As per Goldman Sachs Group Inc, since earnings remain attractive and valuations catch up with the emerging markets average, United Arab Emirates' banks may register an increase on an average 30 percent in a year.
Goldman Sachs' analysts, led by William A. Mejia, said in an August 21 report e- mailed today, "Valuations of six out of the top seven U. A. E. banks that Goldman Sachs covers are likely to improve to 1.2 times their estimated 2010 book value from about 1 as they catch up with the peer average in Turkey, Russia and South Africa."
The report continued that though the shares of the banks are still about 50 percent lower than what they were a year ago, they have increased by 55%, including the shares banks like Abu Dhabi Commercial Bank PJSC, First Gulf Bank PJSC, Dubai Islamic Bank PJSC and Union National Bank PJSC.
The report also said this year will see Emirates NBD PJSC, the nation's largest bank by assets, and second-ranked National Bank of Abu Dhabi PJSC dealing with higher non-performing loans and a "more challenging" funding environment that will affect growth. The analysts said that overall, the banks' profitability levels will remain healthy, though borrowing costs will stay high and slower loan growth will hurt revenue.
The report continued: "There is little to suggest U. A. E. banks should trade at a significant discount to global peers."
It should be noted that the rating by Goldman Sachs was raised on Abu Dhabi Commercial Bank and Dubai Islamic Bank to "neutral" from "sell"; and was lowered for National Bank of Abu Dhabi to "sell" from "neutral." Furthermore, the bank reduced its rating on First Gulf Bank to "neutral" from a "buy."