Rakbank yesterday said its net income grew 1.7 per cent last year as money put aside for bad debts almost doubled.
Net income increased to Dh1.45 billion in 2014 from Dh1.43bn in 2013, bucking the trend of many of the nation’s lenders that reported double- digit profit growth in 2014.
Rakbank’s provisions for impairment almost doubled to Dh595 million in 2014 from Dh341m in 2013, it said. Before provisions, the bank’s operating profits gained 15.7 per cent last year.
Gross loan and advances increased 15.4 per cent to Dh25.8bn in 2014 compared to 2013, while deposits advanced 6.9 per cent to Dh24.6bn in the same time frame. “Rakbank experienced a relatively low level of provisions during 2012 and a large part of 2013 due to write-backs of provisions taken earlier,” said Peter England, the bank’s chief executive officer.
"Therefore, it's more a case of provisions being exceptionally low earlier rather than 2014 provisions being exceptionally high," he added. "The levels of provisions taken in 2014, with net credit losses running at 2.5 per cent of average loans, is considered by the bank to be acceptable given the mix of Rakbank's loan portfolio."
Rakbank gets most of its income from individual customers and small businesses where the risks of default are higher, but the rewards can be more lucrative.
Corporate customers tend to be more reliable and therefore get better rates.
Amid the decline in oil, banks that focus on retail and SME clients are expected to weather any slower economic growth better than lenders that rely on big government companies to fuel deposit growth, analysts say.
mkassem@thenational.ae
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