Strong growth in net interest, as well as fee and commission income, helped the four largest banks in the UAE report higher net profit in the fourth quarter despite higher provisioning and operating costs, said Moody’s in a new report.

"The four largest UAE banks delivered a solid rise in net profits in the final quarter of 2017," said Nitish Bhojnagarwala, a vice president at Moody's. "This was largely driven by higher business volumes and recent interest rates hikes, which generated higher recurring income, both in the form of net interest income and fees and commissions."

"The increases were mainly related to investments in technology to drive digitalization and to improve operational efficiency,” added Bhojnagarwala.

 Key takeaways:

•    The four banks reported a solid combined net profit of Dh7.3 billion ($2.0 billion) in the fourth quarter of 2017, up 8 per cent compared with the same period in 2016 and 2 per cent higher quarter on quarter.

•    Operating expenses at the large UAE banks rose 10 per cent quarter on quarter and 7 per cent from a year ago.

•    Customer deposits at the four banks increased 2 per cent to Dh1 trillion (around $273 billion), compared with the third quarter of 2017.

•    After a 4 per cent decline in Q2 2017, FAB registered the highest increase at 4.5 per cent in Q4, reflecting their solid deposit franchises as the largest bank in the UAE.

•    Deposit growth at ENBD and DIB was around the 2 per cent average total growth of the four banks.

•    Deposits grew fastest at FAB and DIB, (up 4.5 per cent and 2.5 per cent respectively for the quarter) reflecting their solid deposit franchises as the largest UAE bank (FAB) and the oldest Islamic bank (DIB).

•    Over the coming quarters, we expect provisioning costs to rise modestly as loan performance softens and as the rate of recoveries - which has been broadly driving the fall in provisioning charges since 2015 - slows. – TradeArabia News Service

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