Mena equity investors have had a stormy year so far. We have seen decent swings in both directions, but despite the volatility, Mena equities are now where they started the year, although some countries and sectors have fared better than others. While liquidity is down, foreign inflows are strong and we consider that it may be worth looking at sectors where the underlying fundamentals represent a solid investment case.
UAE banks may just be one of those sectors.
At the country level, in a region routinely beset by political uncertainty and widely seen as demanding a high(er) risk premium, the UAE’s unique political and federal governance structure is a strong and sustainable differentiator, as decentralised governance fosters not only competition, but also cooperation, and has translated into a high degree of efficiency in the provision of services and infrastructure.
The UAE’s rankings in the World Bank Ease of Doing Business Survey – No 1 in Mena and No 26 worldwide, ahead of many developed economies – attest to this. We also note that unlike many countries classified as emerging according to the MSCI indexes, the UAE has a strong capacity for reform.
For example, energy subsidy reforms have already been carried out and the country is in the midst of important fiscal consolidation programmes, while the introduction of VAT is planned in the near term.
UAE banks last year recorded combined profits of about US$10 billion, broadly on par with Saudi banks, but well ahead of Turkish banks and several times more than South African or Polish banks.
Our analysis of banking sector return on assets suggest that this is not a function of unsustainable returns, rather a high banking sector penetration underpinning the profitability of the industry. Some of the reasons behind this relatively high penetration over the years include political stability, the peg to the US dollar, the lack of taxes and efficient cost structures. Much of this seems sustainable over the medium term, in our opinion.
Economic headwinds brought about by lower oil prices and fiscal tightening are likely to put pressure on earnings in the short and near term. We think net income for many lenders could be flat or drop slightly year on year in 2016, as asset quality weakens marginally.
Unlike in other regional banking markets, we point out that liquidity pressures are not critical and that deposits are still growing. Further fixed asset expenditure related to Expo 2020 and Abu Dhabi Vision 2030 should underpin steady medium-term growth, and we see no major liquidity constraints for UAE banks to fund this expected growth.
UAE banks also enjoy high levels of capital, which we believe will enable them to maintain relatively steady dividend payout ratios even if profits decrease. Critically, the implementation of Basel 3 regulation, expected by 2019, should also prove easier for UAE banks than for some other economies given the high capital levels.
Similarly, a new regulation related to asset quality provisioning, known as IFRS 9 and expected by 2018, could prove less of a headwind for UAE banks than for some other regional and emerging banking markets given the high level of general provisions.
Following the announcement of a merger between FGB and NBAD, we think that the structural arguments for further consolidation are now weaker. Our studies indicate that in a sample of a dozen emerging and developed economies, the top four UAE banks had an average market share of loans of 53 per cent last year. Post merger, these banks will have a combined 56 per cent market share domestically. One area, however, where the structural rational for more consolidation remains sound is Islamic banking.
There is much to consider in the coming months. US elections are imminent, the oil price continues to fluctuate along with the direction of other major commodities. Monetary policies worldwide are also at risk of diverging further, impacting global currencies and the emerging markets dynamic. Safety in a sound sector, like UAE banks, may just warrant consideration in this uncertain world.
