Emirates NBD profit up 8% on lower provisions

dubai - The bank reports enhanced asset quality as the impaired loan ratio improved to 6.4%

Emirates NBD, the UAE's largest lender, announced on Monday an eight per cent surge in net profit to Dh5.4 billion for the first nine months of 2016.

"The operating performance was helped by higher recoveries and a modest increase in total income, driven by higher core fee income and asset growth which offset a contraction in margins," the bank said.

However, for the third quarter, the bank posted flat third-quarter net profit of Dh1.66 billion in the three months to September 30, compared to Dh1.67 billion in the corresponding period of 2015, according to financial statements.

The bank's total income rose by one per cent to Dh11.3 billion as net interest income grew one per cent on the back of asset growth while core fee income grew two per cent due to growth in credit card and foreign exchange volumes.

"Loans increased by seven per cent and deposits grew by eight per cent during the first nine months of 2016. The advances to deposits ratio remains comfortably within the management's target range at 92.8 per cent," it said.

In a statement, the bank, 55.6 per cent owned by state fund Investment Corporation of Dubai, noted that the cost of risk continued to normalise as the impairment charge of Dh2.184 billion is 22 per cent lower than in the third quarter of 2015, helped by over Dh2 billion of writebacks and recoveries. The bank reported enhanced asset quality as the impaired loan ratio improved to 6.4 per cent while the impaired loan coverage ratio strengthened to 120.8 per cent.

The bank said it "prudently" raised over Dh19 billion of term debt at competitive pricing, through private placements, a sukuk issue and a club loan which further boosted structural liquidity. Its Tier 1 capital ratio, at a healthy 18 per cent, grew on the back of strong retained profit.

Hesham Abdulla Al Qassim, vice-chairman and managing director, Emirates NBD, said despite a challenging operating environment, the Group has achieved improved profitability while further enhancing asset quality, liquidity and capital ratios.

"Emirates NBD is a regional leader in digital banking. We continue to invest in our next generation of online and mobile banking services. We recently launched a pilot blockchain network for international remittances and trade finance, a first for the banking sector in the UAE," said Al Qassim.

He said the bank had showcased its futuristic branch as part of the official opening of the Dubai Future Foundation's Museum of the Future. "Going forward, the Group is well-positioned to utilise our strong franchise, capital and liquidity base to take advantage of growth opportunities within the region."

Group CEO Shayne Nelson said the bank's income grew modestly driven by higher core fee income and asset growth which offset a contraction in margins. "We continue to drive digital innovation. We are proud to take the lead in piloting the UAE's first blockchain network for banking services and to open a 'Bank of the Future' branch at Jumeirah Emirates Towers."

Nelson said while the bank has seen increased delinquencies in the micro SME segment, which has prompted Emirates Islamic to take additional provisions, the Group's overall credit quality continued to improve.

"Both Dubai and Emirates NBD are well placed to deal with the regional challenges stemming from a lower oil price environment. The bank's strong balance sheet will enable us to benefit from Expo 2020 and other regional opportunities for growth."

Group chief financial officer Surya Subramanian said the operating performance improved for the first nine months of 2016, thanks largely to lower impairment allowances backed by higher recoveries. "Given the challenging environment ahead, we have taken measures to contain costs even as we improved asset quality and capital ratios."

- issacjohn@khaleejtimes.com