Emirates NBD first-quarter profit more than doubles to record on higher fee income

Impairment allowances in the first three months of the year dropped 66% annually to $128 million

Emirates NBD, Dubai's largest lender, said its strong earnings reflect higher margins, growth of non-funded income and a lower cost of risk on significant recoveries. Reuters

Emirates NBD, Dubai's biggest lender by assets, said its first-quarter net profit more than doubled to a record as impairments fell and net interest income surged.

Net profit for the three months to the end of March climbed to more than Dh6 billion ($1.64 billion) from the same period a year earlier, the lender said in a statement on Thursday to the Dubai Financial Market, where its shares are traded.

The strong earnings reflect higher margins, growth of non-funded income and a lower cost of risk on significant recoveries, the lender said.

Total quarterly income surged 64 per cent year on year, crossing the Dh10 billion mark for the first time, as “every business unit delivered higher income and improved profitability”.

The record quarterly performance reflects “the success of the group’s diversified business model and a healthy regional economy”, Hesham Al Qassim, vice chairman and managing director of Emirates NBD, said.

“As a leading bank in the region, we are fully aligned with Dubai’s commitment to continue developing and stimulating entrepreneurship, attracting more foreign investment and consolidating Dubai’s position as a land of opportunity and innovation.”

Emirates NBD said its net interest income increased 69 per cent to Dh7.2 billion, while the net interest margin climbed by 145 basis points year on year to 4.05 per cent at the end of March.

Non-funded income of the lender also surged by 54 per cent to Dh3.3 billion amid continued economic momentum. The total assets of the bank rose 5 per cent to Dh782 billion.

“Increased transaction volumes and improved margins from an efficient funding base and higher interest rates” also helped in boosting the quarterly income, said group chief executive Shayne Nelson.

Central banks across the globe are continuing to increase their benchmark rates to curb inflation.

The US Federal Reserve increased its policy rate twice in the first quarter and is expected to increase it further when it meets next week as it attempts to bring inflation down towards its target range of 2 per cent.

Lenders in the GCC, where most central banks peg their currency to the US dollar, are beneficiaries of higher interest rates amid continued economic momentum and relatively lower inflation in the region.

Shayne Nelson, group chief executive of Emirates NBD. The National / Pawan Singh

Profitability of the four largest banks in the UAE will continue to grow this year amid rising interest rates, reversal of pandemic-related provisions and continuing economic momentum, Moody's Investors Service said in March.

After growing 7.6 per cent in 2022, the most in 11 years, the UAE economy is expected to expand 3.9 per cent this year and 4.3 per cent in 2024, the UAE Central Bank said last month.

Emirates NBD said its impairment allowances for loans and advances in the first three months of the year dropped 66 per cent annually to Dh471 million ($128 million).

It underpins the bank's “credit quality”, which improved due to “substantial recoveries reflecting the region’s growing economy”, it added.

Loans and advances rose by 3 per cent to Dh470 billion in the first three months of the year, with the bank recording its highest retail disbursements across conventional and its Islamic retail franchise.

The first quarter “is the strongest ever” for retail lending with over 144,000 new credit cards issued and more than Dh8 billion of retail loan disbursements, Mr Nelson said.

Deposits grew 7 per cent or by Dh35 billion in first quarter to Dh538 billion, including Dh19 billion increase in current and savings accounts.