United Arab Emirates' banks will continue to reap gains in 2005 on the back of a strong economy fuelled by high oil prices and major construction projects in the Gulf Arab state, an investment and brokerage house said. EFG-Hermes said in a report that banks' earnings in 2005 would grow on the back of strong demand for loans, rising prices of financial assets, fees related to a boom in initial public offerings (IPOs) and increased trading volumes on local bourses. However, the bank warned that growth may not be sustainable over the medium term - beyond six to 12 months - as interest rates are likely to rise, the equity market slow and fewer IPOs come to market next year.
Economists say the OPEC member state's real gross domestic product is expected to grow by around 6 percent this year after a similar increase in 2004 thanks to a domestic investment boom and surging oil prices hovering around $50 per barrel.
"The vast lending opportunities created by strong economic activity along with the high level of liquidity created by high and rising oil prices have allowed banks to grow their loans and deposits at double-digit rates," EFG Hermes said in a report.
UAE banks' total assets grew by 13 percent over the nine months ended September 2004, the report said.
Comments
Comments are closed.