Emirates NBD reports 74 per cent rise in fourth-quarter profit

ENBD’s board of directors has recommended an annual dividend of 0.40 dirhams per share for 2015.

Emirates NBD’s net income increased to Dh2.13 billion in the three months ended December 31. Jeffrey E Biteng / The National

Emirates NBD, Dubai’s biggest bank by assets, said its fourth-quarter profit jumped 74 per cent year on year amid higher income from fee-generating businesses, as well as a drop in provisions for bad loans.

Net income increased to Dh2.13 billion in the three months ended December 31 from Dh1.22bn in the same period the previous year, beating analysts’ expectations.

Non-interest income, the money it makes from activities other than getting interest on loans, advanced 30 per cent to Dh1.4bn in the fourth quarter compared to the corresponding period the year before, bolstered by income from foreign exchange remittances and credit cards.

More importantly perhaps, the bank’s provisions to cover bad debt improved 49 per cent to Dh599 million as it continues to reduce risks in the aftermath of the build-up of debt that led to Dubai’s financial crisis in 2009.

Thanks to the buoyant results, the bank said it would reward shareholders by raising the dividend to 40 fils per share for 2015 from 35 fils for 2014.

“Our prudent balance sheet management and strong ability to attract and retain both retail and corporate deposits have enabled us to improve the bank’s liquidity position despite a challenging year for regional liquidity,” said Shayne Nelson, the bank’s chief executive.

The upbeat results come despite the biggest drop in oil ­prices since the financial crisis of 2009 and the damper it put on economic growth.

Emirates NBD has been blazing a trail of profitability in the past couple of years as it lightens 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 said it would freeze payments on US$25bn worth of debt. Last year, Dubai World said it had agreed to a $14.6bn debt restructuring.

Not everything is as rosy for all banks, however. Lenders and other financial services firms are starting to experience some signs of strain as the price of oil, a key catalyst for the country’s economic growth, continues to flounder after losing more than 70 per cent of its value since mid-2014.

FGB, HSBC, Standard Chartered and RAKBank have been among banks that have cut jobs in the past six months.

As well as job cuts, the default rate on loans by SMEs has risen sharply at some lenders.

Still, Emirates results were good enough for Sanyalak Manibhandu, head of research at Abu Dhabi-based NBAD Securities, to upgrade its shares to “buy” from “hold” after the fourth-quarter earnings beat his expectations by 35 per cent.

Looking forward, Emirates NBD said it expected economic growth to ease further to 3.8 per cent in 2016 from the drop to 4 per cent last year as the government takes a more conservative approach to spending and less cash flowing in the banking system constrains growth.

Separately, Emirates Islamic, the Islamic financing arm of Emirates NBD, said that its 2015 net income increased 76 per cent to Dh641m. It did not give a breakdown for its earnings during the fourth quarter.

"Going forward, I see Islamic banking playing an increasingly significant role in the UAE's economy as we create the solutions that support the evolving needs of individuals, corporates and SMEs," said Hesham Abdulla Al Qassim, the chairman of Emirates Islamic.

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