As the first-quarter banking results begin to filter out, a rather mixed pattern is emerging, not all of it encouraging. Bad debts, lower lending ratios and reduced profits suggest that while the finance industry is recovering from the lows of 2009, there is still a way to go before the sector is out of the woods.
With consolidation among the nation's 50 or so banks now looking unlikely, the big four - National Bank of Abu Dhabi (NBAD), Abu Dhabi Commercial Bank (ADCB), First Gulf Bank and Emirates NBD - are beginning to gain a stranglehold on the domestic business.
These four now control more than 50 per cent of the total assets in the banking system. With the two main foreign banks, Standard Chartered and HSBC, there is now the start of a premier league of banking, with the rest fighting for the lower places and hoping to avoid relegation. As the big four get better credit ratings, there may also be a "flight to quality" from depositors.
Emirates NBD's profits in the first quarter, up 27.1 per cent on the same period last year, gave the market a temporary fillip, with investors anticipating better results across the board. But some of this was due to the sale of its credit card unit.
NBAD posted a reduced profit, as did First Gulf Bank. ADCB appears to have performed best, almost doubling its profits.
So while there is a case for cautious optimism, question marks remain. Do the banks still have an appetite for lending? Is there enough liquidity and confidence in the economy? And can the balance sheets recover?
One final question: does the Government guarantee on deposits, introduced at the height of the financial crisis in 2008, still apply?
Hopefully, the Central Bank will confirm it does.
