Emirates NBD third quarter net profit soars 16%, beating analysts' estimates

Dubai's largest bank benefited from higher net interest income

Four analysts polled by Bloomberg had forecast a median profit of Dh2.55bn for the period. Pawan Singh / The National

Emirates NBD, Dubai’s biggest bank, posted a 16 per cent increase in third-quarter net profit, beating analyst estimates, as net interest income rose.

Net profit attributable to equity holders rose to Dh2.64 billion from the year earlier period, the lender said on Tuesday in a bourse filing to the Dubai Financial Market, where its shares are listed. The results beat the median profit estimate of Dh2.55bn of four analysts polled by Bloomberg.

Revenue in the third quarter rose 26 per cent to Dh4.4bn from the same period a year earlier. Net interest income rose 18 per cent to Dh3.3bn.

“The operating performance...was satisfying as all business segments delivered a year-on-year increase in both operating income and contribution to group profit,” said Surya Subramanian, the chief financial officer of the lender. “Margins continued to improve as rate rises flowed through to loan book which more than offset a rise in deposit costs.”

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Banks across most of the GCC are expected to see improved financial performance in 2018 due to an uptick in the regional economy, analysts have said. In March, Abdul Aziz Al Ghurair, chairman of the UAE Banks Federation, forecast loan growth of as much as 6 per cent on aggregate for banks in the UAE, compared to 4 per cent in 2017.

Non-interest margins (NIMs) improved 31 basis points year-on-year to 2.87 per cent “as rate rises flowed through to loan book which more than offset a rise in deposit costs on a change in deposit mix,” the bank added.

Costs in the third quarter rose 15 per cent year-on-year to Dh1.5bn due to higher staff and IT costs in relation to the bank’s digital transformation and technology push.

“Costs were higher as a result of international branch expansion, VAT, advertising and Expo 2020 sponsorship,” the lender said.

Emirates NBD’s non-interest income fell 1 per cent year-on-year to Dh1.15bn due to lower income from investment securities. Provisions fell by 18 per cent year-on-year to Dh353m.

“The bank reported strong performance across line items with NIM expansion, healthy balance sheet performance and lower provisioning,” said Chiro Ghosh, an analyst with Sico Bank in Bahrain. “The only weak aspect was perhaps the surge in operating expense.”

Sico is forecasting Emirates NBD full year earnings at Dh8.6bn, but the Dubai lender could well beat it. Last year, Emirates NBD said it plans to invest Dh1 billion on digitising part of its operations over the next three years.

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