Dubai Islamic Bank, the largest Sharia-compliant lender in the UAE, reported a 23 per cent drop in its first-half net profit as impairment losses and operating expenses rose amid the coronavirus pandemic.
Net income for the six months ending June 30 slipped to Dh2.1 billion, the lender said in a statement on Wednesday to the Dubai Financial Market, where its shares trade.
Impairment losses rose 192 per cent to Dh2.1bn and operating expenses increased 22 per cent to Dh1.47bn.
The year “2020 has turned out to be an exceptionally unusual year for the global economy thus far, due to the lingering uncertainty as to when the pandemic would materially subside”, DIB group chief executive Adnan Chilwan said. “Despite everything, the year has seen us hit new milestones, with both customer financing and deposits crossing the Dh200bn mark and the balance sheet now approaching the coveted Dh300bn level.”
Earlier this year, the Dubai-based lender completed its acquisition of rival Noor Bank to create one of the largest Islamic banks in the world, with more than Dh275bn in assets.
“Whilst monitoring the situation closely, we have managed to sustain our overall business performance, thus resulting in quality growth, healthy capitalisation and ample liquidity,” Mr Chilwan said.
DIB’s total income reached Dh6.82bn during the period while net operating revenue grew 0.5 per cent to Dh4.72bn.
Net financing and sukuk investments rose 29 per cent to touch Dh237.1bn and customer deposits increased 26 per cent to Dh206.5bn, the bank said.
Lenders around the world face tough operating conditions as profits decline amid slower loan growth and lower interest rates.
The world economy is set to slide into its deepest recession since the Great Depression, with the International Monetary Fund projecting a 4.9 per cent contraction this year and a sluggish recovery in 2021.
The economic activity in the UAE has improved on the back of monetary and fiscal support and due to a reduction in the number of Covid-19 infections.
“The new UAE government structure, along with more than Dh6bn Dubai economic stimulus measures that were unveiled by the leadership, are designed to bolster the market and boost investor confidence during and post the Covid-19 era,” Mohammed Ibrahim Al Shaibani, director-general of The Ruler’s Court of Dubai and chairman of DIB.
“As the pandemic is gradually contained, Dubai and the UAE’s sustainable business growth models remain on track to lead the economic recovery in the region.”
In June, DIB closed a $1bn (Dh3.67bn) five-year sukuk with a profit rate of 2.95 per cent despite a challenging global environment due to the coronavirus pandemic.
The sukuk attracted more than 170 investors with the order book rising to over $4.5bn.
