Today's Edition
YOUSEF AL BUSTANJI (ABU DHABI)
Return on equity (ROE) for the 61 banks operating in the United Arab Emirates soared by 41% in 2023, reaching its highest level in over a decade at 14.8%, compared to 10.5% in 2022, according to data released by the Central Bank of the UAE (CBUAE).
The data showed that the significant increase in the ROE was driven by a 56% growth in total net income to Dh74 billion, up from Dh47.5 billion in 2022.
Total shareholders’ equity (capital base) of banks operating in the UAE increased by Dh47 billion, a growth of 10.4%, to reach Dh500 billion by the end of 2023, compared to Dh453 billion at the end of 2022.
The rise in the ROE and net income for banks in the UAE was attributed to the availability of low-cost liquidity, as bank deposits increased by over Dh 300 billion. This coincided with an increase in demand for loans and credit facilities in the local market, which led to an expansion in bank financing operations by Dh 112 billion during the past year.
Additionally, base interest rates rose to their highest levels in two decades, and the economic recovery in the local market led to improved customer solvency, a decrease in non-performing loans, and a decrease in total administrative and general expenses.
The data revealed that the non-performing loan (NPL) balance of banks operating in the UAE decreased by Dh 17.5 billion to Dh 116.3 billion by the end of 2023, compared to Dh 133.8 billion at the end of 2022, marking a 13% decline.
Consequently, the NPL ratio fell to 5.3% of the total banking credit portfolio in the UAE, which amounted to Dh 2.193 trillion by the end of 2023, compared to 6.6% of the total credit portfolio of Dh 2.042 trillion at the end of 2022.
The provisions set aside by banks to cover NPLs also decreased by Dh 13.9 billion, representing a 11.3% decline in the value of provisions, which stood at Dh 70.2 billion by the end of 2023, compared to Dh 81.5 billion at the end of 2022.
The data also showed a decrease in the administrative and general expenses ratio of banks (excluding interest costs) to 31.8% of total operating income in 2023, compared to 36.6% in 2022.
The data confirmed that the performance of banks in the UAE during the past year confirms that the banking sector has succeeded in improving its financial solvency, capital adequacy ratios, and increasing the strength of banks operating in the country and the stability of the banking sector.
