Emirates NBD, Dubai’s biggest bank by assets, said that its first-quarter profit rose 8 per cent amid a rebound in oil and higher interest rates.
The bank also received a boost from setting aside less money to cover bad debt and an improved cost income ratio from the fourth quarter of last year amid layoffs.
Still, the bank’s chief executive noted that the market remained challenging following the biggest drop in oil since the financial crash of 2008.
Net income increased to Dh1.8 billion in the first three months of the year compared to Dh1.67bn in the same period last year, the bank said. Impairment allowances fell to Dh829 million in the first quarter compared to Dh1.08bn in the first three months of last year.
“Liquidity pressures sector continued to ease in the first quarter from the tight conditions experienced in the second half of 2015,” said Shayne Nelson, the bank’s chief executive.
“We remain cautiously optimistic for the remainder of 2016 but are conscious of the headwinds that a strong dollar and volatile oil price can present.”
The bank’s total income from net interest and non-net interest increased 2 per cent to Dh3.9bn in the first quarter from Dh3.84bn in the same period last year.
“Overall results were mixed as stronger-than-expected investment income compensated for pressure on spreads and higher-than-expected provisioning,” said Shabbir Malik, a Dubai-based bank analyst at the Egyptian investment bank EFG-Hermes.
"The bank's provisioning should ease off in 2016 supported by writebacks. We view Emirates NBD as the best positioned among UAE banks to benefit from higher US rates and the lifting of Iranian sanctions."
An Emirates NBD spokesman told Reuters yesterday that the bank has shed 300 jobs in the past several weeks and is planning to close its SME financing unit as part of cost-cutting measures.
Despite the weaker economy, Emirates NBD has bucked the trend of slowing profitability. While for many banks there was a huge retrenchment of growth in fourth-quarter earnings, Emirates NBD jumped 74 per cent year-on-year. That was largely amid higher income from fee-generating businesses, as well as a drop in provisions for bad loans.
The bank, Dubai’s biggest by assets, has been blazing a trail of profitability in the past couple of years, partly thanks to reducing its exposure to non-performing loans. The bank had the biggest exposure among financial institutions to Dubai World, which had triggered the financial crisis in 2009 when it froze payments on US$25 billion worth of debt. Last year, Dubai World agreed to a $14.6bn debt restructuring.
Emirates Islamic, the Sharia-compliant arm of Emirates NBD, did not fare as well, however, as its parent in the first quarter. The bank’s net income slipped 77 per cent to Dh45 million in the first three months of the year compared to Dh193.7m in the same period last year.
The bank did not give a reason for the drop, but its revenues in the same period slid 9.1 per cent to Dh602m versus Dh662m.
Banking sources told The National earlier this month that Emirates Islamic let go 200 staff as part of cost-cutting measures.
It was not immediately clear if those layoffs are included in the most recent tally of 300. A spokesman at Emirates NBD was not immediately available to comment.
Nonetheless, Emirate Islamic’s chief executive Jamal bin Ghalaita suggested that he was positive about a rebound in 2016.
“We strongly believe that the UAE, with its truly diversified economy, will remain resilient to global market conditions and am optimistic that Emirates Islamic will continue to grow organically and increase its customer base in 2016,” he said.
“As Islamic banking gains wider acceptance globally, we aim to lead its growth and in fulfilling Dubai’s ambition to become the global capital of the Islamic economy.”
mkassem@thenational.ae
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