National Bank of Ras Al Khaimah, also known as RAKBank, said its third-quarter profit dropped 1.1 per cent as an impairment charge to cover bad debt more than doubled in the first nine months of the year from the same period last year.
The bank said its profit in the third quarter was Dh373.1 million, without giving a comparative figure for the same period the previous year. The lender’s net income in the third quarter last year was Dh377.4m, according to data compiled by Bloomberg.
RAKBank said the charge it took for unpaid loans was Dh425.1m in the nine months that ended September 30 from Dh183.1m in the corresponding period last year. Aside from the bad debts, the lender said its operating profits were getting a boost from loans to small businesses and individuals where the margins of profit are higher than on less risky corporate debt.
“Given our loan mix, we are now seeing more normal levels of bad debt after a period of abnormally low credit losses last year,” said Peter England, the bank’s chief executive. “However, our underlying business is very robust as operating income continues to grow strongly quarter on quarter.
“In addition to our top line growth in our personal banking business, the business banking segment, which covers traditional SME and commercial lending, has become a major engine of growth for RAKBank, with our loan book more than doubling over the previous year to a total of Dh1.8 billion.”
Banks in the UAE have been the biggest beneficiaries of an economic resurgence that propelled GDP growth to more than 4 per cent last year as corporations and individuals took bank loans for everything from refinancing old debt to new homes and cars. But because interest rates are low, this has meant banks – of which there are more than 50 servicing a population of 9 million in the UAE – have had to vie for clients and search for other ways to make money apart from the interest they receive on loans, such as asset management, brokerage and selling insurance policies. RAKBank said it was waiting for regulatory approval to acquire a majority stake in Ras Al Khaimah National Insurance at Dh3.64 per share.
“Looking ahead, we see more potential for growth by diversifying into fee-generating products and growing our commercial lending and treasury segments,” said Mr. England. “We also see a tremendous opportunity for growth by expanding into complementary industries.”
mkassem@thenational.ae
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