Though they have proved resilient so far, major banks in the UAE face challenges to maintain profitability in the year ahead, warns a ratings agency.
In the last quarter of 2016, net profitability at the country’s top five banks fell 5% compared with the corresponding period in 2015, said Moody’s, in a report.
The decline was modest in the face of a challenging environment where non-oil GDP growth has sunk to 2.5%, compared with 6.4% four years earlier. However, the agency said fresh challenges will soon test the banks’ resilience.
“We anticipate pressure from rising funding costs as liquidity continues to tighten, and as banks increase their reliance on wholesale funding,” said Moody’s. “We also expect a rise in impairment charges driven by continued economic slowdown.”
Moody’s examined the finances of Emirates NBD, the National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, First Gulf Bank and Dubai Islamic Bank, which together account for 62% of UAE banking assets.
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