Dubai Islamic Bank, the UAE's biggest Sharia-compliant lender by assets, reported a 57 per cent rise in first-quarter net profit, driven by lower impairment charges and higher operating revenue, as the UAE economy continues to recover from the Covid-19 pandemic.

Net profit attributable to shareholders of the bank for the three months to the end of March climbed to Dh1.35 billion ($367 million) from Dh845m in the same quarter last year, the lender said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded.

Total income for the first quarter increased 6 per cent annually to Dh3bn, while impairment charges during the period fell 44 per cent to Dh417m.

The results come despite "ongoing unpredictable economic and international market conditions that are impeding progress", reflecting the bank's "alignment towards the expansionary agenda of the UAE’s economy", said Mohammed Al Shaibani, director general of The Ruler’s Court in Dubai and chairman of DIB.

"The banking sector continues to demonstrate steady growth year-on-year as DIB’s first-quarter earnings return to pre-pandemic levels."

The UAE economy continues to recover from the pandemic on the back of stimulus measures worth Dh388bn, a rapid vaccination programme and easing of travel restrictions.

Moody's Investors Service changed the outlook for banks in the six-country GCC bloc to 'stable' from 'negative', citing an improvement in operating conditions after the pandemic. Banks in the UAE will maintain steady profitability and solid capital buffers, the rating agency said in a report.

"DIB’s strong set of first quarter results ... is a demonstration of the bank’s ability to navigate through economic headwinds," said Adnan Chilwan, group chief executive of Dubai Islamic Bank.

"The bank’s financial position clearly denotes the resilience of the franchise and its inherent capability of withstanding market challenges."

The bank's operating expenses rose to Dh698m, compared to Dh612m in the prior-year period, with cost to income ratio now at 28.3 per cent and still in line with the bank's guidelines, it said.

DIB's return on assets increased to 1.88 per cent and return on equity rose to 16.2 per cent.

Banks in the GCC stand to gain from higher energy prices and a rise in interest rates that will significantly improve their bottom lines as cost of risk continues to decline amid economic growth in the region, S&P Global Ratings said last month.

"The improving macro environment with higher oil prices coupled with rising rates will continue to benefit DIB where the majority of earning assets are in a floating rate book, aiding the bank in reaching its targeted margin guidance for the year," Mr Chilwan said.