S&P Global’s roundtable on credit rating trends in Gulf Cooperation Council (GCC) countries unveiled optimistic prospects for UAE banks in 2024. Analysts predict robust bank performance buoyed by prevailing interest rate levels, despite expectations of rate cuts later in the year.
Regarding S&P’s outlook on the Al Maktoum International Airport‘s expansion, analysts noted its positive impact on the real estate sector in nearby areas. S&P analysts revealed that the airport expansion will have direct impact on projects and housing demand in the areas close to the new airport terminal.
UAE banks to maintain growth this year
During the roundtable meeting, S&P Global credit ratings analysts shed light on the key trends and issues in markets, banks, energy, companies and infrastructure entities in the GCC countries.
For his part, Dr. Mohamed Damak, managing director, sector lead financial institutions, and global head of Islamic finance at S&P, forecasted three interest rate cuts totaling 75 basis points in the second half of 2024, along with further reductions of 125 basis points in 2025. He explained that UAE banks will continue to achieve strong growth this year, leveraging their strength despite expectations of interest rate cuts.
Regarding UAE banks, Damak added: “When discussing asset quality, the picture remains strong, with a low level of non-performing loans and a coverage ratio of 100 percent, which is more than adequate.”
Real estate sector surges
In addition to the growth of UAE banks, Tatjana Lescova, an analyst in corporate ratings at S&P Global Ratings, highlighted the developments the real estate sector has witnessed in recent years. In Dubai, Lescova stated that transactions, demand and prices have all witnessed a surge recently. Therefore, real estate developers have significantly improved their financial positions, enhancing their cash balances and collections.
Lescova also emphasized the importance of Al Maktoum International Airport following its expansion announcement, which will transform the airport into the world’s largest with a capacity of up to 260 million passengers annually. Moreover, Lescova noted that the expansion will have a significant impact on the UAE’s economy, with a direct impact on the real estate sector in the near future, especially in nearby areas.
With ongoing development projects in the areas close to the airport as well as other projects that will commence later this year, Dubai’s real estate sector and economy are set for an exponential expansion. “The workforce at the airport itself and in the surrounding projects will create significant demand for housing in the areas nearby the airport,” Lescova added.
Read: UAE banks’ gross assets reach record high, exceed $1.14 trillion in February 2024: CBUAE
UAE’s insurance sector
For his part, Emir Mujkic, director and senior analyst of Insurance Ratings at S&P, highlighted the constant growth of the region’s insurance sector which will continue to achieve great profitability and growth in insurance premiums. Mujkic attributes this growth to the ongoing and new projects in the GCC region as a whole. Moreover, Mujkic forecast an increase in car and property insurance prices which will increase insurance premiums overall.
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