Mashreq’s Q4 profit more than doubles on higher net interest income

Dubai's third-biggest lender reports $762 million in earnings for the period

Dubai, United Arab Emirates - February 8th, 2018: General Views of Mashreq Bank. Thursday, February 8th, 2018. Jumeirah Beach Road, Dubai. Chris Whiteoak / The National
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Mashreq, Dubai’s third-largest lender by assets, more than doubled its fourth-quarter profit on the back of interest income boost amid the continued economic momentum in the UAE.

Net profit for the three months to the end of December climbed to Dh2.8 billion ($762 million) from Dh1.1 billion for the same period in the previous year, the bank said on Tuesday in a statement to the Dubai Financial Market, where its shares are traded.

Net interest income and income from Islamic financing rose nearly 41 per cent annually to Dh2 billion. Insurance, foreign exchange and other income surged 116 per cent year-on-year to Dh541 million.

The lender’s full year profit also more than doubled to record Dh8.6 billion up from Dh3.7 billion for the same period in 2022.

A 69 per cent surge in net interest income and income from Islamic financing to Dh7.7 billion supported the annual profitability of the lender.

“Our franchise continues to yield outstanding results, bolstered by the addition of a substantial number of new clients and the deepening of existing relationships across the bank,” Mashreq chairman Abdul Aziz Al Ghurair said.

“This remarkable achievement mirrors the nation’s significant economic expansion and the resilience and dynamic growth of the UAE’s financial services.”

The UAE, the Arab world’s second-largest economy, rebounded strongly from the coronavirus pandemic-induced slowdown on the back of higher oil prices and continued growth in its non-oil sectors amid continued diversification efforts.

The UAE Central Bank expects the UAE economy to grow by 5.7 per cent in 2024, faster than its previous projection of 4.3 per cent, driven by an expected rise in oil production this year.

The banking sector in the UAE is also well capitalised with adequate liquidity buffers, and remains resilient against the risk of stagflation – when growth slows amid high inflation and unemployment – and market uncertainties, the Central Bank said in July.

The UAE lenders are also benefiting as interest rates remain high globally boosting the profit of banks.

Most regional central banks peg their currencies to the US dollar and follow the Federal Reserve's moves on interest rate increases.

Mashreq’s assets at the end of 2023 grew about 22 per cent annually to Dh240 billion, while loans and advances rose 25 per cent to Dh149.4 billion. Customer deposits during the period jumped 28.5 per cent year-on-year to Dh146.2 billion.

“Looking ahead, our course and position remain resolute in the face of continuing uncertainty,” Ahmed Abdelaal, group chief executive of Mashreq said.

“We possess a stable, robust and resilient business model characterised by high-quality earnings and a well-diversified loan portfolio spanning our various markets.”

The lender, however, is bracing itself “for the normalisation of interest rates, which will necessitate adjustments in operational strategies to align with this new reality”, he said.

The Fed is expected to cut interest rates this year after increasing its benchmark policy rates over the past several quarters to rein in inflation in the world's largest economy.

Although the timing of the rate cuts is not clear, the projections released after the Fed's December meeting forecast three rate cuts this year, to bring interest rates down from 5.4 per cent to the target range of 4.75 and 5 per cent.

Updated: January 30, 2024, 7:50 AM