The UAE’s top 10 banks saw their profitability grow in the first quarter of 2024 with net income of AED 20.8 billion ($5.7 billion), up 9.3% on the previous quarter with deposits up 5.1%.

Alvarez & Marsal’s UAE Banking Pulse said loans and advances had already reached the highest level post-COVID-19 pandemic, up 3.4% quarter-on-quarter (QoQ).

A&M said interest rates are likely to be at peak and the cycle reversion is expected to begin in the second half of the year.

The net income growth comes on the back of non-core income growth, lower operational costs, and declining impairment charges of 47.9% QoQ.

With no change in the benchmark interest rates during the quarter, net interest income (NII) declined marginally by 1.1% QoQ, during the quarter, A&M said, however, non-core income grew by 18.9%, growing the total operating income by 4.8%.

Banks analysed for the report are First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank, Dubai Islamic Bank, Mashreq Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Ras Al-Khaimah and Sharjah Islamic Bank.

Asad Ahmed, A&M managing director and head of Middle East financial services, said asset quality remains sensitive to the continued high interest rate environment, with the rate reversal expected to start in the autumn of 2024, with a gradual impact expected on net interest margins.

“Barring any regional issues, the sector has reason to remain optimistic as we anticipate continued steady growth in the UAE banking sector,” he said.

(Writing by Imogen Lillywhite; editing by Brinda Darasha)