I saw this note out from Goldman Sachs regarding UAE banks today (via Bloomberg):
United Arab Emirates’ banks may rise an average of 30 percent in a year as earnings “remain attractive” and valuations catch up with the emerging markets average, Goldman Sachs Group Inc. said.
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, Goldman Sachs’ analysts led by William A. Mejia said in an August 21 report e- mailed today.
Shares of the banks, which include Abu Dhabi Commercial Bank PJSC, First Gulf Bank PJSC, Dubai Islamic Bank PJSC and Union National Bank PJSC, have already risen by 55 percent this year, although they are still about 50 percent lower than they were a year ago, the report said. Emirates NBD PJSC, the nation’s largest bank by assets, and second-ranked National Bank of Abu Dhabi PJSC, will face higher non-performing loans this year and a “more challenging” funding environment that will hurt growth, the report said. Although borrowing costs will stay high and slower loan growth will hurt revenue, banks’ “profitability levels in general will remain attractive,” the analysts said.
“There is little to suggest U.A.E. banks should trade at a significant discount to global peers,” the report said.
Goldman Sachs raised its rating on Abu Dhabi Commercial Bank and Dubai Islamic Bank to “neutral” from “sell” and cut National Bank of Abu Dhabi to “sell” from “neutral.” It reduced its rating on First Gulf Bank to “neutral” from a “buy.”