UAE bank profits seen rising 20% this year; Mashreq eyeing 40%

Profit at Mashreq is expected to jump 40% this year, up from a February forecast of 10%-15% growth. Last year, the bank reported a 67% net profit increase as provisions dropped to 826.5mn dirhams ($225mn) from 1.2bn dirhams in 2011.

Mashreq sees “much lower” provisions than last year; raises its profit growth forecast from 10%-15%; UAE banks’ assets expand 8% in first half; local banks not ready to implement FATCA; US law will cost UAE banks at least 100mn dirhams

Reuters

Dubai

Net profit growth at commercial banks in the UAE is expected to accelerate to about 20% in 2013, while Mashreq Bank forecasts its own growth at 40%, the chairman of the UAE’s banking federation said yesterday.

UAE banks such as Dubai lender Emirates NBD and National Bank of Abu Dhabi posted strong second-quarter earnings thanks to an economic recovery in key sectors such as real estate, and lower bad loan provisions as the UAE recovers from debt troubles at Dubai’s state-linked entities.

“Banks here managed to overcome challenging global and regional conditions. We expect banks to report a 20% growth in net profit in 2013,” Abdulaziz al-Ghurair, chairman of the banking lobby group and chief executive of Dubai lender Mashreq, told reporters.

Profit growth for banks in the country last year was 15%, al-Ghurair said.

He added that profit at his own bank, Mashreq, was expected to jump 40% this year, revising his February forecast of 10%-15% growth. The new forecast is based on “much lower” provisions which the bank expects to book this year, he said.

“The bank is enjoying healthy levels of liquidity and lower levels of provisions. We expect net profit this year to be around 40% and provisions much lower than last year.”

Last year, Mashreq reported a 67% net profit increase as provisions dropped to 826.5mn dirhams ($225mn) from 1.2bn dirhams in 2011.

Total assets of UAE banks grew 8% to 1.9tn dirhams in the first six months of this year, while net profit during the period was 13.6bn dirhams, al-Ghurair said.

But local lenders are unhappy with the additional costs they will have to bear in order to implement the US’ Foreign Account Tax Compliance Act (FATCA), which cracks down on offshore tax avoidance by Americans, he said.

“UAE banks are not ready to implement the FATCA. It will cost banks here not less than 100mn dirhams to get the right systems and infrastructure in place,” he said.

“We don’t like FATCA and we don’t want it, but we don’t have a choice.”

The US Treasury Department said in July that it would postpone enforcement of the law by six months to give foreign banks more time to figure out how to comply.

FATCA requires foreign banks, insurance companies and investment funds to send the US Internal Revenue Service information about Americans’ offshore accounts worth more than $50,000.