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A vested interest

A vested interest

Higher loan interest rates may have helped banks back on to firmer ground, but now they're helping to crush small businesses, says Eva fernandes.

February 6, 2011 5:44 by

The onset of the economic downturn was marked by the falling of a few prominent banks. The collapse of Lehman Brothers may have received a lot of attention, but the precarious period also saw Bank of America’s acquisition of Merrill Lynch and Royal Bank of Scotland’s acquisition of ABN Amro. The banks were at large blamed for getting the economy into the warped state it was, for irresponsibly lending far too much in exchange for far too little.

But two years on and a plethora of measures set up to ensure prudent lending policies later, the banking sector is picking up. But the question is: are the higher interest rates charged on loans and the stiffer lending policies now doing more harm than good?

It is a tough question, because more conservative lending practices and higher returns seem to have done the UAE banks quite a lot of good as the fourth quarter results – and consequently the yearly performance – reveal. The following is just a brief summary of some of the more impressive numbers posted in the past week:

The National Bank of Abu Dhabi‘s net profit for Q4 rose 71 percent on year to Dh732 million, meaning the bank’s net profit was up 22 percent year-on-year to Dh3.68 billion for the year.

RAK Bank (National Bank of Ras Al Khaimah) reported a net profit of Dh1 billion for 2010, an increase of 38.1 percent compared to Dh726.2 million in 2009.

Commercial Bank of Dubai (CBD) reported a net profit of Dh821 million for 2010, up 2.2 percent over the Dh803 million earned in 2009. CBD reported a 7.7 percent increase of net profits for Q4 this year, from the same period last year.

Abu Dhabi Commercial Bank (ADCB) had an impressive comeback in 2010, which saw the bank return to profit. The bank reported a Dh 371 million net profit in Q4 of 2010, which is a welcome contrast no doubt when compared to its net loss of Dh1.213 billion in the same quarter last year.

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