UAE banking sector poised for growth in 2022

  • The UAE’s 10 largest banks reported a 5 percent year-over-year increase in total assets worth AED 2,989 billion in 2021, and a 42 percent increase in net profit;
  • Improved infrastructure and digital trends such as cryptocurrency will boost the financial services sector;

The UAE’s financial services industry is adopting new resilience mechanisms to counter the effects of the global pandemic. It encompasses digitalisation, improved regulatory frameworks, corporate governance and risk management strategies.

This is evident from the KPMG UAE Banking Perspectives 2022 report, which analyzes the key trends and opportunities in financial services.

Abbas Basrai, Partner and Head of Financial Services, KPMG Lower Gulf, said: “The banking sector in the UAE has performed remarkably despite the prevailing financial and economic conditions. We believe that banks have emerged stronger than ever after the economic slump caused by the pandemic. To best serve the interests of all their stakeholders, financial institutions will do well to continuously adapt their operations and compliance functions to keep pace with the maturing regulatory landscape, early adopters of nascent technologies and embed environmental, social and governance (ESG) into everything they do.”

The seventh edition of the report found that the UAE banking sector had a promising year against a backdrop of sweeping tax reforms, including the UAE corporate tax announced in January and the Global Minimum Tax announced in 2021.

The UAE’s 10 largest banks reported a 5 percent year-over-year increase in total assets worth AED 2,989 billion in 2021, and a 42 percent increase in net profit. This is primarily due to lower impairment charges as banks reported higher losses and customer defaults due to the pandemic in the previous year.

The capital position remains strong and the overall liquidity position, cost/income ratio and return on equity of the market remained stable year on year.

The UAE Banking Perspectives 2022 report also analyzed the key drivers of satisfaction for the major banks in the UAE and found that one of the main pain points for consumers was a lack of efficient support for their reported business behavior issues, including suspected fraud. and incorrect information is received. The ‘cryofixation’ of banks was also identified as a major trend in 2022, due to increased demand, supply and banks did not want to miss its adoption.

The banking industry is under increasing pressure from regulators and stakeholders to embed ESG considerations into its business. Financial institutions play a vital role in providing finance to fight climate change, challenging and encouraging ESG practices within their customer base, and supporting organizations in achieving the United Nations Sustainable Development Goals (SDGs).

Other key trends shaping financial institutions, as the report identified, included the implementation of cloud strategies, outsourcing and offshoring of compliance, IT and other processes to meet the demand for fast and secure transactions.

The typical customer evolves and banks have to move with the times. Customers with low investment capital now form an important potential market. These individuals are looking for highly personalized consulting solutions from technology-savvy advisors and advanced platforms and features to help them manage their family wealth and succession plans. Digitization has lowered the cost of customer retention and improved access to their capital. As a result, many banks are working to strengthen their asset management activities.

Customer satisfaction grows exponentially as banks can ask the right questions, avoid repetition and focus on the right transactions at the right time. A data-driven approach can enable banks to augment traditional risk factors, create a more dynamic risk assessment process by including additional data points, and generate a scoring framework with a detailed web of risk factors. This ensures that they can best serve the interests of their stakeholders and align with the UAE’s long-term vision of digitization.

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