Q1 2023 UAE banking pulse: UAE banks’ first quarter profit surges 35 percent to AED 18.3bln: Alvarez & Marsal

Q1 2023 UAE banking pulse: UAE banks’ first quarter profit surges 35 percent to AED 18.3bln: Alvarez & Marsal

- Net interest margins (NIMs) stable; favorable asset repricing offsets pressure from higher cost of funds (CoF)

- Moderate asset quality concerns expected to resurface in 2023

Dubai – Leading global professional services firm Alvarez & Marsal (A&M) has released its latest United Arab Emirates (UAE) Banking Pulse for the first quarter of 2023. The report highlights that UAE banks’ profitability grew by 35 percent in Q1’23 from the previous quarter due to enhanced cost efficiencies and lower impairment charges. This increase in profitability was further supported by a rise in non-core income.

Incremental deposit growth outstripped credit growth for the first time since Q1’22 amidst monetary tightening. L&A growth was up by 2.0 percent quarter-on-quarter (QoQ), while deposits increased by 6.2 percent QoQ.

Aggregate net interest income (NII) increased marginally by 0.4 percent QoQ and the overall NIMs remained stable at 2.8 percent for the quarter. Overall asset quality showed some improvement with non-performing loan (NPL) / net loans ratio decreasing by 16 basis points (bps) to 5.4 percent.

Overall, top lenders reported higher profitability and return on equity (RoE) improved by 5.9 percent points QoQ to 19.3 percent, whereas return on assets (RoA) increased to 2.2 percent marking a return to new levels