Emirates NBD H1 profit drops to Dh4.1b


Issac John

Published: Mon 20 Jul 2020, 4:54 PM

Last updated: Mon 20 Jul 2020, 6:57 PM

Emirates NBD reported on Monday a 45.3 per cent plunge in net profit to Dh4.1 billion for the first half of 2020 due to higher impairment charges.
Dubai's largest bank said its total assets rose two per cent to Dh 694 billion as net interest income increased 36 per cent year-on-year and non-funded income grew 24 per cent with the acquisition of DenizBank in 2019.
Total income surged 33 per cent year on year to Dh12.6 billion on loan growth and higher fee income from the inclusion of DenizBank as impairment allowances rose to Dh4.2 billion with annualised net cost of risk increasing to 172 bps as the group increased Stage 1 and 2 expected credit loss (ECL) allowances, the bank said in a statement.
While customer loans rose one per cent to Dh443 billion, deposits dropped two per cent to Dh461 billion as non-performing loan ratio increased to 5.8 per cent and coverage ratio remained strong at 116.9 per cent, the bank said.
Hesham Abdulla Al Qassim, vice chairman and managing director, Emirates NBD, said the bank maintained a strong balance sheet. "The UAE government and the UAE Central Bank took decisive action to protect the health of UAE residents and to provide economic relief measures to support customers and UAE banks. This swift Government action to ensure the safety of UAE residents has enabled the Dubai economy to begin re-opening in a phased and controlled manner. The economic improvement is reflected in the UAE headline PMI which rose to 50.4 in June, the first reading in expansion territory this year."
Shayne Nelson, group CEO, said Emirates NBD has put the safety and well-being of customers and staff first. "We proactively reached out to our customer base and support has now been provided to approximately one-tenth of our customers primarily through the deferral of over Dh8.0 billion of interest and principal for periods of up to six months. In addition, we have waived certain fees to help individuals and businesses cope with the disruption. We believe that by providing support now we will assist in stabilizing the economy and minimize the impact on our customers."
He said that in last quarter, the bank experienced an increase in the number of both retail and corporate customers using its digital offering. "As the economy re-opens we are seeing business volumes improving although they are expected to remain below pre-Covid levels in the coming quarters. The Group's balance sheet remains strong with stable credit, capital and liquidity. Emirates NBD's solid capital base along with an ability to generate healthy operating profits, provides a strong loss absorption capacity. The UAE Central Bank has been proactive in supporting the economy through liquidity and capital relief measures introduced through TESS and reduced cash reserve requirements," said Nelson.
Patrick Sullivan, group chief financial officer said the net profit of Dh4.1 billion for the first half was resilient given the significant impact of the challenging operating environment through the second quarter, which saw interest margins decline from rate cuts, lower economic activity affecting non-funded income, and an elevated cost of risk from our proactive Stage 1 and 2 loan provisioning.
Pre-impairment operating profit rose 29 per cent year-on-year on higher income from loan growth and improved margins from the inclusion of DenizBank. Net profit declined 45 per cent due to higher provisions excluding the gain on disposal of Network International. Margins declined as lower interest rates fed through to the loan book. "We are acting to manage costs to reflect lower levels of economic activity, albeit cost reduction will not entirely offset lower levels of income," said Sullivan.

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