Dubai’s CBD reports 21% drop in third quarter profit as impairment allowances climb

The bank expects to end the year on a strong footing despite headwinds, its chief executive says

Commercial Bank of Dubai reported a 23 per cent drop in nine-month net profit on Wednesday. Ryan Carter / The National

Commercial Bank of Dubai (CBD) reported a 21 per cent drop in third-quarter profit as impairment allowances rose and net interest income fell amid the coronavirus-induced economic slowdown.

Net profit for the three months to the end of September declined to Dh285.3 million ($77.73m), the lender said in a statement to the Dubai Financial Market, where its shares trade.

Impairment allowances rose 31 per cent to Dh215m, while net interest income and net income from Islamic financing fell 12 per cent to Dh443m.

"The Covid-19 pandemic has caused a contraction in business conditions and confidence, leading to historically low interbank interest rates and increased specific and forecast credit losses," the bank said on Wednesday.

During the nine-month period, the bank reported a 23 per cent drop in profit to Dh816m as impairment allowances on loans and advances climbed 28 per cent to Dh708.2m.

“Despite the lower overall performance for the first nine months of 2020 compared to 2019, CBD continues to deliver on its strategy and is poised to end the year on a strong footing,” Bernd van Linder, chief executive of the bank, said.

Net interest income and Islamic financing income during the period slid 8.7 per cent to Dh1.37bn, according to the lender. Operating expenses also fell 9.4 per cent year-on-year to Dh591m.

Assets at the end of the nine-month period climbed 12.4 per cent  to 92.8bn, compared to end of December last year level.

Investment Corporation of Dubai, the principal investment arm of the emirate’s government, controls a 20 per cent stake in the bank.