Top 10 UAE banks’ profits shrunk 40% in 2020: A&M | Banking – Gulf News
The aggregate net profit of the top 10 UAE banks declined by 38.3 per cent year on year in 2020, on the back of lower operating income and increased provisions, according to data analysed by Alvarez & Marsal (A&M).
A&M expects the operating environment for the UAE’s banking sector to remain less volatile in 2021 compared to last year; banks might witness deterioration of their asset quality after the completion of Central Bank of the UAE’s deferral programme in June 2021.
“The anticipated economic recovery in 2021 should support the operating environment and the fundamentals of banks in the UAE. Profitability in the sector has shown signs of vulnerability with declining interest income and increased provisioning weighing on the net profit,” said Asad Ahmed, A&M Managing Director and Head of Middle East Financial Services.
Low asset yields resulting from low interest rates along with higher provisions impacted bank profitability last year. Net interest income (NII) decreased about 2 per cent year on year, as system-wide rates decreased substantially after the Central Bank of the UAE slashed rates to counter the effects of the Covid-19 pandemic. However, net interest margins improved as banks were able to reduce their funding costs further.
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