Despite an anticipated trend of decline, rating agencies predicted that banks in the United Arab Emirates would continue to post strong results this year thanks to the country’s high interest rates.
According to Dr. Mohamed Damak, an S&P Global Ratings financial institution ratings analyst, three interest rate reductions this year totaling 75 basis points in the second half of the year are anticipated, with additional reductions of 125 basis points in 2025.
“When discussing asset quality, the picture remains strong, with a low level of non-performing loans and a coverage ratio of 100 per cent, which is more than adequate,” Damak stated.
During the first quarter of 2024, every bank in the nation revealed impressive increases in profits. With the US Federal Reserve likely to begin rate cuts in the middle of 2024, rating agencies are optimistic about the performance of the banking sector and predict that banks will maintain their strong performance in 2024 and lead regional growth following a strong first quarter.
According to Fitch Ratings analysts, both countries’ extensive economic diversification plans and the strong credit demand generated by their thriving non-oil sectors will propel the banking sector’s expansion in the United Arab Emirates.
S&P Global’s banking specialists predict general stability in important metrics for GCC banks in 2024. The banking systems in Saudi Arabia and the United Arab Emirates are anticipated to lead the region in terms of credit growth and profitability. But they wrote, potential risk.
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