Emirates NBD's net profit the nine-month period rose to Dh4.99 billion from Dh3.91bn in the year earlier period. Jeff Topping / The National
Emirates NBD's net profit the nine-month period rose to Dh4.99 billion from Dh3.91bn in the year earlier period. Jeff Topping / The National

Emirates NBD’s Q3 profit rises 7 per cent on higher net income interest



Some of the country's biggest lenders reported third-quarter earnings yesterday with Emirates NBD bucking the recent trend to post a 7 per cent jump in profit on lower bad loan provisions.

The Abu Dhabi-listed First Gulf Bank, known as FGB, the country’s third-largest lender by assets, also reported yesterday, posting a 0.4 per cent dip in its third-quarter net profit, broadly in line with analysts’ estimates.

FGB made a net profit of Dh1.41 billion for the three months, which ended on September 30, compared to Dh1.42bn a year earlier, it said in an emailed statement yesterday.

Four analysts polled by Reuters this month forecast an average net profit of Dh1.51bn.

In the first nine months of this year, net profit increased 4 per cent to Dh4.29bn compared to a year earlier, FGB said.

Emirates NBD, Dubai’s largest lender, made a net profit of Dh1.67bn in the three months to September 30, compared to Dh1.56bn in the same period in 2014. An average of four analysts polled by Reuters forecast the bank to make a net profit of Dh1.60bn for the third quarter.

The bank has reaped the benefits of a robust Dubai economy in recent years as the emirate has made progress in resolving its debt woes.

But pressure from lower crude oil prices has squeezed deposits across the banking system in recent months and generally lifted the sector’s loan-to-deposit ratio.

Despite the trickier operating environment, Emirates NBD’s provisions for bad loans dropped to Dh822 million in the third quarter, compared with Dh1.2bn a year earlier.

A significant amount of the bank’s provisioning in recent quarters has been towards boosting its bad loans coverage ratio, which improved to 115.3 per cent at the end of September, up from 70.3 per cent at the same point of 2014.

“Our prudent balance sheet and strong ability to attract and retain both retail and corporate deposits has helped offer protection against increased challenges that the region has experienced,” said Shayne Nelson, the chief executive of Emirates NBD.

Emirates Islamic reported a 47 per cent rise in commissions and fee income in the third quarter, helping net profit to almost triple to Dh86.9m compared to Dh29.2m a year earlier. Fee income rose to Dh123m in the three months to September compared to Dh83.2m a year earlier. Income from financing and investing activities also increased, by 20 per cent, to Dh461.5m, the bank said in a statement to the bourse.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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