Credit ratings agency Fitch said on Monday that the profitability of UAE banks will be affected this year under the pressure of the Krone pandemic.
This was stated in a report by the international agency entitled "Results of Emirates Banks 2019: asset quality under pressure."
The agency said in its report that the credit prospects of Emirates banks are likely to weaken in 2020 as a result of the Corona crisis and the decline in oil prices.
She added that the profitability of banks in the UAE will be affected by lower interest rates and reduced income from fees and activities outside of lending.
Regarding 2019, the agency said that the average net interest margin decreased due to high financing costs and strong competition for lending.
Regarding the assets, Fitch reported that the quality of the assets remained under pressure in 2019, especially in the contracting and real estate sectors, and in retail, wholesale and hospitality trade, especially malls and hotels, and the growth of local loans was weak, while real estate prices remained weak as well.
The agency stated that Emirates bank deposits constituted about 80% of its financing in 2019, with an average lending to deposits of 93.5%.
And last Friday, Moody's credit rating agency said it has revised its outlook for 8 banks in the UAE from stable to negative, in light of the outbreak of the new Corona virus.
The banks are: Emirates NBD, Abu Dhabi Commercial Bank, Dubai Islamic Bank, Mashreq Bank, HSBC Middle East, Abu Dhabi Islamic Bank, Ras Al-Khaimah National Bank and National Bank of Fujairah.
The agency stressed that the amendment of the future outlook reflects "the perceived weakness in the individual credit situation (of banks), in light of an environment rich with challenges in the UAE due to the spread of the Corona virus, low oil prices and existing pre-existing economic challenges."
The UAE economy is facing a liquidity crisis as a result of the drop in oil prices, which in April reached its lowest level in 20 years at $ 16 a barrel.
Despite the improvement in prices after OPEC Plus agreed on unprecedented production cuts, the current price hovering around $ 42 a barrel is still far from the $ 70 price that the UAE needs to reach the equilibrium point in its budget.