The aggregate net income of the 10 largest lenders in the UAE grew more than 24 per cent in the first quarter of 2022, compared with the previous three months, according to professional services company Alvarez & Marsal. The cumulative net income includes the Dh2.8 billion ($769.4 million) gain recorded by First Abu Dhabi Bank on the sale of its stake in Magnati. Excluding that one-off boost, aggregate net profit declined 2.6 per cent quarter-on-quarter, the consultancy said in its <a href="https://www.alvarezandmarsal.com/insights/alvarez-marsal-releases-uae-banking-pulse-q1-2022"><i>2022 first-quarter UAE Banking Pulse</i></a><i> </i>report. Most top-10 banks in the UAE reported a rise in profitability in the first quarter, despite lower interest income, as the Arab world’s second-largest economy continued to recover from the coronavirus-pandemic-driven slowdown. Banks are set for a further boost in profitability in the coming quarters, said the company best known for its restructuring work. “Rising oil prices, supportive government policies, revival signs in the real estate sector and normalising non-oil activity are expected to accelerate the UAE’s economy in the next quarter,” Asad Ahmed, managing director and head of Middle East financial services at A&M, said. The UAE economy posted strong growth last year and has carried the growth momentum into 2022. The Emirates' non-oil economy expanded an annual 7.8 per cent in the fourth quarter of 2021, the Central Bank of the UAE said in its <a href="https://centralbank.ae/sites/default/files/2022-04/Quarterly%20Economic%20Review%20-%20Q4%202021%20%28English%20Version%29_.pdf"><i>Quarterly Economic Review</i></a>. In March, <a href="https://www.thenationalnews.com/uae/ramadan/2022/03/10/sheikh-mohammed-bin-rashid-announces-one-billion-meals-campaign-for-ramadan-2022/">Sheikh Mohammed bin Rashid</a>, Vice President and Ruler of Dubai, on <a href="https://twitter.com/HHShkMohd/status/1512068507705352203">Twitter said </a>the country's economy grew 3.8 per cent in 2021, above the World Bank's 2.1 per cent estimate. The International Monetary Fund expects the UAE's economy to expand 4.2 per cent in 2022. Banks in the Emirates are also expected to benefit from rising interest rates. The US Federal Reserve earlier this month raised interest rates by 50 basis points, a move mimicked by the CBUAE. UAE lenders' net income is estimated to increase 15 per cent and return on assets to grow 1.4 per cent, for every 100 bps increase in interest rates, according to S&P Global Ratings. “We anticipate domestic lending to grow on the back of revived economic activities, and NIM [net interest margin] to improve as benchmark interest rates have increased by 50 basis points,” Mr Ahmed said. “Deposits are also expected to grow, underpinned by the projected interest rate increase.” The survey covered the UAE’s top 10 banks by assets – First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, Dubai Islamic Bank, Mashreq Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Ras Al Khaimah and Sharjah Islamic Bank. The aggregate loans and advances of these lenders increased 2.8 per cent quarter on quarter. Loans-to-deposit ratio increased to 84.5 per cent from 82.1 per cent in the last quarter of 2021. The cumulative non-interest income increased 0.6 per cent on a quarterly basis as the overall net interest margin remained flat at 2.1 per cent. Asset quality of banks also improved as non-performing loans fell by 0.1 percentage points to 6.1 per cent during the quarter. However, there are potential asset quality risks in the second half of the year, when the CBUAE ends its <a href="https://www.thenationalnews.com/business/2021/12/18/uae-central-bank-to-extend-some-support-measures-until-june-2022/">targeted economic support scheme</a>, the report said.