The UAE remains the most competitive banking market in the GCC, according to a banking competitiveness report from Abu Dhabi Islamic Bank (Adib).

The country's population of approximately 8 million is served by 51 banks with more than 840 branches and over 4,000 ATMs, delivering high levels of service, yet lower profitability than its GCC counterparts, said the recent issue of Adib’s proprietary “GCC Banking Competitiveness Report”.

Adib further notes that UAE banks’ net interest margin, which is the spread between what banks pay for deposits and what they charge for financing and loans remains the lowest among the GCC, at an average of 2.9 per cent.

Saudi banking spreads are currently closer to 3.5 per cent, Qatar at 3.4 per cent those of Kuwait banks are at around 3.2 per cent.

Nevertheless, Adib urges banks across the region to improve their levels of competitive analysis while at the same time raising the level of industry debate.

This is necessary, it believes, if they are to ensure their continued strength in the challenging global economic environment and better meet the needs of their customers and shareholders. Adib's decision to start releasing extracts from its proprietary competitive analysis, via quarterly briefings with selected audiences, is a demonstration of its own commitment to improve regional competitive insight.

Andrew Moir, global head of Strategy and Finance at Adib, said: “Despite the fact that the UAE is a bigger banking market in terms of assets, it remains less profitable than that of Saudi Arabia. In the UAE, the mix of deposits, low customer charges, the presence of high levels of non-performing assets and competitive dynamics have negatively impacted banking profitability and capital ratios.”

“However, lower net interest margin spreads means that consumers in the UAE are getting better rates overall but shareholders are getting lower returns as compared to those in other GCC markets.”

The “GCC Banking Competitiveness Report” focuses on various metrics and ratios that reflect both Islamic and conventional GCC banks’ structures and performance, ranging from customer growth, staffing and service to product trends and performance, financial ratios and indicators, investor insights, capital trends, liquidity, cost of funds and overall pricing dynamics.

Specifically, financial performance, including banking spread analysis; provisioning and profitability are key components of the report.

“This report is one of the mechanisms used by Adib to ensure continued enhancement of its overall offering,” Moir said.

“While the full report will not be made public, certain key insights will in future form part of a quarterly briefing to the market since we believe that if banks across the region commit themselves to learning from each other, we will all benefit. Customers and shareholders will then get the best possible service, solutions and returns from the industry,” he concluded. – TradeArabia News Service