Rafik Nayed is the chief country officer at Deutsche Bank for the UAE
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What to watch out for:
Algae, waste coffee grounds and orange peels will be used in the pavilion's walls and gangways
The hulls of three ships will be used for the roof
The hulls will painted to make the largest Italian tricolour in the country’s history
Several pillars more than 20 metres high will support the structure
Roughly 15 tonnes of steel will be used
Padmaavat
Director: Sanjay Leela Bhansali
Starring: Ranveer Singh, Deepika Padukone, Shahid Kapoor, Jim Sarbh
3.5/5
RESULTS
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THE 12 BREAKAWAY CLUBS
England
Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur
Italy
AC Milan, Inter Milan, Juventus
Spain
Atletico Madrid, Barcelona, Real Madrid
BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
UAE currency: the story behind the money in your pockets
The%20Super%20Mario%20Bros%20Movie
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The%20specs%3A%20Macan%20Turbo
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Company%20profile%20
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EYodawy%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Egypt%3Cbr%3E%3Cstrong%3EFounders%3A%20%3C%2Fstrong%3EKarim%20Khashaba%2C%20Sherief%20El-Feky%20and%20Yasser%20AbdelGawad%3Cstrong%3E%3Cbr%3ESector%3A%20%3C%2Fstrong%3EHealthTech%3Cbr%3E%3Cstrong%3ETotal%20funding%3A%20%3C%2Fstrong%3E%2424.5%20million%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EAlgebra%20Ventures%2C%20Global%20Ventures%2C%20MEVP%20and%20Delivery%20Hero%20Ventures%2C%20among%20others%3Cstrong%3E%3Cbr%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%20500%3Cbr%3E%3C%2Fp%3E%0A
Getting there
Flydubai flies direct from Dubai to Tbilisi from Dh1,025 return including taxes
The Equaliser 2
Director Antoine Fuqua
Starring: Denzel Washington, Bill Pullman, Melissa Leo, Ashton Sanders
Three stars
Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
THE%20HOLDOVERS
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The biog
Favourite colour: Brown
Favourite Movie: Resident Evil
Hobbies: Painting, Cooking, Imitating Voices
Favourite food: Pizza
Trivia: Was the voice of three characters in the Emirati animation, Shaabiyat Al Cartoon
Results
Women finals: 48kg - Urantsetseg Munkhbat (MGL) bt Distria Krasniqi (KOS); 52kg - Odette Guiffrida (ITA) bt Majlinda Kelmendi (KOS); 57kg - Nora Gjakova (KOS) bt Anastasiia Konkina (Rus)
Men’s finals: 60kg - Amiran Papinashvili (GEO) bt Francisco Garrigos (ESP); 66kg - Vazha Margvelashvili (Geo) bt Yerlan Serikzhanov (KAZ)
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
The specs
Engine: 2.0-litre 4-cyl
Power: 153hp at 6,000rpm
Torque: 200Nm at 4,000rpm
Transmission: 6-speed auto
Price: Dh99,000
On sale: now
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
The%20specs
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A German university was a good fit for the family budget
Annual fees for the Technical University of Munich - £600
Shared rental accommodation per month depending on the location ranges between £200-600
The family had budgeted for food, books, travel, living expenses - £20,000 annually
Overall costs in Germany are lower than the family estimated
As proof that the student has the ability to take care of expenses, international students must open a blocked account with about £8,640
Students are permitted to withdraw £720 per month
The%20specs%3A%20Taycan%20Turbo%20GT
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SPEC%20SHEET%3A%20APPLE%20IPAD%20PRO%20(12.9%22%2C%202022)
