Emirates NBD, Dubai’s biggest bank by market value, led the pack of lenders reporting a sharp rise in profits yesterday amid a credit-fuelled boom.
Abu Dhabi Commercial Bank, Dubai Islamic Bank (DIB) and United Arab Bank were also among other big lenders that reported earnings yesterday, with most heading towards another successive year of record profit. Like many other banks here, they are boosting their income by focusing on the highest- yielding loans and fees from services including wealth management and trade finance. That is to offset the declining margin of profit that low interest rates have lumbered them with.
Loans to individuals and small and medium-sized enterprises garner higher profit margins for banks because the risk is greater than for loans to corporations. The banks are all also getting a boost from the decreasing amounts of money they put aside for bad debt, which they call provisions, because of buoyant corporate earnings.
“Across the board, except for DIB, you will see that corporate loan growth has been relatively sluggish and the margins on corporate loans have been very tight,” said Shabbir Malik, a Dubai-based bank analyst at the Egyptian investment bank EFG Hermes. “In order to offset that, banks have been focusing on the high-yielding retail and SME loans and we saw this trend continue in the third quarter. That is helping to preserve the bank’s margins.”
Emirates NBD said its net income doubled to Dh1.56 billion in the three months ending September 30 compared to the same period the previous year. Loans advanced 6 per cent to Dh247.7bn. The net income beat a mean estimate of Dh1.12bn from five analysts polled by Bloomberg. The bank said that its non-interest income gained 39 per cent, bolstered by increases of profit from trade finance, foreign exchange, brokerage and asset management.
“Despite a competitive environment, we have been able to widen margins helped by growth in higher margin retail and Islamic products, a more efficient funding and capital base and contribution from our Egyptian business,” said Surya Subramanian, Emirates NBD’s chief operating officer.
Banks in the UAE have been the biggest beneficiaries of an economic resurgence that propelled GDP growth to more than 4 per cent last year as corporations and individuals took bank loans for everything from refinancing old debt to new homes and cars. But because interest rates are low, this has meant banks — of which there are more than 50 servicing a population of 9 million in the UAE — have had to vie for clients and search for other ways to make money apart the interest they get on loans.
DIB, the biggest Sharia-compliant lender in Dubai, said its third-quarter profit gained 55.7 per cent to Dh676.8 million, also beating the estimate of analysts. DIB, which has businesses in Pakistan and Jordan, is in the process of expanding farther afield into countries including Kenya and Indonesia, where there is demand for its services.
“Global economic growth and development has seen a major shift over the last decade with Asia and in particular Middle East, South Asia and Far East being among the major drivers,” said Adnan Chilwan, DIB’s chief executive.
"In most of these high-growth nations, Islamic finance is essentially being seen as a key component of economic progress and prosperity, which in turn has led to substantial enhancement of wealth across a growing population, fuelling massive liquidity within the Islamic investor base."
In neighbouring Abu Dhabi, ADCB said its quarterly earnings grew 16.4 per cent to Dh1.02bn in the three months to September 30, compared to Dh874.2m in the same period of last year.
“Improving economic conditions combined with our strong risk management culture and disciplined approach to balance sheet management resulted in significant improvement in asset quality metrics year to date,” said Ala’a Eraiqat, ADCB’s chief executive.
Elsewhere, Sharjah-based United Arab Bank said its third-quarter profit jumped 20 per cent to Dh498m versus the same period last year. Sharjah Islamic Bank said its earnings jumped 33.5 per cent to Dh395m in the third quarter.
mkassem@thenational.ae
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