Abu Dhabi Commercial Bank (ADCB), one of the emirate's biggest lenders, yesterday posted an 19 per cent jump in third-quarter profit, even as lower oil prices weighed on economic growth.
Net income rose to Dh1.2 billion in the third quarter from Dh1.01bn in the corresponding period last year, meeting analyst estimates.
Interest income rose to Dh1.76bn from Dh1.58bn last year, while fees and commissions climbed to Dh334.6m from Dh306.4m last year.
“We have consistently delivered good financial results despite the volatility in financial markets,” said Ala’a Eraiqat, ADCB’s chief executive.
“We are focused on maintaining a conservative balance sheet and delivering strong returns, which is reflected in our third-quarter results.”
As banks release third-quarter earnings this month, analysts expect the banking sector to face headwinds caused by funding pressures, a slowing economy and a protracted period of lower oil prices that started in the middle of last year. Margins from loans are expected to tighten amid low interest rates.
EFG Hermes, the Egyptian investment bank, expects the third-quarter earnings growth of the nine UAE lenders it tracks to decline 10 per cent year on year.
That compares to the 14 per cent year-on-year pace of growth in the second quarter.
EFG-Hermes expects most of the earnings growth to come from banks setting aside less money to cover bad debts rather than revenue from lending.
Until now, banks have shrugged off the sharp drop in oil prices.
Crude oil, which powers the region’s economic growth, has lost about half of its value in the past 12 months amid a glut brought about by increased North American production and lower demand from China, the world’s second-biggest economy.
The UAE federal government funds more than 60 per cent of its budget from crude oil sales.
One of the biggest casualties in the reporting season so far has been United Arab Bank (UAB).
The bank, which is headquartered in Sharjah, said it swung to a third-quarter loss after a sharp rise in commercial loan defaults.
UAB lost Dh272.6m in the third quarter, compared to a profit of Dh169.2m in the same period last year.
Despite the pessimism surrounding the economy, many big banks remain optimistic.
“We have confidence in the long-term growth of the economy,” said Mr Eraiqat.
mkassem@thenational.ae
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