New lending and foreign exchange gains helped to propel National Bank of Abu Dhabi (NBAD) to its highest-ever quarterly profit.
The UAE's biggest lender by market capitalisation reported a profit of Dh1.03 billion (US$272.2 million), an increase of 12 per cent on the same period a year earlier. Analysts polled by Bloomberg had expected a profit of Dh965m.
The bank has recorded a dip in quarterly earnings only twice during the past two years.
But the profit was smaller than many in the market had expected, said Raj Madha, a financial analyst at Rasmala Investment Bank.
"Abu Dhabi banks have been saying the operating environment is still difficult, and there isn't a dramatic improvement this quarter for NBAD," he said.
Foreign exchange income totalled Dh206.6m, helping mitigate a Dh27.7m loss on investments.
The bank held provisions for bad debts stable at Dh320m, while net loans and advances increased 1.9 per cent to Dh155.8bn.
As lending increased, NBAD registered a 7.2 per cent surge in net interest income to Dh1.37bn.
NBAD shrugged off a hit to bank charges after the Central Bank introduced new limits on retail lending, with income from fees and commissions rising 0.6 per cent to Dh340.6m.
It also reported strong growth at its Islamic banking business, recording an 85 per cent increase in its operating income from a year ago.
"The market was looking for something slightly more positive" on provisioning, Mr Madha said. "Although the FX income was very strong, trading and investment income was pretty weak, so in some ways these balance themselves out."
However, deposits fell 3.1 per cent to Dh142.5bn, having spiked in the months around the Arab Spring as savers and companies withdrew deposits from countries where governments were overthrown. Central Bank data indicates that deposits peaked at Dh1.12 trillion in April but had fallen by Dh49.9bn by August, the last month for which data is available.
The boost for NBAD came as the Islamic mortgage lender Tamweel reported a doubling of profit to Dh15.6m.
The increase came after a 71 per cent decrease in provisions for bad loans.
NBAD had proved resilient in spite of headwinds on world markets, said Nasser Alsowaidi, the bank's chairman.
"NBAD has delivered healthy profits on the back of strong and prudent balance-sheet growth in a year characterised by multiple economic and political challenges," he said.