Emirates NBD posts Dh424m profit

DUBAI - Emirates NBD (ENBD), the largest bank in the UAE by assets, on Monday posted a 60 per cent drop in third quarter net profits as it increased provisions for bad loans, including its exposure to Dubai World.

By (Issac John)

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Published: Tue 26 Oct 2010, 10:45 PM

Last updated: Mon 6 Apr 2015, 11:45 AM

Dubai-based ENBD said in a statement that its net profit dropped to Dh424 million in the quarter ending September 30, compared to Dh1.05 billion in the same 2009 period.

The bank said it had set aside Dh1.2 billion in provisions for bad loans in the third quarter, taking total impairment allowance in the first nine months of 2010 to Dh2.99 billion.

ENBD is one of the main creditors to Dubai World, which is in the process of restructuring a debt of $25 billion. “The bank’s specific provisions for its exposure to Dubai World were taken in the third quarter 2010,” the statement said.

The bank’s Chief Executive Rick Pudner shrugged off reports that Emirates Islamic Bank, the bank’s Shariah-compliant business, has plans to buy Dubai Bank and Amlak, the cash-strapped mortgage company.

“There are no talks with regards of an acquisition of Dubai Bank by Emirates Islamic Bank,” Pudner told a conference call on Monday.

The bank is also targeting organic growth in the GCC, particularly Saudi Arabia and looking for attractive opportunities for inorganic growth in the region. Analysts expected Dh804.3 million in third-quarter net profit for the bank that is 56 per cent owned by the Investment Corporation of Dubai, the emirate’s sovereign wealth fund.

Analysts at the Kuwait-based Global Investment House said ENBD’s bottom-line deviated significantly from their estimates of Dh875 million for the third quarter. The bank’s net interest income fell seven per cent to Dh1.7 billion, while fee and other income rose one per cent to Dh676 million. The net interest margin, the difference between what the bank earns on loans and pays out on deposits and funds, narrowed to 2.51 per cent in the third quarter from 2.54 per cent in the second.

The bank said overall provisions for bad loans rose 67 per cent from a year earlier to Dh1.2 billion, taking the bank’s non-performing loans to total loans ratio to 3.66 per cent. Overall loans fell six per cent from December to Dh201.1 billion at the end of September, while deposits grew 10 per cent to Dh198.8 billion.

ENBD shares closed unchanged at Dh3 on the Dubai bourse on Monday. They have risen 1.7 per cent this year.

“We would expect NPLs to rise to about four per cent to 4.5 per cent over the next six-eight months and then plateau,” said Pudner.

In its analyst briefing, the bank said that the current increase in NPLs was due to loans emanating from the building materials industry. “We believe that the bank will report high provisions in the last quarter as well,” Global analysts said.

“Moreover, the bank expects flattish loans growth in the remainder of the year and in 2011 as the bank undergoes further consolidation, especially in its corporate books.”

The average non-performing loans to gross loans ratio for the nine largest banks in the UAE rose to 4.3 per cent in 2009 from 1.7 per cent at the end of 2008 as the economy slowed, Fitch Ratings said in a report in June.


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