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UAE most competitive in Middle East banking: report

(Xinhua)

13:22, January 12, 2012

DUBAI, Jan. 11 (Xinhua) -- The Gulf state United Arab Emirates (UAE) is the most competitive banking hub in the Middle East, according to the Gulf Cooperation Council (GCC) Banking Competitiveness Report published by Abu Dhabi Islamic Bank (ADIB) Wednesday.

"The country's population of approximately 8 million is served by 51 banks with more than 840 branches and over 4,000 ATMs, delivering high levels of service, yet with lower profitability than its GCC counterparts," the report said.

In direct comparison to the other Gulf states, ADIB noted that "UAE banks' net interest margin, which is the spread between what banks pay for deposits and what they charge for financing and loans, remains the lowest among the GCC, at an average of 2.9 percent.

Saudi banking spreads are currently closer to 3.5 percent, Qatar at 3.4 percent and those of Kuwait banks at around 3.2 percent, the report said.

Nevertheless, Andrew Moir, Global Head of Strategy and Finance at ADIB, urges banks across the region "to improve their levels of competitive analysis while at the same time raising the level of industry debate."

"Despite the fact that the UAE is a bigger banking market in terms of assets, it remains less profitable than that of Saudi Arabia," Moir said. "In the UAE, the mix of deposits, low customer charges, the presence of high levels of non-performing assets and competitive dynamics have negatively impacted banking profitability and capital ratios."

Besides the local banking market under UAE law, the Gulf state harbors since 2004 the Dubai International Financial Center (DIFC), an offshore-bank free zone under international compatible law similar to the regulatory environment in London. In the DIFC, 270 authorized financial firms, among them over 150 banks, are licensed. While retail banking is not allowed in the DIFC, the center focuses on investment and private banking.

The DIFC, located in the heart of Dubai, is unique in its nature in the Gulf Arab region and the only international financial center in the time zone between London and Hong Kong.

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