The Dubai lender Mashreq reported an 18 per cent decline in first-quarter profit as loan provisions almost doubled amid a worsening economic outlook. Net income fell to Dh532 million in the first three months of the year from Dh651m in the same period last year. Net allowances for impairments in the first quarter almost doubled to Dh366m versus Dh196m a year earlier, it said.
“Given the challenging market conditions, Mashreq has approached the 2016 fiscal year with a pragmatic outlook,” said Abdul Aziz Al Ghurair, Mashreq’s chief executive.
“We responded quickly to the early signs of the market softening by deciding to moderate our growth strategy accordingly.”
The growth of the UAE economy has started to show increasing signs of strain from the crash in oil prices that began nearly two years ago amid less demand for crude from China and an uptick in North American energy production.
While the country has fared better than some of its neighbours, such as Saudi Arabia, which are less economically diversified, the more than 60 per cent drop in oil prices has dented business confidence and curtailed some government spending. Big corporations have weathered the storm fairly well, but small businesses have had a harder time.
Mr Al Ghurair, who is also the chairman of the UAE Banking Federation, warned in November that a number of small business owners might have fled the country, leaving unsettled debts of about Dh5 billion.
That has not only been bad for banks, which have had to increase the amount of money they set aside for bad debt, but it is also not great news for SMEs seeking new loans or refinancing, as these businesses are often the first to have their credit lines halted.
Still, despite the higher provisions during the first quarter, the bank reported growth in its core businesses.
Net interest income increased 6.4 per cent, while fee and commission interest rose 4.6 per cent in the first quarter year-on-year.
mkassem@thenational.ae
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