Emirates NBD second quarter net profit surges 80% on income from unit IPO

Dubai's largest bank made Dh2.1bn from the initial public offering of Network International in London

Emirates NBD is part of KYC blockchain consortium. Pawan Singh / The National

Emirates NBD, Dubai’s largest lender by assets, reported a 80 per cent year-on-year rise in second quarter net profit, driven by gains from the sale of a stake in its payments processing unit.

Net profit in the three months ending June 30 rose to Dh4.74 billion, the lender said in a statement to the Dubai Financial Market, where its shares trade. Emirates NBD made Dh2.1bn from the initial public offering of Network International in London, it added.

Network International is a leading payments company in the Middle East and Africa that joined the FTSE 250 Index of London-traded equities last month. NI's IPO was the biggest of the year at the time of its listing with a market value of £2.175bn (Dh10.44bn) based on the offer price and number of shares issued at the time.

"Earnings surprised positively, mainly on higher-than-expected gain on partial stake sale in Network International," Shabbir Malik and Rajae Aadel, banking analysts at EFG Hermes said. "Provisioning costs were higher than expected, but this is not surprising for us, as the bank is likely to have used the cushion from the gain on Network International [sale] to build coverage ....  cost discipline was good."

Emirates NBD's net income for the first half of this year also surged 49 per cent year-on-year to Dh7.5bn.

An 8 per cent rise in core operating income for the six months ending June 30 was "helped by loan growth, higher foreign exchange income and increased investment banking activity”, group chief executive Shayne Nelson said. "The bank’s balance sheet remains strong with further improvements in liquidity and the common equity tier 1 ratio and stable credit quality."

Total income for the first half of 2019 climbed to Dh9.53bn, an increase of 13 per cent from the year-earlier period. Net-interest income also improved 10 per cent in the first six months to Dh6.85bn as a 13 per cent growth in assets over the reporting period offset a small decline in net interest margin, the bank said.

Core fee income increased 13 per cent year-on-year on the back of higher foreign exchange income, coupled with increased investment banking activity. Total non-interest income advanced 20 per cent year-on-year helped by lower impairments on investment securities, the bank said.

Emirate NBD's loan book grew 3 per cent to Dh338bn from the end of 2018, while customer deposits climbed 5 per cent to Dh367bn.

In June the bank said it received approvals from four regulators - the UAE Central Bank, the Banking Regulations and Supervision Agency in Turkey, the Financial Market Authority in Austria and the Central Bank of Russia - to buy a 99.85 per cent stake in Denizbank from Russia’s Sberbankcountries for its $2.7bn (Dh9.91bn) takeover of Turkey’s Denizbank.

The Turkish deal is the second major acquisition for Emirates NBD since buying BNP Paribas’s Egyptian unit in 2013 for $500m.

"We continue to make progress on the acquisition of Denizbank and expect this transaction to close in the third quarter of 2019,” Mr Nelson said.

Emirates NBD, which has operations in Egypt, Saudi Arabia, India, Singapore, the UK and representative offices in China and Indonesia, is expanding its footprint to boost revenue amid limited opportunities for growth in the over-banked UAE market, where more than 50 lenders compete for business.

In terms of its regional expansion, Emirates NBD said it is increasing its footprint in Egypt and received permission to open 20 branches in Saudi Arabia, the biggest Arab economy and the GCC's top banking market. Mr Nelson first hinted at the lender's plans for the kingdom in an interview with The National in September 2017. Emirates NBD did not say when it plans to open the branches.