Emirates NBD reports 42% rise in Q2 profit on interest income boost and lower provisions

Net impairment charges dropped almost 46% annually to $125.34m

Emirates NBD on Thursday said its second-quarter net interest income climbed 24 per cent year on year to Dh4.41bn. Reuters

Emirates NBD, Dubai's biggest lender by assets, reported a more than 42 per cent surge in second-quarter net profit as provisions for bad loans dropped and revenue increased on net interest income boost.

Net profit for the three months to the end of June climbed to Dh3.5 billion ($953.7 million), the lender said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.

Emirates NBD's total operating income for the April-June period climbed to Dh7.79bn from Dh5.37bn recorded for the same period last year. Net interest income jumped more than 24 per cent year on year to Dh4.41bn for the reporting period.

Net impairment charges dropped almost 46 per cent annually to Dh460m, the lender said.

The bank's net profit for the first six months of this year climbed 11 per cent on an annual basis to Dh5.3bn, its strongest set of first-half results since 2019.

Record half-year retail lending together with improving margins drove total income for the reporting period 23 per cent higher to Dh14.2bn.

Provisions for loan losses during the six-month period fell 28 per cent year on year to Dh1.9bn, reflecting strong writebacks and recoveries and a brighter economic outlook in an "improving operating environment", said Shayne Nelson, group chief executive of Emirates NBD.

"These strong results, along with the positive outlook for margins, enable us to accelerate our investment in our international network and digital capabilities, supporting our next stage of growth,” he said.

The UAE economy, which bounced back strongly from the Covid-19 pandemic-driven slowdown in 2021, carried the growth momentum into this year. The economic recovery has picked up pace, driven by a rebound in the tourism and property sectors.

The Arab world's second-biggest economy is poised to post its strongest annual expansion this year since 2011 after it grew by 8.2 per cent in the first three months of 2022, according to the Central Bank of the UAE.

Higher oil prices have further supported economic activity that has improved operating conditions for lenders in the Emirates.

Banks across the six-member GCC economic bloc stand to gain from higher energy prices and a rise in interest rates that will significantly improve their bottom lines as cost of risk continues to decline, S&P Global Ratings said.

On average, a 100-basis-point increase in benchmark interest rates would boost earnings by 13 per cent and result in 1 per cent capital accretion for lenders across the region, the rating agency said.

In anticipation of further expected rate rises, coupled with improving margins at subsidiary DenizBank, Emirates NBD raised its net interest margin guidance by 50 basis points.

"The UAE banking sector continues to benefit from ample liquidity, helped by the high oil price," said Patrick Sullivan, chief financial officer at Emirates NBD.

“We have maintained good income growth momentum, kept a firm control of costs and seen a consistent decline in the cost of risk."

The Dubai lender's customer loans grew 1 per cent to Dh425bn in the first half of the year, while deposits advanced 2 per cent to Dh468bn. Total assets at the end of June climbed 3 per cent to Dh711bn.