Emirates: The UAE’s top banks witnessed strong profitability in the third quarter of this year, primarily propelled by an increase in non-interest income and reduced impairment charges, according to global professional services firm Alvarez & Marsal.  

Analysis from the consulting firm indicated that the UAE’s banking sector experienced improved profitability in the third quarter, driven by a 15.4 percent quarter-on-quarter uptick in total operational income and a 2.4 percent growth in non-core income during the same period. 

The report highlighted a 11.7 percent reduction in impairment charges for UAE banks in the third quarter compared to the previous quarter.  

Consequently, nine out of the 10 surveyed banks reported an improvement in the cost of risk, which enhanced by 10 basis points quarter-on-quarter, settling at 0.6 percent in the third quarter. 

The findings are derived from Alvarez & Marsal’s analysis of the financial performance of the UAE’s 10 largest financial institutions, including First Abu Dhabi Bank, Emirates NBD, and Abu Dhabi Commercial Bank.

The study also encompasses Dubai Islamic Bank, Abu Dhabi Islamic Bank, and Mashreq Bank, along with Commercial Bank of Dubai, National Bank of Fujairah, and National Bank of Ras Al-Khaimah, as well as Sharjah Islamic Bank. 

Asad Ahmed, managing director and head of Middle East financial services at Alvarez & Marsal said in a statement: “This report showcases a robust third quarter for the UAE banks, buoyed by a higher interest rate environment and a meaningful reduction in impairment charges.” 

He added: “Lenders are benefitting from healthy liquidity conditions supported by high oil prices, foreign capital inflows and moderate credit demand amid rising interest rates.”   

The report further noted that loans and advances provided by these banks witnessed a 2.4 percent quarter-on-quarter growth in the second quarter of this year, predominantly fueled by corporate and wholesale borrowings.  

According to the report, aggregate deposits in these banks grew by 3.9 percent in the third quarter, compared to the previous three-month period, while the loan-to-deposit ratio decreased 1.1 percent points to 75.2 percent during the same period.