Dubai Islamic Bank's third-quarter net profit jumps 20% on strong economic recovery

Net profit for the period rose to more than $329 million

A Dubai Islamic Bank branch. Banks in the UAE are making a strong recovery as business sentiment picks up in the Arab world's second-largest economy. Photo: Dubai Islamic Bank

Dubai Islamic Bank, the UAE's biggest Sharia-compliant lender by assets, reported a 20 per cent jump in its third-quarter net profit, driven by a strong economic recovery in the local economy.

Net profit attributable to owners of the bank for the three-month period to the end of September rose to more than Dh1.2 billion ($329 million), the lender said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded.

The bank's profit in the period was fuelled by a 83 per cent jump in income from property held for development and sale, as well as a 325 per cent surge in income from its investment property portfolio.

Operating expenses narrowed 5.4 per cent to Dh627.6m during the period due to cost-control procedures put in place. Impairment charges during the period rose 27 per cent to Dh675m.

"The economic recovery of the UAE remains on track, with strong performance of the non-oil sectors driven by improving demand of business activities and rising consumer confidence that is supported by high vaccination rates of the domestic population," said Mohammed Al Shaibani, director general of the Ruler’s Court of Dubai and DIB chairman.

"The successful opening of the world expo has demonstrated the nation’s ability to quickly recover from the global pandemic with all key economic sectors geared towards supporting this major event."

Banks in the UAE are making a strong recovery as business sentiment picks up in the Arab world's second-largest economy, which is expected to grow 2.4 per cent this year.

The non-oil economy of the Emirates is expected to expand by about 4 per cent this year and in 2022 while overall economic growth is expected to be 3.8 per cent next year, the UAE Central Bank said in June.

The current economic growth is expected to help boost the country's banking assets, which could grow by 8 per cent to 10 per cent next year, according to the chairman of the UAE Banks Federation.

The local lenders have also benefitted from the Dh400bn monetary and fiscal support by the UAE government, including the central bank's relief package of more than Dh250bn to local lenders to help soften the blow of the pandemic.

The bank’s nine-month net profit fell by about 2 per cent to Dh3.05bn.

Operating expenses continued to fall to Dh1.8bn while impairment charges declined 18 per cent to Dh2.1bn.

Customer deposits rose to 4 per cent to Dh214.1bn, the lender said.

"The steady improvement in our profitability is supported by our consistent efforts to continue to extract synergies from the acquisition, while pushing for further efficiencies through our digitisation drive and further optimisation of our branch and ATM network," said DIB chief executive Adnan Chilwan.

"Evidence of the success of our cost management approach is clearly visible, with Opex reducing by a considerate 12 per cent year on year to reach Dh1.9bn, thereby leading to one of the lowest cost-income ratios in the market at 26.2 per cent."