Lenders will continue to benefit from higher interest rates that will support profit margins Banks in the UAE are well placed to continue posting strong earnings this year, capitalizing on an improving macroeconomic environment and consistently high interest-rate regime supporting their profit margins, S&P Global Ratings has said. The increased business and trading activity that supported non-interest income and bottom-line growth last year will also boost profitability in 2024, the ratings agency said in its latest report on the UAE banking sector.The trajectory of earnings growth for lenders in the Arab world’s second-largest economy, however, will be slightly lower than that of 2023 as a result of expected interest rates cuts towards the end of this year. “This is assuming a 100 bps (basis points) rate cut by the US Federal Reserve during the second half of the year. In accordance with the UAE dirham's peg to the US dollar, we expect the Central Bank of the UAE to mirror the Fed's movements,” S&P credit analyst Puneet Tuli said.  However, despite the expected cuts this year, interest rates will remain at elevated levels and will continue to support profit margins of financial institutions in the UAE. “We believe interest rates will remain higher for longer, and this will support banks' net margins,” S&P said.“Coupled with a broadly stable cost of risk, the profitability of UAE banks is likely to remain strong, albeit lower than last year.”  Most lenders in the UAE posted record earnings in 2023, driven by core banking activities, and have also benefited from higher interest rates that boosted profit margins over the past few quarters. Most regional central banks peg their currencies to the US dollar and follow the Fed’s moves on interest-rate increases.  Earlier this month, the US central bank held interest rates steady at the current range of 5.25 per cent and 5.5 per cent. Fed chairman Jerome Powell squashed hopes of an early US interest-rate cut, saying the central bank needed “greater confidence” in the inflation path before it begins dialing back its restrictive monetary policy. Banks in the UAE and the six-member GCC are also benefiting from the continued growth momentum despite global headwinds and geopolitical uncertainties. Economies in the broader Middle East and North Africa, especially oil-exporting Gulf countries in the GCC, have bounced back strongly from the pandemic-induced slowdown, driven by oil and non-oil sectors. The UAE economy expanded 3.7 per cent annually in the first half of last year, driven by strong non-oil sector growth as the country continues to pursue its diversification goals, Minister of Economy Abdulla bin Touq said in October  (ICE DUBAI)

Fonte notizia: www.thenationalnews.com/business/banking/2024/02/09/uae-banks-set-for-another-year-of-strong-profita