Emirates NBD’s first-quarter net profit jumps 18% as economy recovers

Emirates NBD, Dubai's biggest lender by assets, reported an 18 per cent surge in first-quarter net profit as impairments dropped and revenue climbed amid the UAE's continued recovery from the pandemic-induced slowdown. Net profit for the three months to the end of March climbed to Dh2.7 billion ($735 million), the lender said in a statement on Thursday to the Dubai Financial Market, where its shares are traded. The earnings beat EFG Hermes’ estimate of quarterly income. Emirate’s NBD’s “stronger non-interest income more than compensated for higher Opex [operating expenses] and provisions", the Egyptian investment bank said. Impairment allowances for loan losses dropped 20 per cent annually to Dh1.4bn, while net interest income rose 4 per cent to Dh4.3bn. Emirates NBD’s profit reflects “the strengthening regional economy and the success of the group’s diversified business model”, said Hesham Al Qassim, vice chairman and managing director of Emirates NBD. The UAE, the Arab world’s second largest economy, has recovered from the effects of the pandemic on the back of surging oil prices and a bounce back in its tourism and travel sectors as Covid-19 restrictions ease globally. The country's gross domestic product is expected to grow 5.7 per cent in 2022, up from 3.8 per cent in 2021, helped by an increase in oil production, according to Emirates NBD. Japan's largest lender MUFG projects the UAE's economy to grow 4.9 per cent this year, while Abu Dhabi Commercial Bank estimates a 5.4 per cent expansion. The seasonally adjusted S&P Global United Arab Emirates Purchasing Managers’ Index posted 54.8 for the second month running in March, as the rate of new business growth remained close to the post-pandemic high reported in November 2021. Emirates NBD said revenue during the first quarter was up 3 per cent to Dh6.4bn on an "improved loan mix and cheaper deposits" with initial signs of higher rates starting to feed through to margins. Customer loan grew 1 per cent quarterly to Dh425bn, as retail financing picked up pace during the quarter. Total assets of the bank were flat at Dh694bn, while deposits grew 2 per cent annually to Dh469bn. Expenses rose 5 per cent year on year to Dh2bn, driven by staff costs, indicating an "increase in underlying earnings and future growth", the bank said. The lender raised its net interest margin guidance by 15 basis points due to expected higher interest rates. The Central Bank of the UAE increased its benchmark interest rate in March after the US Federal Reserve raised its key rates to rein in inflation, which hit a 40-year high in the world's largest economy. The Fed is expected to raise rates five more times this year, which will be reflected in the region as well. In the UAE, lenders' net income will increase 15 per cent, and return on assets will rise 1.4 per cent, for every 100 bps increase in interest rates, S&P Global Ratings said in a report. Despite the interest-rate increase, lending growth is likely to accelerate, underpinned by the UAE’s economic growth, it said. Emirates NBD said higher income from anticipated rate rises will enable it to refine its cost-to-income ratio back to its longer-term target of "within 33 per cent". "We delivered loan growth in the first quarter of 2022 reflecting the more optimistic economic outlook," said Shayne Nelson, group chief executive of Emirates NBD. "We have increased margin guidance in light of rising interest rates. International operations contributed 37 per cent of total income in the first quarter and DenizBank’s profitability was stable despite the depreciation in Turkish lira. "These strong results, along with the positive outlook for margins, enable us to invest in our international network and digital capabilities, supporting our next stage of growth," he said. The bank's earnings were "above our estimate as stronger non-interest income more than compensated for higher Opex [operating expenses] and provisions", EGF Hermes said.

Emirates NBD’s first-quarter net profit jumps 18% as economy recovers

Impairment allowances in the first three months of the year dropped 20% annually to $381.5m