Provisions hit Islamic Bank gains

Emirates Islamic Bank's profits fell 82.6 per cent as provisions grew for the Sharia-compliant lender's exposure to bad debts.

Net profits declined to Dh6.5 million (US$1.7m) for the third quarter, dragged down by money set aside for bad debts.

Net allowances for impairments increased by 43.8 per cent, compared with the same period last year, to Dh146m.

The results reflected anaemic lending growth across the whole industry, not just the Islamic sector, according to Ahmad Alanani, an analyst at Exotix.

"For the time being, deposits will continue to outpace loans and banks won't be making enough money," Mr Alanani said.

Emirates Islamic Bank is controlled by Emirates NBD, which also reported a sharp decrease in profits this week because of provisions for bad debts.

A local analyst who asked not to be identified said one of the few bright spots was the bank's growth in deposits, which rose by 21.8 per cent to Dh23.6bn in the past nine months.

But Mr Alanani said it would come as little consolation to either bank as long as they were lumbered with bad debts.

The largest impairments were in the bank's corporate and investment banking divisions.