Profits fall at Dubai's Emirates NBD after upping bad loan provisions

Markets Update: Emirates NBD reported a 62 per cent decline in fourth-quarter profit, below analyst estimates, as the UAE's biggest bank by assets boosted provisions for bad loans.

Emirates NBD's earnings plunged in the fourth quarter as it booked more charges for bad debts and wrote down the value of its stake in Union Properties.

The bank also revealed that it had paid a nominal sum, totalling Dh10, for its acquisition of Dubai Bank, the failed Islamic lender, following guarantees from the Dubai Goverment and a capital injection from the Ministry of Finance.

The UAE’s biggest bank by assets reported a 62 per cent fall in net profits for the fourth quarter to Dh152m  missing analysts’ estimates

Impairment charges on bad debts totalled Dh1 billion during the quarter, a fivefold increase on the same period a year earlier.
The bank had improved performance during the year as whole, said Rick Pudner, Emirates NBD's chief executive.

“During 2011 we have delivered a robust set of financial results with net profits for the year up 6 per cent, despite an extremely challenging and volatile external environment and after adopting a significantly more conservative approach to de-risking the balance sheet.”

Emirates NBD announced a 20 per cent cash dividend to shareholders.

The bank also revealed details of its forced takeover of Dubai Bank late last year.

The Islamic lender was rescued from collapse by the emirate’s government in May after buckling under the weight of bad debts. Emirates NBD was ordered to acquire the Islamic lender in October.

The Government of Dubai has provided a guarantee for any losses related to Dubai Bank’s assets and liabilities until 2018, worth Dh768m. The bank will also realise Dh543m of fair value gains on a Dh2.8bn term deposit from the Ministry of Finance which it received as part of the acquisition, which carries an interest rate below market rates.

Emirates NBD wrote down by Dh750m its 47.5 per cent stake in Union Properties, a lossmaking Dubai-based developer, citing the “underperformance of this asset during the year”.

Last month, the bank agreed a Dh3.8bn debt deal rescheduling payments and transferring property assets.