The total banking investments in the UAE reached Dh396.2 billion in November, the central bank reported. According to the Central Bank of the UAE’s banking indicators debt securities rose 16.7 percent year-to-date, with a total of Dh245.4 billion.
Also, the bank deposits increased 4.6 percent year-on-year, reaching a total of Dh1.8 trillion in November 2019 compared to Dh1.74 trillion for the same month in 2018. The total banks’ reserves at the central bank reached Dh309.6 billion, representing a 9.2 percent increase year-on-year, the local news agency Wam reported.
Earlier this month, EFG Hermes analysts said that the UAE banks are undervalued compared to regional peers. It appears that the UAE lenders are valued at 9.5 times their expected 2020 earnings. This is lower than valuations of Saudi banks at 13.5x and Kuwaiti banks at 15.3x.
UAE banks such as Emirates NBD, Abu Dhabi Commercial Bank and Dubai Islamic Bank have demonstrated strong fundamentals that could boost investor interest. The analyst’s note said, “Large banks with well diversified loan books and high break-even cost of risk should be better positioned to grapple with potential stress in this segment.”
EFG Hermes analysts believe that UAE’s smaller banks are expected to face pressure to consolidate or show maximum profitability. Currently, there are 50 smaller banks in the UAE, while the four biggest banks account for 70 percent of total loans. According to Moody’s, GCC banks overall outlook will remain stable next year backed by strong economic growth.