RAKBank became the latest lender to report a fall in profit for 2015 yesterday, as it was forced to increase provisions for loan impairments in the wake of increasing SME loan defaults.
The bank has followed other lending institutions in moving its focus away from the small- business sector, concentrating instead on increasing penetration among larger businesses.
Net profit at the bank fell 3.5 per cent to Dh1.4 billion in 2015, falling short of analyst estimates, as impairment provisions rose 77 per cent to Dh1.1 bn for the year.
“Provisions for loan impairments increased by Dh460.1 million from the previous year as a result of larger defaults from the unsecured loan products and SME and commercial banking units,” the bank said yesterday.
RAKBank's non-performing loan ratio rose to 3.2 per cent last year, a 28-per-cent increase on 2014's figure. The bank did not provide a breakdown of results for the fourth quarter.
“The bank has faced stronger than expected headwinds in our retail and small business finance portfolios due to the challenging global and regional environment, which is beginning to have an effect on some segments in the UAE,” said the RAKBank chief executive Peter England.
RAKBank announced last month that it was cutting jobs as part of a restructuring drive.
During the fourth quarter the bank moved its SME business into its retail segment and rebranded its business banking segment to wholesale banking, “in line with the bank’s strategy to increase penetration into larger businesses and to focus on growing its commercial and corporate banking portfolio, trade sales, financial institutions lending and asset-based financing”.
Several of the UAE’s largest banks have reported a rise in non-performing loans in recent months, as falling oil revenues take a toll on the country’s small business sector in particular.
The IMF last month cut the UAE’s growth forecast to 2.6 per cent for 2015 from its previous forecast of 3.1 per cent, citing falling oil prices, a worsening Chinese economy and looming regional public spending cuts.
RAKBank shares were unchanged at Dh5.50 at the close of trading on the Abu Dhabi stock exchange.
jeverington@thenational.ae
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