Dubai CBD's first-half net income climbs 68% on lower expenses

Impairment charges declined while net interest and fee income rose

Commercial Bank of Dubai’s Head Office. The lender's half year profit surged as expenses and impairments declined. Courtesy Commercial Bank of Dubai

Commercial Bank of Dubai reported a 68 cent rise in its first-half net income as operating expenses and impairment charges for bad loans declined while net interest and fee income climbed.

Net profit for the six-month period to the end of June, climbed to Dh561 million, the lender said in a statement on Wednesday to Dubai Financial Market, where its shares are traded. Income for the second quarter, surged 63 per cent to Dh281.3m, the lender said in a separate bourse filing.

“CBD’s first half results were strong, underpinned by a higher operating and net profit, with continued expense discipline and increased provision coverage. We remain committed to growing the bank by further developing our digital offering,” Bernd van Linder, CBD's chief executive, said. “With a strong balance sheet, healthy liquidity profile and capital adequacy, CBD is well-placed to support our customers’ requirements.”

The first half profit was boosted by a 5.6 per cent decline in operating expenses to Dh424m as cost to income ratio improved to 31.9 per cent. Net impairment allowances were down at Dh343m, a 35.5 per cent drop when compared to the first half of 2017, CBD said.

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Total operating income increased by 1.1 per cent to Dh1.33 billion, on the back of a 6 per cent increase in net interest income to Dh938m, however, the bank’s non-interest income dropped by 9 per cent to Dh390m. Fees and commission income rose 2.8 per cent, while income from foreign exchange operations surged 27.6 per cent, it added.

GCC banks are forecast to see rising profits in 2018 due to lower costs and a stabilising macroeconomic environment.

"[Regional banks will see] slight recovery in loan growth, driven by the corporate segment, and an improvement in spreads quarter-on-quarter," Egyptian investment bank EFG Hermes said in its Mena banks second-quarter preview paper published earlier this week. "Dubai banks should continue to post stronger loan growth, [and] we expect an improvement from the Abu Dhabi banks."

CBD’s total assets came in at Dh68.9bn at the end of the second half, a 1.5 per cent year-on-year increase. Loans and advances reached 47.2bn for the period from Dh46.3bn from the first six months of 2017, the bank said.

Customer deposits climbed to Dh48.1bn for the six-month period from Dh46.9bn reported at the end of June in 2017. Current and savings accounts constitute 43.2 per cent of the total deposit base, while the financing-to-deposits ratio stood at 98.1 per cent, it said.