Dubai Islamic Bank profit climbs 17% amid continued economic momentum

Net income for the reporting period rose to $428 million

The bank's income from Islamic financing and investing transactions rose by 56 per cent to Dh4.17 billion during the second quarter. Photo: DIB

Dubai Islamic Bank, the UAE's biggest Sharia-compliant lender by assets, has reported a 17 per cent increase in second-quarter net profit, boosted by a surge in income from Islamic financing and investing activities amid a continued economic resurgence.

Net profit attributable to owners of the bank for the three months to the end of June stood at Dh1.57 billion ($427.5 million), the lender said on Wednesday in a filing to the Dubai Financial Market, where its shares are traded.

Income from Islamic financing and investing transactions for the reporting period surged 55 per cent to Dh4.17 billion.

The lender’s quarterly income from properties held for development and sales rose to Dh59 million, up from Dh38 million at the end of the same period last year.

Commissions, fees and foreign exchange income also jumped more than 18 per cent on an annual basis to Dh489.69 million.

“Amidst moderating global growth, the UAE economy continues to expand, driven by recovering tourism, real estate and rising financial markets,” said DIB chairman Ibrahim Al Shaibani.

“This clearly indicates a strong domestic economy supported by the UAE’s non-oil sector, which is estimated to grow at above 4 per cent this year.

“The banking sector continues to remain resilient with rising profitability, strong and growing credit and [a] deposit portfolio supported by the private sector, GREs [government-related entities], as well as the retail sector.”

This economic growth is reflected in a “continued upward momentum” in purchasing managers' index levels, a growing population and increasing foreign direct investment inflows, Mr Al Shaibani said.

The UAE's economy has made a strong recovery from a slowdown caused by Covid-19.

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 were estimated to have grown 6.6 per cent and 10.1 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 benefitting from a rise in interest rates.

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.

Adnan Chilwan, group chief executive of Dubai Islamic Bank. Photo: Dubai Islamic Bank

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

It is expected to raise interest rates further at least twice this year.

DIB said its net profit for the first six months of the years climbed 14 per cent on an annual basis to Dh3.05 billion, driven by “rising core revenue, controlled impairments and effective cost management”.

Net financing and sukuk investments rose 5.3 per cent in the year to date to Dh251 billion, driving total income to Dh9.31 billion, a 49 per cent increase over the same period in 2022.

Impairment charges for loans and advances rose to Dh959 million at the end of June, up from Dh948 million in the first half of last year. However, they fell 13 per cent on an annual basis in the second quarter.

“Sectors such as tourism, construction, real estate and investment in clean energy provide tailwinds to an expanding non-oil economy, further reiterating DIB’s strategic alignment to the UAE’s expansionary agenda,” said Adnan Chilwan, group chief executive of DIB.

Assets at the end of the first half of the year climbed to Dh299 billion, a 4 per cent rise from the end of December.

The bank's total customer deposits climbed 6 per cent in the year to date to Dh211 billion, driven by a 5 per cent increase in corporate deposits and an 8 per cent rise in retail deposits.