UAE 's Best Banks in 2008 - A Survey


B Rajesh Kumar Ph.D (IIT Kharagpur)
Assistant Professor
Institute of Management Technology FZ-LLC
P.O Box:- 345006.
Plot UG-02, DIAC, Dubai, UAE

Email: rajesh155_bk@yahoo.com

This study is based on a survey of the financial performance of UAE based 22 banks(1) that are listed on ADX and DFM. The study finds that the average total assets have increased by 22.5 % in the year 2008 compared to the previous year. The average customer deposits have increased by 38.01% and average loans and advances increased by 38.75%. The average operating income increased by 32.9% for these banks during the period 2008. The average fee income also increased by 39.67 per cent during this period.

In terms of assets in 2008, the largest bank in UAE is Emirates NBD. The total assets of Emirates NBD were Dh 282413.676 million. The second largest bank in terms of assets was National Bank of Abu Dhabi which had assets worth Dh164654.480 million. Emirates NBD 's total assets was about 1.71 times that of the next bank with highest assets. The assets of the top five banks constituted approximately 67 per of the overall assets of the banking sector under survey. In terms of growth rate National Bank of Umm Al Quwain had the highest asset growth of approximately 60 per cent in the year 2008. Emirates Islamic Bank and Gulf Finance House had an asset growth rate of 55.71 per cent and 55.23 per cent respectively. First Gulf Bank had an asset growth of approximately 47 per cent.

Table 1: Top ten banks in terms of assets

In terms of customer deposits, Emirates NBD occupied the top slot. It was followed by National Bank of Abu Dhabi and Abu Dhabi Commercial Bank. Bank of Sharjah had a growth rate of 59.66 per cent in customer deposits in 2008. Finance House occupied the second slot with a growth rate of 52 per cent. National Bank of Umm Al Quwain achieved a growth rate of 50 per cent. Abu Dhabi Commercial Bank and First Gulf Bank witnessed growth rates of 47.5% and 41.5 per cent respectively during the year 2008. The customer deposits of the top five banks constituted 66.4 per cent of the total customer deposits of twenty two banks under study.

Table 2: Top five banks in terms of customer deposits in 2008

Table 3: Largest Loan Providers

Emirate NBD and National Bank of Abu Dhabi were the largest loan providers in the year 2008. In terms of growth rates, National Bank of Umm Al Quwain registered a growth rate of approximately 100 per cent. Bank of Sharjah and First Gulf Bank had a growth rate of 94.6 per cent and 78.7 per cent respectively. Emirates Islamic Bank and Finance House achieved a growth rate of 63.76 per cent and 62.86 per cent respectively.

Table 4: Top Banks - Operating Income

In the year 2008, Emirates NBD had an operating income of Dh 8446.716 million. National Bank of Abu Dhabi and First Gulf Bank had an operating profit of Dh 5301.282 m and Dh 4698.449 m respectively. Arab Emirates Investment Bank witnessed a growth rate of approximately 180 per cent in operating income in the year 2008. Emirates NBD and Finance House had a growth rate of 70 and 67 per cent respectively in operating income.

Table: 5 Top Performers in terms of Fee Income

Emirates NBD and Gulf Finance House were the top performers in terms of fee income.

Table 6: Profit Maximizers

Emirates NBD was the largest profit maximizer in the year 2008. In terms of growth rate Emirates Islamic Bank witnessed a growth of 67.9 per cent in net profit in the year 2008. National Bank of Ras Al Khaimah had a growth of 58 per cent in its net profits. First Gulf Bank registered a growth of 49% and Emirates NBD had a growth of 32.8 per cent respectively.

