Emirates NBD Q3 net profit surges as retail finance demand surges

Emirates NBD on Wednesday reported a strong 29 per cent year-on-year growth in nine-month net profit to Dh7.3 billion due to its resilient business model and continuing economic recovery.

Dubai’s biggest lender said the group’s balance sheet strengthened with further improvements in deposit mix, credit quality, capital and liquidity. Emirates NBD continues to support businesses and customers recovering from the global pandemic, while investing in its digital platform and its international network to drive future growth, according to the bank statement.

Record demand for retail financing

Citing strong underlying business momentum with record demand for retail financing, the bank posted a jump of 61 per cent in third-quarter earnings to Dh2.5 billion, beating forecasts, as impairment charges slumped on a recovering economy and demand for retail financing surged.

The net profit exceeded forecasts by CI Capital, which had projected Dh2.4 billion and EFG Hermes, which had a forecast of Dh2.08 billion.

Hesham Abdulla Al Qassim, vice-chairman and managing director, said Emirates NBD’s growth in income and profitability in the third quarter of 2021 is a clear sign of improving economic conditions within the region.

“The UAE economy has fully reopened, thanks to the successful handling of the pandemic by the country’s wise and visionary leadership and is well positioned to benefit from the expected growth in international travel,” he said.

Economic recovery

S&P expects Dubai’s economy to expand by 3.5 per cent this year, mainly because of a high vaccination rate —with more than 85 per cent of the UAE population having received two doses — and the easing of Covid-19 global restrictions. Dubai’s economy shrank 10.9 per cent last year, it said.

The bank said its total income up seven per cent on Q2 2021 as margins improved on record demand for retail financing, a more efficient funding base and a higher contribution from DenizBank. However, total income down five per cent year-on-year basis from record low interest rates.

Strong balance sheet

The bank’s expenses declined two per cent while 33.1 per cent cost-to-income ratio stood within management guidance. Impairment allowances down substantially 42 per cent with 106bps cost of risk at lower end of pre-pandemic range.

The bank said its deposits grew two per cent during the third quarter of 2021 with Dh5 billion further growth in CASA and Dh4 billion growth in fixed deposits as the group conservatively maintained access to all sources of funding. The bank’s maintained a strong asset base at Dh699, it said.

“Liquidity remains strong with the liquidity coverage ratio at 157.2 per cent and the advances to deposits ratio at 94 per cent. During the first nine months of 2021, the group raised Dh21.9 billion of senior term funding, taking advantage of historically low cost of term funding,” according to the bank statement.

During July-September 2021 quarter, the non-performing loan ratio improved by 0.1 per cent to 6.2 per cent whilst the coverage ratio strengthened further to 126.07 per cent, demonstrating the group’s continued prudent approach towards credit risk management, it added.

International expansion

Group CEO Shayne Nelson said the bank is using its balance sheet strength to support its customers, helping them to benefit from the growing economy as world fair Expo 2020 Dubai began in October.

“This strength is reflected in Moody’s recent affirmation of Emirates NBD’s ratings and improved ‘Stable’ Outlook, combined with the upgrade in DenizBank’s credit ratings,” he said.

Nelson said international expansion continues with additional branches in the Kingdom of Saudi Arabia, approval for further branches in India and strong results in Turkey. The group continues to diversify with 36 per cent of income now coming from international operations,” he said.

Patrick Sullivan, group chief financial officer at Emirates NBD, said there are many positives in the group’s strong set of results.

“Total income rose seven per cent in the third quarter as margins expanded on an improved loan mix, lower cost of funding and a higher contribution from DenizBank,” he said.

“We continue to maintain a strict control on expenses with the cost to income ratio within guidance. The balance sheet remains rock solid with a further improvement in capital, liquidity and credit quality during Qthe third quarter,” he said.

— muzaffarrizvi@khaleejtimes.com