Emirates NBD's profits dropped 13 per cent in the second quarter as revenues fell and costs rose against the backdrop of a "challenging" external environment. Net profit dropped to Dh647 million (US$176.1m) in the second quarter from Dh744m a year earlier, Dubai's largest lender said yesterday. The results were better than the Dh613m median estimate of four analysts polled by Bloomberg. "The UAE economy has continued to display resilience to global uncertainty, underpinned by a continued increase in oil output and strength in the trade, logistics, tourism and retail sales sectors," the bank said. "Nevertheless, the external environment remains challenging and the bank maintains its cautious outlook." Emirates NBD and other local lenders have been seeking to rebound from a severe property downturn linked to the global financial crisis of 2009. The bank has been a significant lender to government-linked conglomerates restructuring piles of debt including Dubai Group, which is in talks with lenders to restructure $6 billion of loans. Net interest income fell 5 per cent to Dh1.64bn in the second quarter compared with the same period of last year. Non-interest income rose to Dh860m, 2 per cent up from over the same period. Net interest margin, which measures what banks earn from assets and what it pays on deposits, slipped to 2.28 per cent in the second quarter from 2.63 per cent in the first quarter. The results reflected the tricky conditions within the UAE market, said Naveed Ahmed, the senior financial analyst of the research group of Global Investment House in Kuwait. "The negative impact comes from a decline in the top-line performance," he said. "Volumes are largely stagnant and yields are under pressure. Benchmark interest rates are coming down as well." Lending by the bank picked up only slightly during the period. Customer loans rose by 2 per cent to Dh208.2bn between the end of last year and the end of last month. The bulk of the lending came in the second quarter. "There's a lack of opportunities in the market to lend to customers that comply with the bank's risk appetite," said Mr Ahmed. The sluggish lending could also be a reflection of Emirates NBD preparing to comply with Central Bank regulations that will, from September 30, limit local banks' exposure to the Government and companies with government-links, he said. Emirates NBD was in talks with the Central Bank about the regulations, with an extension of the deadline a possibility, said the bank's chief executive Rick Pudner. "We are still working with our plan and will go back to the Central Bank," he said during a conference call after the results release. "That could involve an extension. At the request of the Dubai Government, Emirates NBD took over Dubai Bank last October after it required a government rescue. The absorption of the bank continues to affect the bank's bottom-line results. Second-quarter costs rose by 8 per cent to Dh894m during the period but improved by 4 per cent when the impact of Dubai Bank was excluded from the results. National Bank of Ras Al Khaimah (RAKBank) reported a 16 per cent rise in second-quarter profit yesterday. Net income rose to Dh343.4m during the quarter from Dh296m a year earlier, the bank said. Higher interest income and lower impairment charges helped to boost the bank's performance. <span class="s1"><a href="http://twitter.com/Ind_Insights"><strong>twitter:</strong></a></span> Follow and share our breaking business news. <a href="http://twitter.com/Ind_Insights"><span class="s1"><strong>Follow us</strong></span></a> <strong>iPad</strong> users can read the digital edition of business section as it was printed via our e-reader app. <a href="http://itunes.apple.com/ca/artist/newspaperdirect-inc./id313904714"><span class="s2"><strong>Click here</strong></span></a>