A weaker than expected start to the year saw little respite from bad debts for Emirates NBD, the first Dubai bank to post earnings for the first quarter of 2011.
The UAE's biggest bank by total assets reported a rise in net profits of 27.1 per cent to Dh1.41 billion, but a sharp decrease in the bank's operating profit meant the lender missed analysts' expectations.
The bank avertedposting a net loss as a result of the Dh978m sale of a stake in Network International, an electronic payments platform, and fair value gains of Dh856m on the 51 per cent stake the bank retained.
However, the bank continued to feel the weight of bad debts. Operating profits fell 92.6 per cent to Dh83m, pushed downwards as net impairments on financial assets swelled 156.9 per cent to Dh1.36bn.
The bank also posted impairments and a share of losses on its associates and joint ventures worth a total of Dh477.2m.
Though the sale of Network International had helped boost profits for the quarter, analysts had expected net profits of Dh2.17bn, according to median consensus estimates from Bloomberg.
"Adjusted for the substantial one-offs, ENBD's results are slightly below our forecasts," said Jaap Meijer, a financial analyst at Alembic HC Securities.
"All in all, operationally a little weak quarter, but Emirates NBD is now better provisioned versus year end 2010 thanks to the gain on Network International."
Abraaj Capital, the private equity investor, acquired 49 per cent of the bank's holding in Network International earlier this year.
Lending fell 1.2 per cent to Dh176bn, while deposits increased 6 per cent to Dh212bn.
The bank is leading restructuring talks over Dubai Group, according to Bloomberg News. Recently, it was revealed that the amount of liabilities under restructuring by the financial services investment company had increased to $10bn (Dh36.7bn), $4bn more than previously disclosed.