Sunday, Apr 15, 2012
Dubai: After enduring three consecutive years of asset impairments and rising provisions which ate into profits, most UAE banks see a light at the end of the tunnel.
Ahead of the first quarter results, banking analysts said this year will be a year of a big comeback in terms of profitability for the banks after more than three years of balance sheet repair.
The current year is expected to bear sweeter fruit, with one-off adjusted profits rising 22 per cent year on year. Bottom-line growth is anticipated to be driven by a drop in provisions, said Naveed Ahmad, senior financial analyst with Global Investment House.
According to a recent study by Boston Consulting Group (BCG) the banking industry experienced an impressive 24 per cent increase in profits in 2011 and the outlook remains strong.
Although banks showed a strong recovery last year, some analysts attribute the surge in profits to significant one-off revenue streams. But this year even without the contribution of one-off items, banking profits are expected to surge.
Our discussions with banks have led us to believe that banks non-performing loans (NPLs) are nearing the end of the current cycle. The NPL ratio is expected to peak in 2012 for most banks and in 2013 for others NPL formation will decelerate significantly for all, said Ahmad.
By Babu Das Augustine, Deputy Business Editor
Gulf News 2012. All rights reserved.
