ENBD Records Dh1.3b Profit

Emirates NBD, the largest UAE bank by assets, on Monday posted a first-half net profit of Dh1.3 billion, up 274 per cent compared with the same 2011 period after excluding non-recurring gain on subsidiaries.

However, compared with the first-half net profit of Dh2.157 billion of 2011, which was inclusive the Dh1.813 billion gain on the stake sale of Network International, this year’s net profit marked a 40 per cent decline, data released by the bank shows.

The bank’s total income rose seven per cent to Dh5.2 billion in the first half as operating profit before impairment allowances of Dh3.3 billion rose five per cent from the first half of 2011. Total assets rose by five per cent  to Dh298.4 billion compared with Dh284.6 billion at the end of 2011.

In the second quarter 2012, net profit of Dh647 million marked a 13 per cent decline as against the same 2011 period.

Rick Pudner, Emirates NBD’s chief executive officer, said during the first half of 2012 the bank delivered “a robust set of financial results “with pre-impairment operating profits for the period up five per cent, despite a continued challenging external environment.

“In addition, the progress we have made towards our strategic priorities is now bearing fruit as growth momentum in our retail and Islamic banking franchises is evidently gathering pace, while the strategy transformation activity in our Wholesale Banking business is set to reap future benefits,” he added.

“The operating performance for the first half of 2012 has been strong despite challenges to top-line growth and has been supported by a sustained cost optimisation initiative, reporting declining operating costs over the last two quarters,” said Emirates NBD’s chief financial officer Surya Subramanian.

“The bank has also continued to maintain conservatism in de-risking its balance sheet and further optimised its balance sheet during the period through its focus on growth in stable low-cost deposits and the issuance of almost Dh9 billion in medium-term liabilities.”

Net interest income for the six months ended 30 June 2012 improved by one per cent to Dh3.416 billion from Dh3.379 billion in 2011 first half as a moderate three basis point decline in the net interest margin was more than offset by growth in average interest earning assets during the period.

On a quarterly basis, second quarter 2012 net interest income of Dh1.64 billion decreased by five per cent from the same 2011 quarter levels due to a reduction in the net interest margin, driven primarily by lower loan spreads.

The bank said its non-interest income recorded an increase of 22 per cent to Dh1.77 billion in 2012 first half compared with the same 2011 period, driven by increased banking fee income, a pickup in trade finance activity and increased foreign exchange and rates income. Second quarter non-interest income increased by two per cent compared with 2011, principally due to improved banking fee and trade finance income, the bank said.

Customer deposits as at 30 June 2012 were Dh208.4 billion, an increase of eight per cent over the customer deposit base as at 31 December 2011. The loan to deposit ratio improved in the first half 2012 to 100 per cent from 105 per cent at the end of 2011.

The bank’s total capital adequacy ratio and Tier 1 capital ratio were 19.5 per cent and 12.8 per cent respectively as at 30 June 2012. While capital increased due to profit generation during the first six months of 2012, this was more than offset by the dividend payable in respect of the 2011 financial year and the commencement of the capital amortisation of the Ministry of Finance Tier 2 deposits.

These impacts, together with an increase in risk weighted assets of two per cent over the period, resulted in a moderate decline of 0.2 per cent in the total capital adequacy ratio relative to the end of 2011, the bank said.

Impaired loans across the bank’s corporate, retail and Islamic financing portfolios increased during the first six months of 2012 by 0.5 per cent to end the period at 14.3 per cent.

The impairment charge in the first half improved to Dh2.055 billion compared with Dh2.35 billion in 2011 first half.

This impairment charge was primarily composed of specific provisions made in relation to the bank’s corporate and Islamic financing portfolios. As at 30 June 2012, total portfolio impairment allowances amount to Dh3.7 billion or 2.5 per cent of unclassified credit risk weighted assets, in excess of the UAE Central Bank requirement of 1.5 per cent by Dh1.5 billion.

Costs in 2012 first half amounted to Dh1.836 billion, an increase of 12 per cent due to the inclusion of the Dubai Bank cost base in the current period, without which costs were flat relative to first half 2011.