at the end of March reached 25.1 per cent, compared with 33.2 per cent recorded in the first quarter of 2022.
Loans and advances and Islamic financing rose 9 per cent on an annual basis to Dh473 billion.
The lender, which expects the UAE's economy to expand by about 5 per cent this year and maintain robust growth momentum next year, is also upbeat about the regional growth prospects.
“Despite the global headwinds, to which the GCC will not be immune, we expect the economies of the UAE and KSA [Saudi Arabia] to remain robust as the region continues to focus on economic growth and diversification,” FAB said.
The GCC, with most members of the economic bloc holding their PMI’s firmly above 50 since late 2020, has experienced continued strength and resilience. However, Egypt’s macro narrative remains fragile, the bank said.
On the oil outlook, FAB expects the Brent benchmark to average $89 per barrel this year, compared to an original target of $93 per barrel.
However, despite a slowing global economy, the bank is “positioned to navigate uncertain times”, Ms Al Rostamani said.
FAB is open to acquisition opportunities in the Middle East and North Africa and in markets beyond as long as the deals make commercial sense and create value for the bank.
The lender is also open to acquiring international banks if an opportunity presents itself, as it continues to expand its footprint in markets across continents, Ms Al Rostamani told The National earlier this month.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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What are NFTs?
Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.
You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”
However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.
This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”
This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
