Emirates NBD, DIB and ADIB buck the trend

Sunday, May 01, 2016

Dubai: Most banks in the UAE reported a decline in their first quarter profits with a few notable exceptions such as Emirates NBD, Dubai Islamic Bank (DIB) and Abu Dhabi Islamic Bank (ADIB) that managed to record profit growth along with improvements in asset quality indicators.

Emirates NBD reported a first quarter net profit of Dh1.8 billion, up 8 per cent compared to the first quarter of 2015. The bank’s balance sheet remained strong in the first quarter of 2016. Credit quality improved as the impaired loan ratio advanced from 7.1 per cent to 6.9 per cent during the quarter whilst the impaired loan coverage ratio also strengthened to 113.5 per cent.

A fall in non-interest income partially dented the bottom-line growth. Fee income was flat. “Asset quality improved during the quarter with an improvement in coverage ratio, while balance sheet growth was satisfactory. We see the results in positive light,” said Naveed Ahmad, Assistant Vice-President, Research Group at Global Investment House.

Emirates NBD’s top-line recorded 3 per cent growth with the improvement attributable to lending growth, favourable shift in the asset mix and growth in CASA [current and savings account] deposits. Net interest margins (NIM) was at 2.62 per cent in the first quarter of 2016 as compared to 2.9 per cent in the first quarter of [2015] due to lower yield on competitive margin compression across most products.

“We have delivered another robust set of financial results. This is driven by higher income from asset growth and lower provisions. Liquidity pressures in the sector continued to ease in the first quarter from the tight conditions experienced in the second half of 2015,” said Shayne Nelson, Group Chief Executive Officer, Emirates NBD.

Despite the gains in the first quarter, the bank recognises the challenges ahead. “We remain cautiously optimistic for the remainder of 2016 but are conscious of the headwinds that a strong dollar and volatile oil price can present,” said Nelson.

Decline in impairment losses

Among all the banks, DIB had the most convincing first quarter results as it reported a net profit of Dh1 billion in [2016], up 18 per cent from Dh850 million for the same period in 2015. While the bank’s total assets increased 10 per cent with customer deposits and financing assets growing at 11 per cent and 6 per cent respectively, it reported decline in impairment losses declined in the first quarter of this year to Dh118 million compared with Dh136 million for the same period in 2015. While NPLs were on a consistent decline with NPL ratio improving to 4.7 per cent, compared to 5 per cent at the end of 2015, provision coverage ratio improved to 97 per cent, compared to 95 per cent at the end of 2015.

The bank is confident of its performance for the rest of the year. “As the year progresses, we are confident that the performance leadership demonstrated by DIB over the recent past will carry through the rest of 2016 as we culminate our carefully crafted and progressive three-year growth strategy towards a strong conclusion,” said Dr Adnan Chilwan Dubai Islamic Bank Group Chief Executive Officer.

ADIB reported a net profit of Dh482 million for the first quarter of 2016, up 6.9 per cent compared to the same period in 2015. The bank’s total assets increased by 4.5 per cent year on year to Dh119.2 billion in the first quarter.

By Babu Das Augustine Banking Editor