UAE banks’ credit fundamentals strong for 2023

UAE banks’ credit fundamentals strong for 2023

Interbank rates have risen more than 400 basis points this year and most large UAE banks mainly rely on net interest income for revenue generation.

Credit fundamentals for UAE banks look very strong for next year on the back of higher crude prices, rising interest rates and solid economic conditions, says Fitch Ratings.

Following the US Federal Reserve Bank’s decision to hike policy rate by 50 basis points on Wednesday, the Central Bank of the UAE hiked rates by a similar percentage point to 4.4 per cent from 3.9 per cent.

Interbank rates have risen more than 400 basis points this year and most large UAE banks mainly rely on net interest income for revenue generation.

Despite projections of a lower rate for next year, crude oil prices are expected to still stay higher. Global rating agency Fitch has forecast $85 per barrel for Brent for 2023 as against $100 in 2022.

“Operating conditions will be underpinned by our forecast average oil price of $85 a barrel and solid, albeit slowing, non-oil real GDP growth. Higher rates and strong liquidity conditions should underpin revenue expansion,” Fitch analysts said.

“Banks with high shares of current and saving accounts deposits will benefit most from higher rates. Liquidity is