Pandemic to stall UAE banks’ recovery in early 2021: A&M report

DUBAI: The pandemic will continue to affect profitability for banks in the United Arabia Emirates (UAE) in the early quarters of 2021, after a sharp drop in return on equity last year, consulting firm Alvarez & Marsal (A&M) said on Tuesday.
Return on equity fell to 7.7 percent in 2020 from 13.3 percent the previous year, A&M said in a report on the UAE’s top 10 banks.
“We possibly have not turned the corner,” Asad Ahmed, head of Middle East financial services for A&M told a briefing, saying this goes for banks globally as well as in the UAE.
“In terms of the region and the UAE, 2021 will continue to be a year which does not produce stellar results, but hopefully next year onwards we will see the numbers turn around.”
Growth in loans and advances during 2020 slowed sharply to 1.4 percent from 13.2 percent in 2019, the report said.
2021 is expected to be less volatile than the past year, but banks might see a deterioration in their asset quality after the completion of the central bank’s stimulus scheme later this year, it said.
Total loan-loss provisions jumped 79 percent year-on-year to 28.1 billion dirhams ($7.65 billion) for the top 10 UAE banks last year, as a challenging economic environment and banks’ exposure to several high-profile cases boosted impairments, A&M said.
UAE banks have been hurt by their exposure to hospital operator NMC Health, which disclosed more than $4 billion in hidden debt after short-seller Muddy Waters questioned its financial reporting.
The hospital operator filed for administration in London in April last year.