Emirates NBD, Dubai’s biggest bank by assets, said that its fourth-quarter profit fell by 13 per cent, weighed down by a decline in non-interest income, foreign exchange losses from the devaluation of the Egyptian pound in November and a drop in net interest margins because of competitive pressures.
Net profit fell to Dh1.85 billion during the last three months of 2016 from Dh2.13bn in the same period of 2015, the bank said. Despite the decrease in profitability, the earnings beat the expectations of three analysts polled by Reuters. They had forecast fourth-quarter earnings of Dh1.62bn for the bank.
For the full year, however, the bank’s profit rose 2 per cent to Dh7.23bn versus Dh7.12bn.
Emirates Islamic, the Sharia-compliant arm of Emirates NBD, reported a net profit of Dh106 million in 2016, without giving a corresponding figure for 2015.
“Given the ongoing challenging environment, we will remain focused on controlling expenses and managing risks while ensuring that we continue to invest to support future growth,” said Shayne Nelson, the Emirates NBD chief executive.
Non-interest income, which is the money the bank makes from services and products away from the interest it collects on loans, plunged by 29 per cent to Dh1bn in the fourth quarter versus Dh1.4bn in the corresponding period the previous year. Meanwhile, net interest margin slipped to 2.29 per cent from 2.82 per cent even as the cost of funding rose, it said.
Net interest income fell by 8 per cent to Dh2.46bn in the last three months of the year versus Dh2.66bn in the same period of 2015. That income was dragged down by lower demand for corporate loans amid the ongoing economic slowdown, triggered by the collapse in the price of oil, as well as tighter net interest margins.
Sanyalak Manibhandu, head of research at NBAD Securities, said that he had estimated Dh2.59bn for the bank’s interest income but that the lender’s cost of funding had surged by 48.8 per cent, leading to the forecast being missed.
Nonetheless, he maintained his price target for shares of Emirates NBD at Dh10 apiece. The stock closed 1.15 per cent lower in Dubai yesterday at Dh8.6.
As one of the biggest banks in the UAE, Emirates NBD has weathered the storm of low oil prices without having too many of its feathers ruffled, not only because of the high quality of its assets and the low default rate of its biggest clients but also because of its increasing international exposure, with operations in Egypt, India and Saudi Arabia.
On that front, the bank said in its quarterly statement that it had been granted licences to open three additional branches in Saudi Arabia as well as its first branch in India.
The dramatic drop in the price of oil, which has lost as much as 70 per cent of its value since it began its decline in the summer of 2014, has reduced demand for loans, making expansion abroad a key way for banks to diversify their sources of income.
However, the bank’s board, encouraged by the overall results for 2016, recommended maintaining a 40 fils per share dividend for 2016.
mkassem@thenational.ae
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