UAE’s banking industry is regarded as the most competitive market in Gulf Cooperation Council region (Haseeb, 2012). This competitiveness is justified by the comparative statistics of banking industries in the GCC region.
As for instance, the difference between interest paid by UAE’s banks on their customers’ deposits and the interest charged on loans and advances provided by those banks is lowest in the region, i.e. 2.9 %, which in itself is evident of the competitiveness of UAE’s banking industry.
The banking industry in the United Arab Emirates is composed of local and international banking companies. As per the statistics for 2011, there were 23 local and 28 international banking companies operating in the country (Moukahal, 2011).
Owing to the significant infrastructural development and economic activities taking place in the UAE, the banking companies are faced with a major challenge of coping up with the domestic finance needs.
Apart from this, the UAE’s banking sector has also been affected by the recent financial slowdown and the profitability of the banking companies declined significantly in 2009 (Moukahal, 2011).
Financial Performance Review
In this section, financial and strategic analysis of Abu Dhabi Islamic Bank and National Bank of Abu Dhabi is presented while referring back to their respective financial performances.
The financial performance of Abu Dhabi Islamic Bank and National Bank of Abu Dhabi has been analysed in this section on the basis of information presented in the annual reports of the two banks pertaining to the financial year 2011. The financial performance review for both banks is individually presented as under:
Financial Performance of Abu Dhabi Islamic Bank
In 2011, apart from the fact that the total customers’ deposits in 2011 declined by 2.4 %, Abu Dhabi Islamic Bank showed a considerable increase in its revenues and an equivalent increase in its operating margin.
Moreover, the bank has been able to achieve higher use of its deposits in 2011 as consumer financing as compared to 2010. The bank has maintained its strong capital adequacy position in both 2010 and 2011.
The international rating agencies, such as Moody and Fitch, declared the outlook of the bank as stable (Abu Dhabi Islamic Bank, 2011).
In addition to this, as stated by the Chairman in his statement, the bank also distributed about 50 percent of its net income for the year in dividends to the shareholders (Abu Dhabi Islamic Bank, 2011).
Financial Performance of National Bank of Abu Dhabi
National Bank of Abu Dhabi was able to report only 1% increase in its net profits for the year 2011 and earnings per share were reported as AED 1.19.
Moreover, the management set a 20 % return on average shareholders’ funds in 2011, which came out to be 16.3 % in actual, but this gap has been due to unfavourable changes in the financial market (National Bank of Abu Dhabi, 2011).
Given the fact that banking companies faced unfavourable market and economic conditions during the financial year 2011 and while comparing this percentage of 16.3 % to other industry leaders, it can be said that National Bank of Abu Dhabi performed well in this respect.
The bank has successfully maintained higher capital adequacy levels in both years. In view of the banks strong position in the market, it has been able to attract greater deposits in 2011 (National Bank of Abu Dhabi, 2011).
Final Analysis
Keeping in view the strategies of the two banking companies selected in this analysis, it can be stated that both of them have been able to attain their strategic goals as planned in 2011 to a certain extent (Abu Dhabi Islamic Bank, 2011; National Bank of Abu Dhabi, 2011).
Owing to the fact that effects of the financial crisis, which emerged in 2008 existed in 2011 also, the strategy of the two banks was to remain stable as far as financial performance was concerned.
In this regard, both banks were able to report even better results, as they not only maintained their performance but also improved overall profitability and revenue levels in 2011.
However, the comparison of both banks performance reveals that National Bank of Abu Dhabi has been a better performer than Abu Dhabi Islamic Bank (Abu Dhabi Islamic Bank, 2011; National Bank of Abu Dhabi, 2011).
As has been noted in the financial analysis of the two banks presented earlier, National Bank of Abu Dhabi has shown stability and growth in profitability as compared to Abu Dhabi Islamic Bank (National Bank of Abu Dhabi, 2011).
Moreover, the gearing level of the bank also came down in 2011 in comparison with previous years, which was also a part of management’s strategy (National Bank of Abu Dhabi, 2011).
On the other hand, liquidity and solvency positions of both banks remained similar in 2011 and did not show significant variations in comparison with previous years (Abu Dhabi Islamic Bank, 2011; National Bank of Abu Dhabi, 2011).
The fact that both banks made strategies increase their market share was also achieved successfully by way of growth in their depositors. However, NBAD appears to be more strategically successful as compared to the other bank as its financial position is better than ADIB.
Reference List
Abu Dhabi Islamic Bank. (2011). Annual Report 2011. Abu Dhabi: Abu Dhabi Islamic Bank.
Haseeb, H. (2012, January 12). UAE’s banking industry most competitive in the GCC. Khaleej Times.
Moukahal, W. (2011). The banking industry in the UAE. Web.
National Bank of Abu Dhabi. (2011). Annual Report 2011. Abu Dhabi: National Bank of Abu Dhabi.