Table 7: Position in terms of Net Interest Income

Table 8: Top Islamic Banks - Ranking

In terms of asset growth rate among Islamic banks, Emirates Islamic bank witnessed a growth of 55.71 per cent. Sharjah Islamic Bank had a growth rate of 42.74 per cent in assets. Abu Dhabi Islamic Bank and Dubai Islamic bank recorded an asset growth rate of 16 and 8 per cent respectively. In terms of customer deposits, Abu Dhabi Islamic Bank had a growth of 40.79 per cent followed by Dubai Islamic Bank which had a growth rate of 30 per cent in customer deposits in the year 2008 compared to the previous year. In terms of net profit, Abu Dhabi Islamic Bank witnessed a growth of 10.66 per cent in the year 2008.

Table 9: Ranking on the basis of overall average growth rate

The dimension of overall average growth rate includes growth in customer deposits, loans and advances, fee income, operating income and net profit.

Emirates Islamic Bank had the highest overall average growth rate in the year 2008.

Table 10: Most Productive Banks

Productivity has been measured by the ratio of operating expenses to the total assets of the banks in the year 2008.

The operating expenses of large banks like Emirates NBD, Abu Dhabi Commercial bank and First Gulf bank constituted 1.77%, 2.04% and 1.58 % of their total assets respectively.

Table: 11 Best Asset Quality

Asset quality was measured by the ratio of impairment losses of assets to loans and advances.
Smaller banks were toppers with respect to quality of assets.

Smaller banks were toppers with respect to quality of assets

Emirates NBD had a NPA of 0.87 per cent of the total loans and advances. Abu Dhabi Commercial bank had an NPA of 1.37 per cent of the total loans and advances. National Bank of Abu Dhabi had an NPA of 0.64 per cent of its loans and advances.

Table 12: Ranking by Return on Assets

Return on Assets was found out by the ratio of net profit to total assets.

Emirates NBD had a ROA of 1.30 per cent. National Bank of Abu Dhabi had a ROA of 1.83 per cent. Abu Dhabi Commercial bank had a ROA of 0.91 per cent. Bank of Sharjah had a ROA of 2.59 per cent.

Table 13: Most Efficient Users of Capital

The ratio used to find out the most efficient users of capital was return on equity. Return on equity was found by the ratio of net profit divided by equity and net worth.

Abu Dhabi Commercial Bank had a ROE of 8.5 per cent. Emirates NBD 's ROE in the year 2008 was 14.28 per cent.

Best Capitalized Banks
Capital Adequacy ratios are considered broad indicators of the risk appetite. Capital Adequacy ratio is the ratio of a bank's capital to its risk weighted assets.

Table 14: Best Capitalized Banks

Sharjah Islamic Bank had the highest Capital Adequacy ratio of 39 per cent. Emirates NBD and Abu Dhabi Commercial Bank had a Capital Adequacy Ratio of 11.4 and 11.07 respectively. National Bank of Abu Dhabi and Mashreq bank had a Capital Adequacy Ratio of 13.71 per cent and 14.08 respectively. The average Capital Adequacy ratio of the twenty two banks was 19.73 per cent in the year 2007. The average decreased to 17.07 per cent in the year 2008. The average capital adequacy ratio of the Islamic banks were 18.41 per cent in 2008.

Table 15: Liquidity Position

The liquidity position of the banks is measured by the ratio of cash to deposit.

Table 16: EPS Position in 2008

In terms of earnings per share, the top ranks can be assigned to Mashreq bank, First Gulf Bank and National Bank of Abu Dhabi.

Table 17: Wealth creators in Stock Market

In terms of Wealth maximization in 2008, Dubai Islamic Bank occupied the top position. It was followed by First Gulf bank and Union National Bank. The analysis was based on the bank's values in the respective listed exchanges (DFM and ADX) as on 31/12/2008.

Ranking Summary
(Click for table)

Footnote
1. Banks like Commercial International Bank (Egypt) , Al Salam Bank (Bahrain ) whose financial data was supplied in foreign denominations and other banks like Arab Bank , Jordan Bank and TAIB Bank were not included in the study. Gulf Finance House financial data was converted @ Dh 3.67/$.

References:
1) Data sources from ADX and DFM Websites

Appendix:
Banks Financial Parameters - Year 2008