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Moody's expects UAE banks to gain profitability

Moody's expects UAE banks to gain profitability


  • Dubai – Ashraf Rafiq

Date: 08 November 2018

Moody's International maintained its optimistic prospects for the banking sector in the UAE and said it expects an increase in profits and improved capital quality in support of its economic recovery, which means stability for the banking sector in the coming period.

The agency expects improved profit levels to support higher interest rates and because banks raise lending rates, higher interest income will cover what they have to pay dividends on deposits.

The agency has maintained a stable outlook for the banking sector in the UAE, reflecting the gradual recovery of the economy, as well as the strength of banks' capital, flexibility in profitability and strong funding.

A report entitled "UAE Bank System Future" expects the rise and production of oil and dubai government spending on infrastructure projects and the economic stimulus package announced by Abu Dhabi to be among the factors that will increase economic growth in the UAE.

Moody's predicts economic growth of 2.2% for UAE this year and 2.9% next year from 0.8% last year and the expected economic recovery in the UAE will stimulate and increase credit growth. Mike Kapia, Moody's CEO, said he expected stable credit and lending growth, and noted that the strength of capital levels gave a strong protection factor for UAE banks.

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