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Mashreqbank’s Q2 Profits Plummet 39 Per Cent
/ 30 July 2009
DUBAI — Mashreqbank reported on Wednesday that its second-quarter net profit had tumbled by 39 per cent compared with the same period last year, due to increased provisions against bad loans that the bank took amid the country’s slowing economic growth.
Mashreqbank’s quarterly net income fell to Dh434.9 million from Dh706.9 million in 2008, it said. The UAE’s fifth-biggest bank by assets booked provisions of Dh319 million in the April-June quarter. Its total provisions stood at Dh551.4 million for the first half of this year, almost three times the comparable figure for the same period last year.
The recession has eroded the earnings of many UAE banks, and the sharply reduced profits that most lenders have reported for the second quarter provide stark evidence of the challenge they face.
For the first six months, Mashreqbank’s higher provisions caused a 22 per cent decline in its half-year net profit to Dh919 million, down from Dh1.17 billion in the first half of 2008.
Mardig Haladjian, a vice-president at Moody’s Investors Service, said last month that loan defaults at banks in the Gulf may rise three to four times from their existing levels as a result of the global economic slump and the drop in property prices.
However, Mashreqbank “has been able to operate prudently and profitably” during the financial crisis, Chief Executive Officer Abdul Aziz Al Ghurair said in a statement. “The bank’s strong liquidity and capital ensure that the bank will continue with its strategic growth plans once the economy recovers.”
The bank reported a 3 per cent year-on-year increase in operating revenues for the first six months of 2009. In spite of challenging market conditions, revenue for the second quarter of 2009 remained strong at Dh1.2 billion, equal to the first quarter’s revenue of the year, the bank said. Second-quarter operating expenses declined by 8 per cent from the first three months to Dh440 million.
For the first half, net interest income, and income from Islamic products net of distribution to depositors, grew year-to-year by 5.2 per cent to Dh1.06 billion.
Loans outstanding fell to Dh51.7 billion at the end of June, down 6 per cent from December, Mashreq said in the statement. Deposits rose 10.3 per cent to Dh56.8 billion over the same period.
Mashreqbank last week confirmed that it was suing Ahmad Hamad Algosaibi & Bros., one of two heavily indebted Saudi companies at the heart of a large financial dispute. Algosaibi and the Saad group of companies owe billions of dollars to UAE banks.
Mashreq’s shares have fallen 51 per cent so far this year and closed at Dh117 on June 14, the last day they traded.
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