Mashreq Bank’s first quarter profit slides amid coronavirus pandemic

Net profit for the reporting period declined to Dh450 million

Mashreq Bank on Thursday reported a 28 per cent drop in its first quarter net profit. Chris Whiteoak / The National

Mashreq Bank, the Dubai lender controlled by the Al Ghurair family, reported a 28 per cent drop in its first-quarter net profit, as global interest rates declined and economic activity remained subdued amid the coronavirus pandemic.

Net profit for the three months ending March 31 declined to Dh450 million, the lender said in a statement to the Dubai Financial Market, where its shares trade. Revenue slid 3 per cent year-on-year to Dh1.52 billion and impairment allowances rose 56.5 per cent to Dh409m.

“These are difficult times for the whole world and despite a tough operating environment, Mashreq continued its positive growth trajectory in the first quarter of 2020,” Ahmed Abdelaal, group chief executive of Mashreq Bank, said.

“We achieved a respectable ... net profit for the first quarter of 2020 despite strong headwinds like steep decline in interest rates and [the] impact of the Covid-19 crisis."

The lender's revenue also remained stable with loans and advances growing by almost 3 per cent during the reporting period, Mr Abdelaal noted.

Investment income more than doubled to Dh127m. Net interest income and income from Islamic financing, however, slid 16.5 per cent to Dh782m, Mashreq said.

Lenders across the globe are at risk of a decline in profitability as loan growth slows and interest rates plunge amid the coronavirus pandemic. The global economy could experience the worst recession this year since the 1930s great depression. The International Monetary Fund on Tuesday projected a 3 per cent contraction in 2020 and said the outlook for the world economy is worse than the 2008 global economic crisis.

The UAE, the second-biggest Arab economy, was the first in the Middle East and North Africa to roll out Dh282bn in fiscal and monetary support, providing zero interest funding to banks to boost lending growth in the country. The government, in addition, has also implemented a variety of other initiatives that range from discounted utility bills to waivers of fees to buttress the economy.

Mashreq on Thursday said its assets grew 2 per cent to Dh162.6bn, while loans and advances rose 2.8 per cent from the end of last year to reach Dh78.3bn. Customer deposits, however, fell 2.7 per cent to Dh88.5bn during the period.

“Given the unprecedented situation we are facing now, we invoked several management actions during the quarter, aimed at ensuring the safety and security of all our stakeholders as well as supporting their financial well-being,” said Mr Abdelaal.

Mashreq is among UAE banks that have rolled out a comprehensive package to reduce financial distress of their clientele. Banking benefits packages extend relief to businesses and individuals, particularly in stressed sectors, through reduced costs and fees, loan deferrals, reduced interest rates and processing fees.

Earlier this month, the UAE Central Bank urged lenders to support the private sector and individual borrowers to cushion the impact of Covid-19 and disbursed Dh10bn worth of zero interest loans to banks from the Targeted Economic Support Scheme launched in March.