Emirates NBD’s profit jumps 27 per cent to Dh3.26bn in 2013

The Dubai lender Emirates NBD's profit last year was powered in part by a growth in loans and deposits from its consumer banking business.

Emirates NBD, Dubai’s biggest bank, said its profit in 2013 increased 27 per cent, as growth in loans and deposits from its consumer banking business jumped amid a recovery of the economic fortunes of the UAE.

Net profit advanced to Dh3.26 billion last year from Dh2.55bn in 2012, the bank said in an emailed statement yesterday. Customer loans in 2013 rose 9 per cent to Dh238.3bn, while deposits advanced 12 per cent to Dh239.6bn.

“As the bank witnessed growth across multiple revenue streams, particularly in the Islamic franchise and retail business, it continued to innovate and deliver a superior customer experience,” said Shayne Nelson, the bank’s chief executive. “This, combined with our healthy levels of capitalisation and an improving business mix, positions the bank to reap the benefits of revenue growth opportunities.”

Mr Nelson said that the bank’s retail business has tended to be more profitable. Revenue at ENBD’s consumer banking and wealth management division increased 15 per cent to Dh5.02bn in 2013 from the previous year as deposits grew 11 per cent. Loans, driven by mortgages, personal loans, credit cards and auto loans, soared 32 per cent.

In recent years, banks in the UAE have increasingly focused on retail banking where the yields have been more attractive. Competition for retail banking has become intense because products such as home and car loans offer better margins than company financing. And banks have beefed up their push for retail customers outside their traditional hunting grounds and by using new technologies both at home and abroad.

Emirates NBD’s expansionary drive involved it buying an Egyptian bank, while Abu Dhabi Islamic Bank, the largest Sharia-compliant lender in the emirate, has been aggressive in luring customers beyond its home city. Mashreq, run by the billionaire Abdul Aziz Al Ghurair, has spent millions of dollars to set up high-tech, iPad-laden branches that make banking chores easier for customers.

Yet things have not been completely rosy for ENBD. Bad loans from the days of Dubai’s excessive spending still haunt its balance sheet. In the fourth quarter of 2013 alone, ENBD’s profit rose 8 per cent to Dh673 million from Dh626m in the same period the previous year, but that missed analysts expectations because the provisions the bank set aside to cover bad loans increased. Five analysts polled by Reuters had forecast a net profit of Dh705.9m.

The bank said net impaired loans rose mainly owing to an increase in bad loans in the Islamic corporate portfolio.

Meanwhile, net provisions increased by Dh1.1bn to Dh20.8bn in the fourth quarter from the third quarter.

Still, many analysts remain upbeat about the bank’s prospects. Jaap Meijer, the head of financial institutions research at Dubai-based Arqaam Capital, said in a note to clients that the investment house maintains its “buy” recommendation on the stock and welcomed ENBD’s efforts in reducing the cost of funding and improving income generation, asset quality and fees and commissions income. Emirates Islamic also yesterday reported a 72 per cent increase in annual profits for 2013.

The Dubai-based bank, which is owned by Emirates NBD, announced a net profit of Dh139.5m in 2013, up from Dh81.1m in 2012, and equivalent to earnings per share of 3.9 fils.

Total assets grew by 6.7 per cent to Dh39.8bn.

Total income rose 42 per cent during the year to Dh1.9bn. The increase was fuelled by a 56 per cent increase in income from financing activities, which grew to Dh1.2bn.

Emirates Islamic changed its brand from Emirates Islamic Bank last November.

In light of the recent spate of strong results that UAE banks have been reporting, Mr Meijer said that Arqaam remains “strongly overweight” on the sector, especially when compared to banks in Qatar. He said a recent re-rating by the investment house did not fully price in a new era of growth that banks in the UAE have embarked on.

* The National, with additional reporting by John Everington