Dubai Islamic Bank beats earnings estimates

The bank’s chairman Mohammed Ibrahim Al Shaibani attributed the lift in business to an improvement in the fortunes of the UAE economy in the first quarter.

Dubai Islamic Bank’s net profit rose to Dh1.042 billion in the first three months of the year. Mona Al Marzooqi / The National

Dubai Islamic Bank (DIB) kicked off earnings season with results that beat estimates amid signs of an improving economy.

The biggest Sharia-compliant lender in the emirate said on Tuesday its first-quarter net profit rose by 4 per cent, as income gains from financing outweighed money set aside for bad debts.

The bank’s chairman attributed the lift in business to an improvement in the fortunes of the UAE economy in the first quarter amid the firming of oil prices and an uptick in infrastructure spending. At the same time, the bank said it would be forging ahead with expanding its presence internationally.

Net profit rose to Dh1.04 billion in the first three months of the year compared with Dh1bn a year earlier. Net revenue rose by 7 per cent to Dh1.8bn over the same period.

“The UAE economy saw a strong start to 2017 following the stabilisation of commodity prices and continuation of infrastructure spending around all key areas,” said Mohammed Ibrahim Al Shaibani, the bank’s chairman. “While the UAE market continues be the biggest contributor by far, the bank’s international expansion strategy has progressed very well with the official launch of our operations in Indonesia and the recent positive developments with the regulators for our eastern Africa ambitions.”

Still, the bank’s impairment losses increased by 43 per cent to Dh169 million in the first quarter from Dh118m a year ago.

Despite the rise in impairments, its non-performing assets ratio improved to 3.7 per cent in the first three months of the year compared with 3.9 per cent at the end of last year.

The investment bank Sico Bahrain had projected a first quarter net profit of Dh908m and NBAD Securities forecast Dh953m for DIB.

“DIB grew deposits and grew financing and that was the basis for their very good first quarter numbers and I think if they are able to maintain this, the stock price will get to a much higher level,” said Sanyalak Manibhandu, the head of research at NBAD Securities.

Customer deposits at the end of the first quarter rose by 12 per cent to Dh137bn from Dh122bn at the end of last year. Net financing assets grew to Dh121.4bn for the period to March 31, an increase of about 6 per cent from Dh114.9bn at the end of last year.

The bank also managed to keep expenses under control, he said. The bank’s cost-to-income ratio improved to 32.8 per cent at the end of the first quarter compared with 33.7 per cent a year earlier.

“We remain positive on DIB and expect the bank to report Dh3.8bn in financial year 2017, higher than the consensus, as we continue to believe in the bank’s balance sheet growth story, supported by cost rationalisation, along with net interest margin and provisioning stabilisation,” said Chiradeep Ghosh, an analyst at Sico.

Shares of DIB rose by 0.87 per cent to Dh5.8 in Dubai on Tuesday.

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