Steady Does It


Dubai's attraction as a center for the global banking industry through the DIFC is growing, while the strength of its locally headquartered banks is on the improve.

The banking system as a whole is divided into three broad categories: local banks, foreign banks operating under local rules and banks from fellow GCC member states, and foreign bank representative offices, many of which operate out of the Dubai International Financial Centre (DIFC). Of the 22 local banks operating in the UAE, seven of them nominate Dubai as their headquarters, more than in any other Emirate. As for the 28 foreign and GCC banks operating in the UAE, 20 of them are headquartered out of Dubai, while of the 120 foreign banks with representation offices in the UAE, 69 of them chose to call Dubai home. Over 2013, their numbers grew by another three as Lebanon & Gulf Bank, Housing Development Finance Corporation Limited (India), and Banco Popular Español joined the ranks.


Among the seven national banks nominating Dubai as their home, the largest by far in terms of total assets was Emirates NBD at AED342.1 billion ($93.22 billion) by the end of 2013, up some 11% in YoY terms. Emirates NBD was created out of a 2007 merger between Emirates Bank International (EBI) and the National Bank of Dubai (NBD), which sought to limit the impact of the global financial crisis on the Emirate’s main banks. One of the last remnants of that period was the AED4.8 billion in support given to the bank by the UAE Ministry of Finance during the crisis, which was finally repaid by the bank in July 2014.

Although 2013 saw strong growth at Emirates NBD, by the end of 1H2014 the bank reported a more muted 1.8% increase in total assets to AED348.3 billion ($94.9 billion). However, in net profit terms the bank saw a 27% rise over 2013 to AED3.3 billion ($899 million), while the 1H2014 figure for the half year came in at a healthier 30% rise to AED2.35 billion ($640 million) when compared in like for like terms with 1H2013. The CAR for the bank was at 19.6% by the end of 1H2014, showing no change on the end-2013 figure. Non-performing loans (NPLs) were slightly down by 40 bps to 13.5%, demonstrating the slow repair of the bank’s loan book. By end-2013, customer deposits had risen by 12% over the year to AED239.6 billion ($65.29 billion), while loans were at AED238 billion ($64.85 billion). The bank reported a return on equity (ROE) of 12% for FY2013, up on the 9.9% it displayed for 2012. Emirates NBD has a wide international presence, and includes under its consolidated group statements its operations in Egypt, Emirates NBD S.A.E., which has some 70 branches, as well as its sharia-compliant window in the UAE, Emirates Islamic Bank. In 2012, Emirates Islamic Bank took over the operations of Dubai Bank, another sharia-compliant institution.

Dubai Islamic Bank (DIB), the second largest by assets in the Emirate, reported 15% growth in total assets for FY2013 to AED113.29 billion ($30.86 billion), while the figures for 1H2014 over the half-year period showed a further 9% growth to AED123.24 billion ($33.58 billion). Customer deposits were up 18% during 2013 to AED79.06 billion ($21.54 billion), while over the 1H2014 period they surged another 20% to AED94.79 billion ($25.8 billion), showing the healthy state of the sharia-compliant bank. While it reported a CAR of 18.2% for FY2013, this had declined somewhat over the first half of 2014 to 16.4%, though the NPL rate had also fallen by 1.8 percentage points over the same period to 9.3%, with a coverage ratio of 71%. DIB reported a return on average assets (ROAA) of 2.26% for 1H2014, while the return on average equity (ROAE) was at a healthy 17.76%. As a sharia-compliant bank, its financing assets metric increased by some 18% from AED56.1 billion ($15.29 billion) to AED66.1 billion ($18.01 billion) for 1H2014, with corporate and consumer financing leading the charge. DIB is looking to reduce real estate as a share of its loan book going forward, though from all indications it is well on the way to improving its ratings and market position as the largest Islamic bank in the UAE.

Mashreq Bank, as the largest private sector bank in the UAE, is also benefiting from the uptick in the Emirati economy, seeing total assets up 15.9% over 1H2014 to AED103.91 billion ($28.31 billion) compared to the end-2013 figure. Loans and advances over the same period rose by a more sedate 11% to AED55.96 billion ($15.25 billion), while customer deposits surged 20.7% over 1H2014 to AED70.76 billion ($19.28 billion). The bank, which operates both conventional and sharia-compliant windows through its Mashreq Al Islami subsidiary, had one of the lowest NPL ratios for the local banking sector, at just 3.4% for 1H2014. The CAR saw a reverse over 1H2014 compared to the end-2013 figure, falling from 19.3% to 16.1%. Mashreq Bank reported an ROA of 2.4% for 1H2014 and an ROE of 15.8%, both figures improving over the end-2013 numbers, while the net interest margin (NIM) was at 3.1% for the period.

Commercial Bank of Dubai (CBD) is also reporting healthy growth figures of late. Total assets stood at AED44.5 billion ($12.13 billion), up 13.2% on 2012. Customer loans and advances rose 11.3% over FY2013 to AED30.3 billion ($8.26 billion), while customer deposits saw more muted growth of 10.3% to AED30.9 billion ($8.42 billion). The bank has looked to focus more of its loan book to corporate lending, 9.3% up for 2013, and personal banking, which saw a 34% in the size of the loan book to AED3.3 billion ($900 million). The NPL ratio improved over 2013 to 10.1%, but was still well down on the 11.2% recorded for FY2012, while the NPL coverage ratio spiked from 71.7% in 2012 to 84.7% by end-2013. The bank’s ROAA came in at 2.4% for FY2013, above the 2.2% recorded in 2012, while the ROAE was a healthier 15.1% in 2013, also up on the 13.4% seen in 2012. The big news from the bank over 2013 was its repayment of the AED1.8 billion ($490 million) in deposits it received from the UAE Ministry of Finance during the crisis period, showing that CBD is well on the road to a bright recovery. The bank’s CAR was at 19% for 2013, well above the regulatory requirement of a minimum of 12%.

After a trial by fire when it emerged as a new sharia-compliant financial institution in 2008, Noor Bank has shown just what a newcomer in the market can do. Over 2013, the bank managed to increase its net assets by a robust 29% to AED23.2 billion ($6.32 billion), while its net profit for the year came in at AED255 million ($69.48 million). This was no mean feat, considering the same metric for FY2012 was just AED76 million ($20.7 million). Customer deposits also surprised, jumping by 33% in 2013 to reach AED18.6 billion ($5.07 billion), much on the back of a 24% boost to the bank’s customer base. In terms of total customer financing, it rose a strong 32% for FY2013 to AED14.3 billion ($3.90 billion). The bank reported a CAR of 17.6% for the same year, with a coverage ratio of nearly 100%. And the bank has continued to impress both at home at abroad, ranking number one for the FY2013 EMEA Islamic Loans Book released by Bloomberg.

Rounding off the locally headquartered banks is Commercial Bank International (CBI), although including it in the list of Dubai-based banks may be somewhat misleading. With its origins lying in the Emirate of Ras Al Khaimah, the bank is listed on the Abu Dhabi Stock Exchange (ADX).