Professionals in the world of finance and investments expect that the banking sector in the UAE will grow in 2022 because of the improvement in the economy and the rise of digital transformation in the industry. Eminent business analysts expect that the growth of the net income from interest will bring in more profitability as their rates are on the rise in the region.
Kavan Choksi– consistent growth in the economy expected to be good this year
There is anticipation among outstanding finance and business analysts that the growth in the UAE with regard to its economic activities will be good this year. According to finance and business expert in the UAE, Kavan Choksi expects that the above growth in income will trigger higher profitability as the rates of interest in the region surge along with the hikes in interest rates from the Federal Reserve in the USA.
There is an expectation that the prices of oil in the region will increase in 2022
Besides the above, he, along with other experts in finance and economics, expects oil prices in the region to rise with supportive spending initiatives from the Government and the normalization of the sectors that do not deal with oil to support the growth of the region GDP and the creditworthiness of lenders in the UAE.
The extension of the TESS Scheme forbearance measures
The Government of the UAE has extended the forbearance measure of the TESS scheme for aiding economic recovery till June 2022. However, once this period for the loan forbearance expires, banks would need to book additional provisions for affecting the quality of the asset and its profitability. Again, the ongoing war in Ukraine needs to be another subject of consideration because the UAE banks restricted exposure in these areas.
The performance of the banking sector was good and encouraging for the UAE last year
The profitability for UAE banks recovered to a large extent in 2021 as the economy steadily bounced back from the coronavirus pandemic effects. According to reports from credible sources, banks have managed to perform well in several categories of income that are related to the markets that are displaying elevated activity slowly.
Reports suggest a surge in liquidity
There are reports of increased liquidity, but banks in the UAE have been cautious in sourcing out new loans last year. According to business and finance expert Kavan Choksi, banks are currently holding excess reserves if you compare them to their portfolio risk profiles.
Anticipation that the economic activity in the UAE will accelerate in 2022
It is due to the above factors that experts in the industry are anticipating that the volume of economic activities will quickly accelerate in 2022. The factors that will trigger the growth of economic activity in the region will be a rise in the prices of oil, government policies, and the gradual return to normal levels of economic activity in the area.
The Banks in the UAE will also take the necessary precautions to prevent the deterioration of the indicators pertaining to asset quality with the improvement of the economy and the recovery of corporate activity.
