ENBD’s Q3 Profit Soars On Lower Provisions

Emirates NBD, Dubai’s largest bank by market value, on Monday said third-quarter net profit more than tripled on the back of lower provisioning for bad loans and higher non-interest income, beating analysts’ forecasts.

The lender, 55.6 per cent owned by state fund Investment Corporation of Dubai, made a net profit of Dh640 million ($174.2 million) in the three months to September 30, compared with Dh175 million in the same period last year, a statement from the bank said.

An average of four analysts polled by Reuters had forecast a net profit of Dh514.4 million.

Impairment allowances, the amount set aside to meet bad loans, stood at Dh1.01 billion for the third quarter, down 36 per cent from the Dh1.57 billion which the bank recorded in the same three months of 2011.

The lender was hit hard by impairment allowances in the previous four quarters, dragging down profits at the bank. Exposure to indebted Dubai state-linked entities was one of the main reasons.

ENBD made just over Dh2 billion of provisions in the first six months of this year.

Non-interest income climbed 21 per cent in the third quarter to Dh790 million, driven by higher investment securities income and a 5 per cent improvement in core fee income across most areas, the bank said.

Loans and advances have gained 5 per cent since the start of 2012, while deposits increased 11 per cent over the first nine months of this year. The former had grown two per cent and the latter eight per cent in the first six months.

Commenting on the Group’s performance, CEO Rick Pudner, said: “During the first nine months, we have delivered a strong set of financial results with operating profits for the period up 87 per cent. This performance demonstrates our ability to take advantage of gradually improving economic conditions and to deliver on a clear strategic course.”

“While the outlook continues to be cautious and uncertain, our strong levels of capitalisation and liquidity offer both resilience and flexibility for the future and an ability to take advantage of selected growth opportunities,” he added.

Chief financial officer Surya Subramanian, said the operating performance had been strong with good top-line growth supported by a sustained cost optimisation initiative, reporting declining operating costs over the last three quarters.

“In addition, while the bank has continued to maintain conservatism in de-risking its balance sheet, non-performing loan formation has been modest and within expected levels, resulting in a reduced risk cost. Finally, the bank has further optimised its balance sheet during the period through its focus on growth in stable low-cost deposits and issuance of Dh12 billion in medium term liabilities,” he added.

For all banks in the UAE, combined lending was flat at the end of August compared to the end of the second quarter, according to the latest central bank figures. System-wide deposits rose 1.1 per cent month-on-month in August after a gain of 0.7 per cent in July.

Dubai Bank, which ENBD was obliged to take over last year after the Islamic bank buckled under the weight of its bad loans, will be fully integrated by year-end, with branches rebranded as ENBD’s own Islamic arm, Emirates Islamic Bank.

Shares in ENBD closed on Sunday flat compared to their level at the start of this year. The main Dubai stock index has gained 21.9 percent year-to-date.

Reuters