UAE most competitive banking market in Gulf

January 14th, 2012 - 1:47 pm ICT by IANS  

Abu Dhabi, Jan 14 (IANS/WAM) The United Arab Emirates (UAE) remains the most competitive banking market in the Gulf region, a report by the Abu Dhabi Islamic Bank (ADIB) has said.

The “Gulf Cooperation Council Banking Competitiveness Report” said the UAE’s population of approximately eight million is served by 51 banks with more than 840 branches and over 4,000 ATMs, which deliver high levels of service yet lower profitability than their GCC counterparts.

The ADIB report said the UAE banks’ net interest margin — which is the difference between what banks pay for deposits and what they charge for financing and loans — remains the lowest among the GCC, at an average of 2.9 percent.

In Saudi Arabia, the net interest margin is currently 3.5 percent, in Qatar 3.4 percent and in Kuwait banks 3.2 percent.

The ADIB has urged banks across the region to improve their levels of competitiveness if they are to ensure their continued strength in the challenging global economic environment and meet the needs of customers in a better way.

Comparing the No.1 and No.2 banking markets by size in the GCC — the UAE and Saudi Arabia — the global head of strategy and finance at the ADIB, Andrew Moir, said: “Despite the fact that the UAE is a bigger banking market in terms of assets, it remains less profitable than that of Saudi Arabia.”

“In the UAE, the mix of deposits, low customer charges, the presence of high levels of non-performing assets and competitive dynamics have negatively impacted banking profitability and capital ratios. However, lower net interest margin means consumers in the UAE are getting better rates overall but shareholders are getting lower returns as compared to those in other GCC markets,” he said.

The “GCC Banking Competitiveness Report” of the ADIB is updated on a quarterly basis by the bank’s strategic planning department.

The report focuses on various points that reflect both Islamic and conventional banks’ structures and performance, ranging from customer growth, staff and service to product trends and performance, financial indicators, investor insights, capital trends, liquidity, cost of funds and overall price dynamics.

Financial performance and profitability are key components of the report.


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