The Chairman of the UAE Banking Federation, Abdul Aziz Al-Ghurair, has predicted a fall of between 10 to 20 per cent in bank profits during 2016 as a result of the decline in oil prices.
“We are no different from the economy,” he told Anadolu on Sunday, “so the sector has slowed down during the year and that is reflected in its performance. Banks’ profits will come down by anything from 10-20 percent this year.” He made his comments on the fringe of a conference in Dubai.
According to Al-Ghurair, the reduction in profits has not resulted directly from the drop in global oil prices, but from being exposed to UAE government obligations and general issues within the local economy. Both, he believes, will be affected by the fall in oil revenues.
The banking federation head is also the CEO of Mashreqbank, the 3rd largest bank in Dubai in terms of total assets. “Our banks are too spoilt because of years of high profits, high margins and strong asset growth over several years,” he explained. “A slowdown is good for the sector because bank managements will seek to innovate to make business more efficient.” He added that this would “weed out” the poor performers and produce better ones.
Al-Ghurair said that the sector’s liquidity is still in a strong position, however, and he anticipates a rise in interest rates while banks compete to attract deposits. Such rates will affect bank profitability positively, he believes, benefiting from the strong liquidity they possess, which amounts to $76.3 billion, in addition to the non-interest bearing current accounts.