Emirates NBD, Dubai's biggest lender, said on Tuesday its net income rose 17 per cent year-on-year in the fourth quarter, broadly in line with analysts' estimates, as its interest income benefitted from December interest rate hikes.
Net profit at the bank rose to Dh2.176 billion in the three months ended December, compared to Dh1.857bn in the same period in 2016.
Profit for the quarter came in ahead of a prediction of Dh1.98bn reported by Reuters, but slightly below forecasts by Bahrain-based Sico (Dh2.23bn) and NBAD Securities (Dh2.24bn).
Net interest income rose 14 per cent to Dh2.8bn in the fourth quarter versus Dh2.46bn in the corresponding period a year earlier. Net interest margin increased to 2.51 per cent in the fourth quarter compared with 2.29 per cent in the year-earlier period.
"We are confident that our prudent business model shall continue to deliver a solid performance and deal with the opportunities and challenges that will present themselves," said Hesham Al Qassim, vice chairman and managing director of Emirates NBD.
The Central Bank of the UAE, which tracks US monetary policy because of the dirham's peg to the greenback, raised interest rates by 25 basis points on December 14 after the US Federal Reserve increased rates by the same amount. The increase will give UAE banks a boost in 2018, as they have seen their margins squeezed since borrowing costs were reduced close to zero in the aftermath of the 2008 global financial crisis.
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Emirates NBD's profit for 2017 rose 15 per cent to Dh8.35bn. The bank said it would recommend a 40 fils per share dividend for the year.
Looking forward, the bank said it will boost its international presence in 2018.
"We opened our first branch in India [in November 2017] and will continue to expand the bank's international presence in 2018, by growing our branch network in Egypt and Saudi Arabia and opening a representative office in Turkey, to better support our customer network," said Mr Al Qassim.
Emirates NBD has been expanding internationally in recent years amid stiff competition at home coupled with tighter margins. That expansion includes fast growing emerging countries like Egypt, which is becoming one of the most important markets for the bank because a large segment of the population is unbanked. The most populous Arab country has also embarked on an economic reform program that is beginning to bear fruit. India has been on the bank's radar because the country is a net oil importer providing the bank with a hedge against lower oil prices.
Closer to home, the fortunes of banks in the UAE have been improving in recent quarters amid better liquidity and a rebound in oil prices. UAE banks showed improved profitability in the third quarter versus the second as lenders expanded loan books and kept costs at bay, according to a recent study by the global consultants Alvarez & Marsal.
Operating income growth of the banks measured by the consultancy gained 1.92 per cent in the third quarter, compared with a drop of 1.18 per cent in the second quarter on the first quarter. Return on assets rose 1.83 per cent, against a 1.74 per cent increase in the second quarter on the first quarter.