Once a hurricane passes, those left in its wake assess the damage, pick up the pieces and look ahead to how best to get on with life. The first quarter of 2010 was akin to such a moment for the six biggest United Arab Emirate banks, unbattening their hatches as the financial storms of 2009 slowly abated in the distance.
Ostensibly, exposure to poorly performing sectors and bad loans generally did not prevent Emirati banks from posting attractive numbers on first quarter financial statements.
But one must sift through the statistics to be sure whether faults in the findings have not been masked by opaque disclosures of asset quality and a recent UAE central bank circular to reduce provisioning.
The headline of the first quarter
Most UAE banks posted better-than-expected results, leading to improvements in ratings and paving the way for an upward trend in 2010 estimates.
According to profit and loss (P&L) statements, quarter-over-quarter (QoQ) improvements in first quarter net income stemmed from higher operating profits coupled with lower credit costs, which had peaked in the fourth quarter of 2009.