Dubai’s Noor Bank third quarter net profit drops 12% to Dh185m

Higher impairment charges and lower financing income cut into Islamic lender's returns

Dubai, United Arab Emirates - April14, 2017.  Noor bank along Sheikh Zayed Raod.  ( Jeffrey E Biteng / The National )  Editor's Note;  ID 19393 *** Local Caption ***  JB140417-Banksstocks07.jpg

Dubai’s Noor Bank, a Sharia-compliant lender being acquired by its larger rival Dubai Islamic Bank, reported a 12 per cent slide in its third quarter net profit due to higher impairment charges as well as reduction in income from Islamic financing.

Net profit for the three-month period ending September 30 dropped to Dh185.3 million, the lender said on Thursday. However, operating income rose 3.4 per cent to Dh545.7m during the period.

Impairment charges on financial assets increased to Dh185.4m in the third quarter of the year, from Dh133.8m during the same period last year. Net income from Islamic financing and sukuk reduced to Dh288m, from Dh325.4m in the same period last year.

“Our strong returns against the backdrop of a challenging global environment are underpinned by our robust balance sheet and diversified performance across our businesses,” said John Iossifidis, chief executive of Noor Bank.

Total operating expenses in the third quarter reduced 5.2 per cent to Dh173m, year-on-year.

In the nine-month period ending September 30, the bank’s net profit climbed to Dh595m, up 12.4 per cent year-on-year, driven by higher operating income and lower expenses.

Operating income during increased 6.7 per cent to Dh1.6 billion, whereas expenses dropped 0.7 per cent to Dh528.4m.

Disciplined cost management and a de-risking of certain parts of the business contributed to the increase in profit, Mr Iossifidis said. The lender had improved its cost-to-income ratio, he added.

Noor Bank is in the process of a consolidation with DIB, whose board has recommended the takeover of the smaller bank to its shareholders. Dubai’s sovereign fund Investment Corporation of Dubai has stakes in both lenders.

DIB has hired HSBC to advise on the deal. Noor Bank is working with Barclays on the transaction that would create an Islamic lender with Dh275bn in assets, The National reported in June.

Mergers of lenders across the region are gathering pace. Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank combined earlier this year to create the third-biggest lender in the UAE.

National Commercial Bank in Saudi Arabia is pursuing a union with its competitor Riyad Bank, whereas Kuwait Finance House recently received conditional approval from the country’s central bank for its proposed acquisition of Bahrain’s Ahli United Bank.