For the UAE banking sector March was another good month.
Most banking stocks went ex-dividend and after adjusting for corporate actions, National Bank of Abu Dhabi was the best performer with its stock up by 10 per cent, followed by Union National Bank up by 9 per cent, while Mashreq was the worst performing stock, down by 5 per cent.
On a year-to-date basis, Emirates NBD is the best-performing stock with stock up by 46 per cent, followed by Abu Dhabi Commercial Bank up by 38 per cent.
It is expected that the performance and profitability of the UAE banking system will further improve this year, primarily thanks to a decline in provisioning.
The asset quality of UAE banks is now showing signs of stability. Liquidity in the system has strengthened, with a loans to deposit ratio of 94 per cent at the end of last year from a high of 100 per cent at the end of 2011.
Loan growth of the UAE banking sector this year is expected to be about 5 per cent. Overall, banks remain well capitalised and well- positioned to take advantage of future growth opportunities.
The property sector in the UAE benefited from profit taking last month after recording a strong performance in January and February. The Dubai real estate index was down 7 per cent in March after a 29 per cent increase in the first two months of this year, led by Emaar Properties.
However, Emaar remained one of the best performers in the sector with a total return of 37 per cent so far this year.
In the first quarter of this year, Dubai's property market continued registering growth in activities and prices were supported by continued improvement in the tourism and hospitality segment.
In Abu Dhabi, Aldar and Sorouh were down by about 12 per cent last month.
However, on a year-to-date basis, both Aldar and Sorouh were up by 14 per cent and 35 per cent respectively, supported by the merger progress.
Both companies received shareholders' approval for a merger last month, which is scheduled to be completed by the end of June.
Du and Etisalat further extended their gains last month, supported by increased dividend payouts for last year.
The biggest surprise from UAE telecoms companies was the better-than-expected dividend payout for last year. Du lifted its dividend payout by 100 per cent, while Etisalat increased the dividend payout by 10 fils. DP World shares gained 7.5 per cent in March, after reporting solid 2012 financial results.
The company management expects the current market condition to remain uncertain and consistent with those experienced at the end of last year. The stock will pay 24 US cents cash dividend for 2012, implying a yield of 1.7 per cent.
Overall, the outlook for the Middle East and North Africa region remains extremely positive. Recent announcements by central banks and governments in GCC countries regarding their intent and ability to support growth and reform in the region have boosted confidence and sentiment among investors.
Fundamental valuations for many companies remain compelling despite recent gains.
Saleem Khokhar is the head of equities at NBAD asset management
