The National Bank of Ras Al-Khaimah (RAKBank) reported a 54 per cent drop in third-quarter net profit as total income reduced and impairments rose amid the coronavirus pandemic.
Net profit for the three month period ending September 30 declined to Dh132 million, the lender said in a statement on Thursday. The total income during the period fell 15 per cent to Dh852.5m.
Provisions for impairment rose 21 per cent year-on-year to Dh394.8m, while operating expenditure slid 17 per cent to Dh325.7m.
"Since the gradual reopening of the business, we are seeing signs of improvement in the UAE economy,” RAKBank chief executive Peter England said. “However customer demand for loans has declined considerably as many SMEs and individuals continue to take a cautious stand. This combined with a low-interest rate environment is providing challenges for the bank’s top line income.”
To help cushion some of this impact, RAKBank has taken a proactive approach in cost optimisation including reducing operating expenditure, he added.
The bank’s nine-month net profit fell 48 per cent to Dh438.6m from the year earlier period as total income including net interest income and income from Islamic financing and non-interest income dropped 8 per cent to Dh2.75 billion, the lender said.
Total assets slid 8 per cent to Dh52.3bn at the end of September 2020, compared to Dh57.1bn on December 31 last year.
“Other than the continued precautionary loan loss provisions being taken under IFRS 9, the underlying asset quality of our book remains in decent shape, which of course has been supported by the Central Bank of the UAE’s very proactive approach in providing the Targeted Economic Support Scheme (TESS) for borrowers who are challenged in this time,” Mr England said.
RAKBank expects next few quarters to remain challenging due to a pandemic-induced slowdown.
Globally, banks have reported falling profits and higher provisions in the wake of the pandemic, which disrupted global trade and slowed economic activity as countries implemented lockdowns to contain the coronavirus.