Mashreq second-quarter profit down 16% to Dh539 million

Mashreq's non-performing loans stood at Dh2.6 billion at the end of the quarter, giving the bank an NPL ratio of 3.5 per cent. Satish Kumar / The National

Higher impairment costs weighed on Mashreq's performance in the second quarter as the banking sector moves into a challenging final six months of the year.

The bank, the third-largest in Dubai in terms of assets, said net profit for the three months to the end of June dropped 16 per cent year-on-year to Dh539 million, falling short of a forecast of Dh588m by analysts at Arqaam Capital.

Central Bank data this month shows that banks were less willing to lend in the second quarter and at the same time demand for loans has eased across the board amid a slowdown in economic growth.

“We remain cautiously optimistic for the remainder of 2016 and we are conscious of the challenges we may face,” said the bank’s chief executive Abdul A ziz Al Ghurair.

“Our focus remains on keeping a strong hand on expenses while allowing flexibility to take advantage of opportunities that present themselves over the remainder of the year and into 2017.”

Mashreq’s impairment allowances more than doubled year-on-year to Dh472m for the second quarter, cancelling out a 7.5 per cent rise in operating income and a slight improvement in operating expenses.

Non-performing loans (NPL) stood at Dh2.6 billion at the end of the quarter, giving the bank an NPL ratio of 3.5 per cent.

This represents an improvement on the 3.7 per cent figure for the end of June 2015, but slightly higher than the figure of 3.2 per cent for the first quarter of this year.

Mashreq’s loans and advances rose 5.7 per cent year- on-year to Dh61.7m at the end of June, with customer deposits 2.6 per cent lower at Dh73.3m.

Net interest income rose 1.8 per cent year-on-year to Dh834m for the quarter, but fees and commissions declined 3.2 per cent to Dh447m.

The bank’s shares, suspended yesterday ahead of the results announcement, are among the worst performers on the Dubai Financial Market so far this year.

The bank’s shares have lost 14.7 per cent of their value so far this year, compared with a 12.55 per cent gain for Dubai’s headline index.

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