The pandemic has done severe damage to the worldwide economy. While UAE has shown excellent recovery, there are places where they are receiving mere profits. The UAE Banks will soon return to pre-pandemic profitability in the coming 12-18 months by retaining net interest income and increasing business with the introduction of new initiatives that help the economy to recover at a faster rate.
The profits will be majorly driven by the growth in net interest income where the rise in interest rates and fluctuation in business support the non-interest income. The largest four banks’ profitability has seen a major fall due to the near pre-pandemic level due to the robust non-interest loans and soft loan loss provisions in the UAE. The data has anticipated the generation of profits in the next 12-18 months.
UAE has the four largest have recorded a combined net profit that is quite high in 2021 as compared to 2020. The profits will be driven by the robust non-interest income and softening loan loss provision that works on improving the consumer’s confidence also it has contributed to the recovery of UAE by loosening pandemic restrictions, rolling out of the vaccinations, major recovery in oil prices, and with the reversal in interest rates cycle which has been a great factor as people are investing in a major industry which allows the flow of funds in the economy.
The non-interest income is approximately 35 percent of the total operating income which is higher than the pre-pandemic. The non-funded revenue generated from the non-recurring returns through investment portfolios, trading gains, returns on foreign currency and derivative income, and higher fee-generating transactions provide profitability to the financial institutes and also focus on the improvement of the market conditions.
The improving market conditions ensure the returns of investment in any industry would be higher compared to other countries. FlyingColour Business Setup Services helps you set up the business in UAE, also our team of experts forecasts and provides you the best resources that take a business to the global markets and increase its growth. The UAE is presenting an opportunity globally for entrepreneurs to come and settle while pursuing their business in foreign lands without paying a penny in taxes.
The income generated one-off gains by the sale of securities by providing an exceptional performance seen in the global markets during the year. It has been anticipated by monitoring the markets and trends that non-interest income in 2022 will be considered non-recurring income.
In 2021 the low-interest rate has dropped the banks’ profits that have also caused a decline in the bank’s income. The pandemic has left a huge impact on the bank’s asset quality. The largest banks in UAE have maintained their capital ratios in 2021 due to the low dividend payouts, profit generation, and modest growth in risk-bearing assets.