Dubai Islamic Bank chief says lender will require capital in 2016

Dubai Islamic Bank will require capital in 2016 but has still to decide on which method it will use to raise it, Adnan Chilwan, its chief executive, said in a webcast.

It was still too early to say how much the bank will raise, but it will either be from a bond which enhances its core Tier 1 or its supplementary Tier 2 capital, or through a rights issue, Mr Chilwan said.

In 2016, the bank was targeting loan growth of between 10 and 15 per cent and a net interest margin of between 3.25 per cent to 3.50 per cent.

The UAE’s largest Sharia-compliant lender posted a 62.8 per cent increase in fourth-quarter net profit on Wednesday, according to Reuters calculations.

The bank made Dh1.15 billion in the three months to December 31, Reuters calculated based on its full-year earnings statement as it did not provide a quarterly breakdown.

This compares with a profit of Dh706.3 million in the corresponding period of 2014 and the forecast by an analyst at HSBC for the quarter of Dh915m.

The bank said in a bourse filing its 2015 net profit rose to Dh3.84bn, up 37 per cent from the previous year.

The bank’s board proposed a 0.45 dirhams cash dividend for 2015, subject to central bank approval, it added. This is up from 0.4 dirhams for the previous year.

“Their loan to deposit ratio is low and they have lots of cash to lend,” said Nabil Farhat, an Abu Dhabi-based partner at Al Fajr Securities. “Their loan portfolio experienced higher growth than an average bank in UAE and also lower loan loss provisions.”

Banks in the UAE are bracing for a decline in government spending, slower economic growth and falling asset quality as oil is posed to remain lower for longer. Still, DIB’s non-performing loan ratio dropped to 5 per cent at the end of last year, compared to 8 per cent in 2014.

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