The Top 5 UAE Banks Record Combined Net Profit of $11.5 bn in 2022
The top five banks in the UAE, namely First Abu Dhabi Bank (FAB), Emirates NBD, Dubai Islamic Bank (DIB), Abu Dhabi Commercial Bank (ADCB), and Mashreq Bank, reported a combined annual net profit of $11.5 billion (Dhs42.1 billion) in 2022. This increase was fueled by rising interest rates and business volumes, which enhanced overall income.
S&P Global noted that net interest income at UAE banks has risen significantly over recent quarters as lenders pass rate increases onto customers. In March, the UAE central bank raised its base rate by 25 basis points (bps) to 5.5% following the US Federal Reserve's quarter-point interest rate hike.
The top 10 banks in the UAE recorded a 31% increase in annual net profit in 2022, according to KPMG. The sector is expected to maintain stability in 2023, driven by growing demand for digital financial services, rapid adoption of fintech solutions that enhance customer experience, and industry competitiveness. The cost-to-income ratio improved by an average of 1.8% in 2022, and banks maintained capital levels well above the minimum regulatory requirements.
Total assets of the 10 banks in the UAE grew by 10.6% YoY, driven by robust growth in deposits, loans, and advances. Abbas Basrai, partner and head of financial services at KPMG Lower Gulf, cited the UAE's thriving economy and favorable business environment as factors attracting significant foreign investment, with banks benefiting from the capital influx and high net worth customers.
Basrai also highlighted the government's commitment to regulatory reforms as a key contributor to the sector's stability. Although UAE financial institutions have adequate capital and ample liquidity, pressures on small banks' profitability, alternative delivery channels, and competition from digital banks are likely to increase shareholders' interest in consolidation to strengthen banks' financial profiles.
In related news, digital banking is rapidly transforming the UAE's financial services sector, with traditional banks facing growing competition from neobanks and challenger banks that emphasize customer experience. UAE banks are focusing on digital growth strategies, such as cloud adoption, to maintain a competitive edge in the dynamic environment. Additionally, larger banking institutions in the UAE are exploring the metaverse as a novel channel for providing financial services and connecting with the broader banking ecosystem.