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Healthy Growth Indicated for Q2 Profits of Top UAE Banks as Stronger Economy Drives Capacity Growth at Dubai Airport and New Islamic Banking Centre Launched in Dubai

Middle East : 02 August 2013

Healthy Growth Levels at Leading UAE Banks for Q2

Earnings grew in the second quarter for the leading banks in the UAE, indicating healthy profit growth and sustainable levels of recovery for loan growth, according to banking experts.

Robust loan growth of ten percent (y-o-y) was recorded for the top three banks in the UAE, including First Gulf Bank, the National Bank of Abu Dhabi (or NBAD) and Emirates NBD.

Reports indicate that this trend will continue and may even accelerate over the balance of this year, with banks developing a higher appetite for risk and the macro environment of the Emirates improving, according to local analysts.

The analyst noted that the Central Bank’s reaction to the level of loan growth has yet to be seen, although growth did surpass objectives.

Credit appetites in the UAE continue on a path of improvement, according to a second Dubai-based banking expert, as indicated by higher levels of loan growth in Q2.

After the worldwide financial crisis of 2008, the UAE’s property market dropped, although signs of recovery have arisen. Advances and loan at UAE banks were up by 5 percent annually in May, a major increase from December’s rate of 2.6 percent.

Average economic growth of 4.6 percent is expected for the period from 2012 to 2015, a rate more than double the total for four years previous.

Emirates NBD stated that net profits in Q2 jumped by 50 percent in the second quarter. NBAD stated that second quarter profits were up by 15.8 percent y-o-y. First Gulf Bank noted a 15 percent increase in net profits over the second quarter, reaching Dh 1.71 billion.

Stronger Economy Supports Expansion at Dubai Airport

Plans to increase capacity at Dubai airports anticipate higher levels of traffic in the future, driven by a healthy economy and Emirate Airlines pattern of funneling travelers through the hub.

Dubai experienced economic revitalization with stronger tourism and trade after the worldwide crisis of 2008. The peace and absence of political unrest makes Dubai stand out in the surrounding area.

Dubai’s position as a hub of transport helped the emirate recover and resulted in economic expansion, such as the airport capacity growth, based on comments made by a Dubai Airports Co chief executive.

Dubai International plans to expand capacity to over 100 million by 2018, higher than previous goals of 90 million and far above current capacity of 60 million. Plans include a fourth concourse and improved operations, according to Paul Griffiths of Dubai Airports.

The company also plans to move forward with capacity expansion at Al Maktoum International Airport, with a capacity goal of 160 million by 2030. Emirates should be moved into the newer facility by 2020, according to Griffiths, which is sooner than the original plan of moving in 2027.

The Al Maktoum Airport is included in a large planned development, covering 140 square kilometers and containing residential development, as well as the aviation and logistics industry. Revisions of the airport design see the facilities hitting a passenger-capacity of 80 million by 2020.

Emirates is the largest airline in the world in terms of international traffic and continues to play an important role in the plans of Dubai. The airline keeps growing with passenger traffic surging by 16 percent in the year ending March, reaching 39.4 million. Nearly 200 aircraft remain on order, valued at over $71 billion.

This year Dubai International became the second busiest airport in terms of international traffic. The facilities handled around 4.8 million travelers, a 15 percent increase over last year and coming in second to Heathrow Airport in London, which handled 5.6 million. A total of 57 million passengers came through the Dubai hub last year, with forecasted expansion to 65 million passengers this year. Heathrow handled 70 million last year.

Emirates handled around 64 percent of traffic moving through Dubai International. Lower-cost carrier Flydubai handled around 10.7 percent, according to Griffiths.

New Islamic Banking Centre Set for Dubai

Dubai Executive Council chairman and Dubai’s Crown Prince Sheikh Hamdan Bin Mohammed bin Rashid Al Maktoum considered the Dubai Centre of Islamic Banking & Finance an initial step in the move to establish Dubai as the capital of the Islamic economy.

The Crown Prince noted that the Islamic economic sector felt a “significant boost” from the launch of the new centre, making the institute a major forward step in Dubai’s economic development.

The Emirate’s ruler has plans to establish Dubai as the worldwide capital of Islamic economy.

The collaboration between Dubai’s initiative and HBMeU underscores how cooperation and partnership between various economic sectors in the UAE utilize the best experiences and expertise within the Islamic economy, according to Sheikh Hamdan. He also noted that this occurs with the goal of aiding this sector and consolidating Dubai’s stature in the global economy.

Three academic programs will run through the new centre, focusing on community service, scientific research and human resources development.

Intentions are for the centre to play an important role in providing greater access to Islamic banking and improving the finance education available for the community.

Earlier in 2013 announcements outlined Dubai’s goal to increase development on the Islamic business sector, with the goal to attract investors from across the Middle East and South Eastern Asia.

Islamic banking, financial products and insurance, as well as Islamic contract arbitration and halal food quality standards fall under the government’s promotional efforts.

Islamic finance includes principles like interest bans and the elimination of pure monetary speculation. Despite remaining smaller in scale than conventional finance, Islamic finance has seen serious and surprising growth around the world.

Around 25 percent of companies in the GCC’s banking market are Islamic banking institutions, based on estimations by Ernst & Young. The Dubai International Financial Centre, launched around ten years ago, has climbed to the top of the GCC’s banking sector. Dubai now aims to expand trade and investment growth.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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