Mashreq reports surge in second-quarter profit on higher-interest income

Net-interest income rose almost 37 per cent during the April-June period

The bank's net interest income rose nearly 37 per cent while loan impairment charges dropped almost 73 per cent. Satish Kumar / The National

Mashreq, the Dubai lender controlled by the Al Ghurair family, reported a nearly 19-fold jump in its second quarter profit as net interest income rose and impairment allowances fell.

Profit attributable to owners in the second quarter of 2022 reached Dh793 million ($215.9m), up from Dh42.3m during the same period last year, Mashreq said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded.

The surge in profit came as the bank reported a nearly 37 per cent increase in net interest income and almost 73 per cent decline in loan impairment charges annually in the second quarter.

Revenue rose almost 19 per cent year-on-year in the April-June period to Dh1.7 billion. Meanwhile, loans and advances increased 10 per cent to Dh89.67m and customer deposits grew nearly 8 per cent to Dh109.33bn during the period.

“Mashreq Bank has posted a healthy growth in net profits for the first half of 2022. As we continue to operate in increasingly uncertain economic times, we registered a net profit of Dh1.4 billion [in the first half], which is a great achievement,” said AbdulAziz Al Ghurair, chairman of Mashreq.

High oil prices and improving economic activity coupled with rising interest rates are boosting the UAE banking sector’s profitability to pre-pandemic levels.

The risk perception on overall asset quality of banks is improving, with significantly lower provisions, while margins are on the rise.

Over the last 24 months, there has been a steady decline in bad loan provisions. Last year, impairment charges accounted for about 30 per cent of pre-impairment operating profit for UAE banks, compared with roughly 55 per cent in 2020, a report by Fitch ratings said.

Improving business conditions in both oil and non-oil sectors are supportive of loan growth and profitability for local lenders.

The UAE has recovered from the effects of the pandemic on the back of surging oil prices and a bounce-back in its tourism and travel sectors as Covid-19 restrictions ease globally.

For the first six months of the year, Mashreq’s operating income increased by 15 per cent over the previous year to Dh3.3bn, mainly due to increased net interest income and income from Islamic financing.

Net profit during the period surged more than 16 times annually to Dh1.39bn.

“In the midst of challenging global financial headwinds, we saw our total assets increase by 7 per cent in the year, while our loans and advances experienced double-digit growth to reach Dh89.7bn [in the first half],” said Ahmed Abdelaal, group chief executive of Mashreq Bank.

While the bank's liquid assets ratio stood at 27.6 per cent as of June end, capital adequacy ratio was at 13.6 per cent and Tier 1 capital ratio at 12.4 per cent as of June 2022.

The bank said its digital and operational strategies were fundamental to its improved performance in the first half of the year.

Established in 1967, Mashreq, like its peers in the Middle East, is pivoting towards digital banking and is reducing the number of physical branches to cater to a young, tech-savvy demographic that typically opts to complete its transactions online.

“The first six months of 2022 has ... strengthened our position as a powerful digital disrupter," Mr Abdelaal said.