Emirates NBD says reduced impairments helped lift profit in first half of the year

The UAE’s largest lender announced net profits of Dh3.7 billion for the six months to the end of June, compared with Dh3.3bn in the same period last year.

Four analysts on average had forecast the bank would make a net profit of Dh1.8 billion for the quarter. Pawan Singh / The National

Emirates NBD announced quarterly profit ahead of analyst forecasts, rising 16 per cent year-on-year for the three months to the end of June as lower levels of bad debt allowed the bank to reduce impairment charges.

However, Dubai’s largest bank warned that it would continue to face “headwinds” as lower oil prices contribute to tighter fiscal policy and slower growth in the UAE’s non-oil sector.

Net profit at Emirates NBD rose to Dh1.9 billion for the second quarter, compared with Dh1.6bn in the same period last year.

An average of forecasts from four analysts had predicted the bank would make a net profit of Dh1.8bn for the quarter.

Emirates NBD’s impaired loan ratio, reflecting the level of bad debt on its books, fell to 6.6 per cent at the end of June from 7.4 per cent a year earlier.

This in turn enabled the bank to reduce allowances for impaired debt in the first half of this year to Dh1.4bn, down from Dh1.9bn a year earlier.

“We find it a good set of numbers driven by strong growth and benign credit costs,” said Jaap Meijer, the managing director of equity research at Arqaam Capital in Dubai.

“With the Expo 2020 project awards, we expect [Emirates NBD] to be one of the key beneficiaries in Dubai.”

Such positive sentiment had little impact on the bank’s shares however, which ended a quiet day of trading unchanged at Dh8.50 each.

The bank’s loan book grew 12 per cent to Dh286 million at the end of June compared to a year earlier, while deposits grew 8 per cent year-on-year to Dh297.6m.

The group chief executive Shayne Nelson said the bank remains “cautiously optimistic for the remainder of 2016,” having raised Dh14bn last month to boost structural liquidity.

Emirates NBD said that it expects tighter liquidity conditions in the UAE and a strong dollar to “continue to pose headwinds to non-oil growth, particularly in the services sectors,” but that rising oil output in line with official targets would boost the country’s GDP growth.

Meanwhile, the bank’s Islamic banking subsidiary Emirates Islamic announced a fall in second-quarter profit to Dh92m from Dh253.2m a year earlier as impairments, net of recoveries, increased to Dh241m compared to Dh65.6m a year earlier.

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