Emirates NBD, Dubai’s largest bank by market value, reported a first-quarter profit of Dh641 million on the back of a rise in non-interest income and lower impairments.
However, the profit, which more than tripled compared with the fourth quarter of 2011, was 55 per cent lower than the prior-year period, which was bolstered by a one-off gain on the stake sale in a subsidiary — Network International. The bank made Dh1.84 billion from selling 49 per cent stake.
Although the bank’s profit beat analysts’ estimates, it dropped to Dh641 million, or 10 fils a share, from Dh1.41 billion or 24 fils a share, in the year-earlier period, Emirates NBD said in a statement to Nasdaq Dubai.
Banks in the UAE, the second-largest Arab economy, are recovering from a slowdown in lending in the wake of the global financial crisis and a real estate crash in Dubai.
The bank’s provisions, including for loan losses, fell 20 per cent in the first quarter to Dh1.1 billion, pushing the ratio of non- performing loans to gross loans to 14.1 per cent in March from 13.8 per cent in December.
The bank said it remained ‘cautious’ in its outlook and the external environment remained challenging.
For 2011, Emirates NBD posted a six per cent increase in net profits at Dh2.5 billion compared with Dh2.34 billion in 2010.
The bank’s total revenues inched up two per cent to Dh9.93 billion in 2011, compared with Dh9.72 billion in the previous year.
Chief Financial Officer Surya Subramanian said the bank expects lending to rise by as much as five per cent in 2012. Loan growth in the first quarter is in line with the bank’s full-year expectation of a 4 to 5 per cent growth, he said.
Emirates NBD and its unit have already raised Dh7.4 billion this year from bond sales and private placements. The bank’s loan book was unchanged at Dh204.1 billion at the end of March compared with December. Deposits rose eight per cent from December to Dh 208.5 billion.
First-quarter net interest income rose eight per cent to Dh1.78 billion, while non-interest income jumped 49 per cent to Dh909 million, the bank said. Net interest margin, the difference between what the bank earns from loans and what it pays out on deposits, fell to 2.63 per cent in the quarter from 2.85 per cent in the fourth quarter last year, the bank said.
The bank’s shares fell 2.8 per cent to Dh2.81 at the close in Dubai on Wednesday, extending their decline this year to 4.4 per cent.
The lender said it expects its non-performing-loan ratio to rise to between 14 per cent and 15 per cent this year and as high as 16 per cent in 2013.
Emirates NBD is assessing the impact of new central bank rules on limiting lending to the emirate’s government and state- owned companies and will discuss the issue with central bank, Chief Executive Officer Rick Pudner said in a conference call.
UAE banks can lend no more than 100 per cent of their capital to local governments and the same to government-related entities, the central bank said on April 4. There was no limit under previous rules. Emirates NBD’s exposure to sovereign loans was 130 per cent of regulatory capital at the end of 2011, according to the 2011 financial statements.
The new rules will affect the levels of allowable lending to various government entities, said Pudner.