Emirates NBD profit jumps 78% on interest income boost

Quarterly net income for the three months to the end of June climbed to $1.69 billion

Emirates NBD is the biggest lender in Dubai by assets. Reuters

Emirates NBD, Dubai's biggest lender by assets, recorded a 78 per cent jump in its second-quarter net profit as net interest income surged amid continued economic momentum in the UAE.

Net profit for the three months to the end of June climbed to record Dh6.22 billion ($1.69 billion) from the same period a year earlier, the lender said on Thursday in a filing to the Dubai Financial Market, where its shares are traded.

The results beat the estimates of analysts surveyed by Bloomberg that expected a net profit of Dh5.77 billion.

Net interest income in the quarter stood at Dh5.9 billion, a 34 per cent increase from the same period a year earlier, while total operating income surged by about 39 per cent on an annual basis to Dh10.82 billion.

The bank recorded 5 per cent loan growth in the first half of the year despite rising interest rates.

Emirates NBD's earnings were driven by “an excellent deposit mix and strong lending growth”, group chief executive Shayne Nelson said.

The group’s focus on investments in technology will allow it to launch new products and harness the power of generative artificial intelligence to “further transform Emirates NBD’s operations and enhance productivity”, he said.

Emirates NBD said all segments of its business contributed to growth in profitability as the UAE's economic momentum gathered pace.

The country's economy, which made a strong rebound last year from the slowdown caused by Covid-19, has carried the growth momentum forward into 2023.

The resurgence has come on the back of higher oil prices and government measures to mitigate the impact of the pandemic.

The Arab world’s second-largest economy grew by 7.9 per cent in 2022, the most in 11 years. It is expected to expand by 3.3 per cent this year and 4.3 per cent in 2024, according to UAE Central Bank data.

Non-oil gross domestic product and oil output increased by 7.2 per cent and 9.5 per cent, respectively, in 2022.

The UAE's non-oil GDP is expected to accelerate by 4.5 per cent this year and 4.6 per cent in 2024.

With economic momentum continuing and interest rates still on the rise, the profitability of the four largest banks in the Emirates is set to grow further this year, Moody's Investors Service said in March.

Banks in the UAE, as is the case with their regional peers, are beneficiaries of higher interest rates amid relatively lower inflation in the region.

Most central banks in the six-member GCC economic bloc peg their currencies to the US dollar and follow the US Federal Reserve's interest rate moves.

Shayne Nelson, group chief executive of Emirates NBD. Photo: Emirates NBD

The Fed has aggressively increased its benchmark rates over the past several quarters to bring inflation down to 2 per cent target range in the world's largest economy.

On Wednesday, the US regulator increased its policy rate by 0.25 percentage points, pushing it to the highest level in 22 years. It is expected to raise the rates at least once more time this year.

Emirates NBD said its net impairment loss on financial assets fell by 50 per cent annually to Dh949 million for the first six months of the year.

The bank’s net profit for the first six months of the year jumped more than 130 per cent on an annual basis to Dh12.2 billion.

“All business units generated a substantial increase in income, helping Emirates NBD deliver its strongest ever half-year for both income and profit,” said group chief financial officer Patrick Sullivan.

“The group’s success in growing an inexpensive and diversified funding base has positioned the bank to continue benefiting from higher interest rates.”

The bank said its total income climbed 50 per cent on an annual basis to Dh21.3 billion.

Fee and commission income jumped 12 per cent, year on year, to Dh1.99 billion, driven by increased local and international retail card business, strong investment banking revenue and an increase in the trade finance business.

Assets at the end of the first half of the year climbed to Dh811 billion, a 14 per cent rise on an annual basis.

Emirates NBD’s customer deposits climbed 19 per cent annually to Dh556 billion while gross loans and advances rose 13 per cent to Dh479 billion during the period.