Emirates NBD Q2 profit up 5.8% amid lower expenses, higher loan rates

Emirates NBD (ENBD), Dubai's biggest bank by assets, said its second-quarter profit rose 5.8 per cent, owing to higher loan rates, tighter expenses and lower provision costs.

At the same time the lender said that as a result of cost cuts last year, it would invest Dh1 billion in digital technology over the next three years - a move that is likely to reduce its costs even more.

Net profit increased to Dh2.02bn in the three months ended June versus Dh1.91bn in the same period last year, the bank said on Wednesday. Net interest income rose 6 per cent to Dh2.69bn in the three months ended June compared with Dh2.54bn in the same period last year.

"The operating performance for the first half of 2017 was pleasing as we saw margins improve coupled with controlled loan growth," said Surya Subramanian, the bank's chief financial officer.

"Non-interest income declined year-on-year due to the sale of investment securities in 2016 that were not repeated in the current year. Expenses remain firmly under control and provide headroom to invest for future growth," he said.

Mr Subramanian said he expected that the improvement in credit quality and firming of the lender's non-performing loan ratio would probably hold for the remainder of this year.

Net non-interest income, the money the bank makes from fees and commissions, fell 7 per cent to Dh1.14bn compared with Dh1.22bn in the same period last year.

Net impairment losses, meanwhile, fell by just under 1 per cent to Dh621 million from Dh626m in the same period last year. The bank's impaired loan ratio strengthened, however, at the end of the first half to 6.1 per cent from 6.6 per cent at the end of the first half last year.

Operating expenses improved 7 per cent to Dh1.14bn in the three months ended June compared with Dh1.23bn in the same period last year. The lender said that the decline in expenses was helped by containing staff costs last year.

Three analysts polled by Reuters forecast an average net profit of Dh1.9bn for the bank in the second quarter.

Net profit at ENBD's subsidiary Emirates Islamic, meanwhile, rose 80 per cent year-on-year to Dh165.7m for the second quarter, in spite of a 5.4 per cent fall in income from financing and investing activities.

It saw its impairment bill fall 27 per cent to Dh175m, with profitability also boosted by a 26 per cent drop in personnel expenses to Dh136.4m compared with Dh184.4m in the same period last year.

Dubai Islamic Bank, the emirate’s largest Sharia-compliant lender, said net income rose 13.8 per cent in the second quarter, boosted by growth in financing assets and customer deposits. That came even as impairments more than doubled.

Net profit attributable to owners of the bank increased to Dh1.1bn for the three months to the end of June , compared with Dh929m in the same period last year. Net financing income rose 18 per cent to Dh1.9bn for the quarter, although income from commissions, fees and foreign exchange income fell 7.7 per cent over the same period. Impairment charges rose 156 per cent to Dh187m from Dh73m in the same period the previous year.

The Egyptian investment bank EFG-Hermes forecast a profit of Dh979m for the bank's profit in the second quarter, while Arqaam Capital forecast a profit of Dh928.94m.