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UAE banks had a solid 3Q 2024 compared to their GCC counterparts, taking the lead in customer deposits, net interest margins, and return on equity, while achieving the lowest cost-to-income ratio across the region, according to a Kamco Invest report (pdf).
Customer deposits grew by 3.1% q-o-q to USD 828 bn in 3Q 2024, while lending jumped 3.4% q-o-q during the quarter. The UAE’s loan-to-deposit ratio was the second lowest in the GCC, reaching 69.3% after Bahrain’s 66.1%, marking a 30 bps increase compared to 2Q 2024. This figure indicates that UAE banks “remain in a comfortable position to finance future growth” in terms of liquidity, according to the report.
The UAE had the second highest gross credit figures in the region, after Saudi Arabia, with AED 2.1 tn in gross credit — a marginal increase driven by a 0.3% increase in domestic credit that offset the 1.5% decrease in foreign credit.
Total bank revenues rose 3.9% q-o-q, with net interest income increasing 1.8% q-o-q and net interest margins coming in at 3.42% — the highest in the region, though still marginally decreasing from 3.47% in 2Q 2024. The solid margins indicate “ample liquidity that allows UAE banks to capitalize on the tightening interest rate cycle with more modest asset growth,” Kamco said. Non-interest income grew 7.5% q-o-q.
Increase in expenses was offset by a cost-to-income ratio improvement: UAE-listed banks recorded the highest q-o-q growth in operating expenses across the region with a 7.7% q-o-q jump to USD 4.6 bn in 3Q 2024. However, this figure was offset by reporting the biggest q-o-q decline in cost-to-income ratios, amounting to 37.6% compared to 38.2% in 2Q 2024.
Loan impairments more than doubled to reach USD 800 mn in this quarter — the highest increase across the GCC. Still, the cost of risk ratio — which is the ratio of yearly provisions to average loans — came in at 0.5%, which is the same value as the average ratio for the GCC banking sector.
Emirati banks achieved a 16.8% return on equity ratio, dropping slightly by 10 bps compared to 2Q 2024, followed by Saudi Arabia and Qatar at 12.8%.
REGIONAL PICTURE-
GCC banks reported a record high of USD 2.1 tn in gross loans in 3Q 2024, increasing 10.1% y-o-y and 3.1% q-o-q, backed by growth across all regional markets. Operating expenses rose for the second consecutive quarter by 4.1% q-o-q to USD 13.1 bn, which was driven by higher expenses in four out of six GCC country aggregates and which weighed on the aggregate net income of GCC banks. Net income saw a three-quarter low growth of 0.4% q-o-q.
The aggregate net interest income also rose to a record level of USD 22.1 bn in this quarter, while the return on equity remained high in comparison to the last few years at 13.6%.
