Dubai-Mubasher: Moody's Investors Service maintained its stable outlook on the UAE' banking system, reflecting the rating agency's expectation of resilient capital and liquidity buffers, according to a recent statement on Wednesday.
The outlook expresses Moody's expectation of how bank creditworthiness will evolve in the system over the next 12 to 18 months.
UAE banks' credit profiles are expected to remain resilient despite the softening economy driven by low oil prices, owing to their strong capital and liquidity buffers, in addition to resilient profitability, says Nitish Bhojnagarwala, an assistant vice president at Moody's.
However, the economic slowdown will weaken operating conditions and result in subdued credit growth which is expected to ease from around 9% in 2014 to 3% and 5% annually in 2015 and 2016, respectively.
Moody's projected asset quality to remain stable, the statement said, adding the UAE banks continues resolution of legacy problem despite the increasing pressures in the small and mid-sized enterprise sector.
The rating agency also noted that capital buffers are solid and expects them to improve further, with tangible common equity expected to reach around 15% of risk-weighted assets by 2016, up from 13.8% in June 2015.
Deposit growth will decelerate sharply to 2%-4% this year and into 2016 from 10% for 2014, driving the banks to raise funding from increasingly expensive and confidence-sensitive debt and sukuk markets to support growth, noted Khalid Howladar, Senior Credit Officer at Moody's.
