UAE banks’ credit fundamentals strong for 2023

UAE banks’ credit fundamentals strong for 2023

Analysts at Fitch expect impairment charges to “fall further on the supportive macroeconomic backdrop and recovering real estate prices, and capital buffers will remain adequate.”

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.

Published: Sun 18 Dec 2022, 3:37 PM

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.