Emirates NBD, Dubai's biggest lender by assets, reported a 69 per cent drop in third-quarter profit as impairment allowances climbed amid the coronavirus pandemic.
Net profit attributable to equity holders of the group for the period ending September 30 declined to Dh1.56 billion, the lender said in a statement to the Dubai Financial Market, where its shares trade. Impairments rose 41 per cent to Dh2.15bn.
Net fee and commission income fell 16 per cent year-on-year to Dh955 million.
“Despite the challenging conditions that individuals and businesses have faced over the last six months, Emirates NBD has remained profitable and maintained a strong balance sheet,” Shayne Nelson, group chief executive of Emirates NBD, said. “We have used that strength to support our customers affected by the disruption caused by Covid-19 to help avoid credit issues developing in the future. As the economy has started to reopen, we continue to provide nearly Dh6.6bn of interest and principal deferrals to over 98,500 customers.”
The bank's nine-month net profit fell 55 per cent to Dh5.6bn from the year earlier period as impairments increased 131 per cent to Dh6.3bn. The ratio of non-performing loans in the first nine months of the year edged up to 6 per cent, compared with 5.6 per cent a year earlier.
Banks globally have reported falling profits and higher provisions in the wake of the pandemic, which disrupted global trade and slowed economic activity as countries implemented lockdowns to contain coronavirus.
The world economy is in its deepest recession since the Great Depression and is set to shrink 4.4 per cent this year before it rebounds unevenly in 2021, according to the International Monetary Fund.
The UAE has reopened its economy gradually since movement restrictions were introduced in March, and business activity has picked up on the back of monetary and fiscal support.
Dubai’s non-oil private sector economy continued to improve in September as demand rebounded from the coronavirus-induced slowdown, with the IHS Markit Purchasing Managers' Index climbing above the neutral 50 mark for a third consecutive month to hit 51.5, compared with 50.9 in August. A reading above 50 indicates an expansion.
Dubai’s continued economic recovery mirrors that of the entire country. The UAE's headline PMI reading hit an 11-month high last month when it rose to 51, up from 49.4 in August. The overall improvement in business conditions marked a renewed expansion in the non-oil private sector of the country at the end of the third quarter.
The country was the first in the Mena region to introduce economic stimulus measures, including zero interest funding to banks to boost lending growth. It also unveiled other initiatives such as discounted utility bills and fee waivers.