DUBAI- Dubai's Mashreqbank posted a 1.4% decline in fourth-quarter profit on Monday as impairment charges rose 29%, offsetting a double-digit rise in net interest income and income from Islamic financing.

Banks in the United Arab Emirates have reported a sharp spike in bad debt charges in the fourth quarter, as they navigate a sluggish economy and a property downturn in Dubai that has hit contractors.

MashreqBank's bigger rival Emirates NBD reported a three-fold rise in impairment charges, partly hurt by bad debt charges at its newly acquired Turkish lender.

Mashreqbank's fourth-quarter net profit was 308 million dirhams ($84 million), down from 312 million dirhams a year earlier, missing a forecast by analysts at Arqaam Capital who had projected a net profit of 399 million dirhams.

Net interest income and income from Islamic financing rose 12.7%, but fee and commission income dropped 6.7%.

Rating agency S&P said in a report on Monday that asset quality of UAE-based banks would remain resilient in 2020 despite a more than 35% decline in property prices since mid-2014. Real estate accounts for 20% of total lending.

"UAE banks are now in a better position than the 2009-2010 crisis, because they have built sufficient loan-loss reserves since then," it said.

"Overall, we expect banks' cost of risk to increase slightly in 2020 to about 120 basis points (bps), compared with 110 bps in 2019," S&P said.

($1 = 3.6729 UAE dirham)

(Reporting by Saeed Azhar; Editing by Edmund Blair) ((Saeed.Azhar@thomsonreuters.com; +971 44536787; Reuters Messaging: saeed.azhar.reuters.com@reuters.net))