UAE bank profits seen rising 20% in 2013; Mashreq aims for 40%

DUBAI: Net profit growth at commercial banks in the UAE is expected to accelerate to about 20 percent in 2013, while Mashreq Bank forecasts its own growth at 40 percent, the chairman of the UAE’s banking federation said.
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 percent growth in net profit in 2013,” Abdulaziz Al-Ghurair, chairman of the banking lobby group and chief executive of Dubai lender Mashreq , said.
Profit growth for banks in the country last year was 15 percent, Al-Ghurair said.
He added that profit at his own bank, Mashreq, was expected to jump 40 percent this year, revising his February forecast of 10-15 percent 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 percent and provisions much lower than last year.”
Last year, Mashreq reported a 67 percent net profit increase as provisions dropped to AED826.5 million ($225 million) from AED1.2 billion in 2011.
Total assets of UAE banks grew 8 percent to AED1.9 trillion in the first six months of this year, while net profit during the period was AED13.6 billion, Al-Ghurair said.
But local lenders are unhappy with the additional costs they will have to bear in order to implement the United States’ 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 100 million 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.