%3Cp%3E%3Cstrong%3EDisplay%3A%3C%2Fstrong%3E%2012.9-inch%20Liquid%20Retina%20XDR%2C%202%2C732%20x%202%2C048%2C%20264ppi%2C%20wide%20colour%2C%20True%20Tone%2C%20ProMotion%2C%201%2C600%20nits%20max%2C%20Apple%20Pencil%20hover%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EChip%3A%3C%2Fstrong%3E%20Apple%20M2%2C%208-core%20CPU%2C%2010-core%20GPU%2C%2016-core%20Neural%20Engine%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMemory%3A%3C%2Fstrong%3E%20Storage%20%E2%80%93%20128GB%2F256GB%2F512GB%20%2F%201TB%2F2TB%3B%20RAM%20%E2%80%93%208GB%2F16GB%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EPlatform%3A%3C%2Fstrong%3E%20iPadOS%2016%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMain%20camera%3A%3C%2Fstrong%3E%20Dual%2012MP%20wide%20(f%2F1.8)%20%2B%2010MP%20ultra-wide%20(f%2F2.4)%2C%202x%20optical%2F5x%20digital%2C%20Smart%20HDR%204%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EVideo%3A%3C%2Fstrong%3E%20ProRes%204K%20%40%2030fps%2C%204K%20%40%2024%2F25%2F30%2F60fps%2C%20full%20HD%20%40%2025%2F30%2F60fps%2C%20slo-mo%20%40%20120%2F240fps%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFront%20camera%3A%3C%2Fstrong%3E%20TrueDepth%2012MP%20ultra-wide%20(f%2F2.4)%2C%202x%2C%20Smart%20HDR%204%2C%20Centre%20Stage%2C%20Portrait%2C%20Animoji%2C%20Memoji%3B%20full%20HD%20%40%2025%2F30%2F60fps%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EAudio%3A%3C%2Fstrong%3E%20Four-speaker%20stereo%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBiometrics%3A%3C%2Fstrong%3E%20Face%20ID%2C%20Touch%20ID%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EI%2FO%3A%3C%2Fstrong%3E%20USB-C%2C%20smart%20connector%20(for%20folio%2Fkeyboard)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBattery%3A%3C%2Fstrong%3E%20Up%20to%2010%20hours%20on%20Wi-Fi%3B%20up%20to%20nine%20hours%20on%20cellular%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFinish%3A%3C%2Fstrong%3E%20Silver%2C%20space%20grey%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EIn%20the%20box%3A%3C%2Fstrong%3E%20iPad%2C%20USB-C-to-USB-C%20cable%2C%2020-watt%20power%20adapter%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20WiFi%20%E2%80%93%20Dh4%2C599%20(128GB)%20%2F%20Dh4%2C999%20(256GB)%20%2F%20Dh5%2C799%20(512GB)%20%2F%20Dh7%2C399%20(1TB)%20%2F%20Dh8%2C999%20(2TB)%3B%20cellular%20%E2%80%93%20Dh5%2C199%20%2F%20Dh5%2C599%20%2F%20Dh6%2C399%20%2F%20Dh7%2C999%20%2F%20Dh9%2C599%3C%2Fp%3E%0A
Three trading apps to try
Sharad Nair recommends three investment apps for UAE residents:
- For beginners or people who want to start investing with limited capital, Mr Nair suggests eToro. “The low fees and low minimum balance requirements make the platform more accessible,” he says. “The user interface is straightforward to understand and operate, while its social element may help ease beginners into the idea of investing money by looking to a virtual community.”
- If you’re an experienced investor, and have $10,000 or more to invest, consider Saxo Bank. “Saxo Bank offers a more comprehensive trading platform with advanced features and insight for more experienced users. It offers a more personalised approach to opening and operating an account on their platform,” he says.
- Finally, StashAway could work for those who want a hands-off approach to their investing. “It removes one of the biggest challenges for novice traders: picking the securities in their portfolio,” Mr Nair says. “A goal-based approach or view towards investing can help motivate residents who may usually shy away from investment platforms.”
COMPANY%20PROFILE
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Brief scores
Toss India, chose to bat
India 281-7 in 50 ov (Pandya 83, Dhoni 79; Coulter-Nile 3-44)
Australia 137-9 in 21 ov (Maxwell 39, Warner 25; Chahal 3-30)
India won by 26 runs on Duckworth-Lewis Method
Company%20profile
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Warlight,
Michael Ondaatje, Knopf
Abu Dhabi traffic facts
Drivers in Abu Dhabi spend 10 per cent longer in congested conditions than they would on a free-flowing road
The highest volume of traffic on the roads is found between 7am and 8am on a Sunday.
Travelling before 7am on a Sunday could save up to four hours per year on a 30-minute commute.
The day was the least congestion in Abu Dhabi in 2019 was Tuesday, August 13.
The highest levels of traffic were found on Sunday, November 10.
Drivers in Abu Dhabi lost 41 hours spent in traffic jams in rush hour during 2019