News Column

Rising liquidity and capital adequacy lifts confidence in UAE banks

February 2, 2014

Babu Das Augustine, Deputy Business Editor

Dubai : The UAE banks continued to remain well capitalised in 2013 with overall capital adequacy ratio in excess of the central bank requirements. Emirates NBD's total capital adequacy ratio and Tier 1 capital ratio were 19.6 per cent and 15.3 per cent respectively at the close of 2013. During the year ADCB's capital and liquidity remained strong with capital adequacy ratio of 21.21 per cent and Tier 1 ratio of 16.62 per cent. Irrespective of the size of the balance sheet, banks across the country reported stronger balance sheet and capital levels in 2013. Mashreq's capital adequacy ratio and Tier 1 capital ratio continue to be significantly higher than the regulatory limit and stood at 18.2 per cent and 16.4 per cent respectively, at the end of December 2013 . "The banking industry as a whole has enjoyed a strong 2013 which is good for the UAE . The banking industry is in a strong position and the performance of the banks can be used as a measure of wider economic performance, so a healthy banking industry is indicative of a healthy economy," said Al Ghurair . While strong asset growth with improved asset quality has improved the interest margins, lower cost of funds and dynamic liability management has helped many banks to lower their cost of funds. During the course of the year, many banks substituted their higher cost deposits with lower cost term deposits resulting in significant cost savings. Emirates NBD's net interest income for the year improved by 18 per cent to Dh8.13 billion from Dh6.91 billion in 2012. The improvement in interest income was largely driven by a combination of loan growth, an improvement in the net interest margin helped by a more efficient capital and funding structure, a higher growth in consumer lending and the positive impact of declining Emirates interbank offered rate (Eibor) on loan spreads, the bank said in a statement. Most banks gained from lower cost customer deposits. Dubai Islamic Bank (DIB) attributed surge in operating revenues to strong liability management and significant current and savings account (CASA) component in deposits leading to lower cost of funds and early repayment of high cost liabilities. The bank enjoyed strong and stable funding base with customer deposits at Dh79.1 billion, up 19 per cent compared with Dh66.7 billion at the end of 2012. A large and stable low cost CASA book comprised of 43 per cent of total deposit base. During the year Mashreq's customer deposits increased by 23.5 per cent during the same period to stand at Dh58.6 billion at the end of December 2013 . The Bank's loan-to-deposit ratio remained stable at 86 per cent at the end of 2013 as compared to 87 per cent in December 2012 .

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Source: Gulf News (United Arab Emirates)

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