UAE banks' profits deteriorate; bad loans likely to go up | ZAWYA MENA Edition
Profits of UAE’s top banks continued to deteriorate in the second quarter of the year as interest rates and credit uptake remained low and bad loans grew amid challenging economic conditions.
Total interest income of the ten largest banks in the country continued to fall for the third consecutive time by 7.7 percent quarter over quarter, while net income dropped by 3 percent due to lower interest and other operating income, according to Alvarez & Marsal, a global professional services firm.
“Challenging macroeconomic conditions, low oil prices and effects of COVID-19 have severely impacted overall asset quality and resulted in higher non-performing loan (NPL) reporting, at 3.6 percent quarter over quarter increase,” the firm said.
“The challenging economic environment impacted credit uptake as [loans and advances] remained flat in Q3 2020 compared to Q2 2020,” the firm added.
It also warned that the country’s lenders may have to brace for further increases in bad loans, particularly after the payment deferral relief for borrowers is lifted.
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