UAE equity benchmarks posted their strongest single-session gain in six weeks after the country's four largest lenders reported aggregate net income of AED 14.2 billion for Q1 2024, surpassing analyst forecasts of AED 12.7 billion. Emirates NBD led with a 18% year-on-year profit jump to AED 5.1 billion, while First Abu Dhabi Bank posted a 9% rise to AED 4.3 billion, both benefiting from widening loan-to-deposit spreads.
The earnings beat reflects resilient credit demand from non-oil sectors, which grew 6.4% annually in March according to central bank data, alongside disciplined provisioning that kept cost-of-risk below 50 basis points. This combination signals that UAE banks are navigating the rate cycle's peak without asset-quality deterioration, a key concern for foreign portfolio managers.
Trading volumes surged 42% above the 30-day average, with institutional flows accounting for 68% of turnover, suggesting the move has conviction beyond retail momentum. The banking sector's weight of 38% on the ADX amplified the index impact, while Dubai's DFM General Index gained 1.9% led by Emirates Islamic and Dubai Islamic Bank, which both reported double-digit profit growth.
Analysts are now revising full-year earnings estimates upward by 5-7% for the sector, with consensus 2024 ROE projections rising to 16.2% from 15.4%. The re-rating potential remains contingent on Q2 loan growth sustaining above 5% annualized and non-performing loan ratios holding below 4.5%, thresholds that would justify current forward P/E multiples near 8.5x.
Key insights
- Q1 aggregate bank profits of AED 14.2bn exceeded consensus by 12%, driven by net interest margin expansion to 3.1%
- Institutional investors accounted for 68% of elevated volumes, signaling conviction in earnings sustainability
- Sector 2024 ROE consensus revised to 16.2% from 15.4%, with forward P/E at 8.5x offering re-rating scope if asset quality holds
Why it matters
The earnings beat reinforces the UAE banking sector's role as a proxy for non-oil economic momentum, attracting Gulf institutional capital seeking yield with quality. Sustained credit growth below 50bps cost-of-risk validates the central bank's macroprudential framework and supports the dirham's stability outlook.
Source: صحيفة الخليج