National Bank of Fujairah and the Islamic lender Ajman Bank both reported a rise in profit as the banking sector reaped rewards from moving into fee-generating business lines.
At Ajman Bank, profit jumped by 256 per cent to Dh27.4 million in the three months to June, more than twice the Dh10.8m it earned in the same period last year. Earnings rose to 2 fils per share, up from 1 fil per share last year.
Ajman Bank’s corporate banking business was its most profitable business line and recorded net income of Dh90.3m in the period.
Profit at National Bank of Fujairah rose 26.7 per cent in the first half the year against the same period last year, the bank said. Net profit increased to Dh303.6m, up from Dh239.5m in the previous year. Fee income rose by 39 per cent, the bank said.
The UAE’s banks look set to shrug off the impact of low oil prices and the country’s slowing growth rate, analysts said.
The IMF downgraded its 2015 growth forecast for the third time last month, and purchasing managers index data suggests a slowing of non-oil activity – but so far this has not hit banks’ bottom lines.
The ratings agency Standard and Poor’s believes that the low oil price might lead to depositor numbers dwindling, resulting in lower growth over the course of the year. The agency reckons this means average income at UAE banks will grow 8 per cent this year, not 9 per cent as previously estimated.
The investment bank Arqaam Capital expects an average earnings growth of 15.9 per cent among banks it studies, while EFG-Hermes anticipates income growth of 5 per cent.
The UAE’s banks have largely cleared their books of bad debt and have reduced their exposure to Dubai government related entities that suffered during the 2008 real estate bubble, analysts said.
A move to increase fee income, and a rise in the value of collateral as property prices recover, have both bolstered bank finances.
Ajman Bank, which is listed on the Dubai Financial Market, closed up 1 per cent yesterday at Dh1.99 a share. Trading in National Bank of Fujairah, which is listed on the ADX, was suspended yesterday pending its results.
abouyamourn@thenational.ae
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