Bank shares led by FGB and Union National Bank drove Abu Dhabi stocks higher yesterday as investors shifted to dividend-rich equities ahead of pay-off season.
Abu Dhabi’s main stock measure, the ADSMI, gained 0.4 per cent 4,681.28. In Dubai, the DFMGI index fell 0.03 per cent.
“Today’s market summarises what we have been seeing in UAE market since late November, which is more fundamentally based investors buying banking stocks and other dividend plays,” said Sanyalak Manibhandu, the head of research at NBAD Securities.
Banks, which have some of the highest dividend yields among UAE stocks, are set to declare dividends this month when they release full-year earnings for 2016.
While many banks in the UAE have been hit over the past year by slower economic growth, bigger banks such as FGB have held their own in recent quarters thanks to their international operations and cost-cutting measures.
FGB and NBAD, its main competitor that it is merging with this year, revealed in third-quarter earnings that their core business of lending remained steady despite the slowdown in economic growth.
While FGB reported a 31 per cent gain in profit for the quarter on the back of strong revenue from non-core businesses, NBAD said its profit was unchanged as a gain in fees and commissions was outweighed by a slight drop in income from loans. The banks have yet to report fourth-quarter earnings.
Abdul Aziz Al Ghurair, the head of the UAE Banks Federation, said in October that banking sector profits may fall between 10 and 20 per cent in 2016 versus 2015, as a slowing economy takes its toll on loan growth.
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