Top two UAE banks results show decline in provisions
Financial results of top two banks in the UAE showed sharp decline in provisions, improvement in noninterest incomes, consistent decline in costs and improvement in operating profits pointing a steady improvement in the overall economic conditions in the UAE.
Earlier this week Emirates NBD Group reported net profits of Dh2.32 billion for the first quarter, a 12 per cent yearon-year gain and 76 per cent up quarter-on-quarter, supported by lower provisions, lower costs and higher income from improved economic conditions.
First Abu Dhabi Bank (FAB), the UAE's largest bank, on Wednesday reported a group net profit of Dh 2.5 billion in the first quarter of 2021, up 3 per cent compared to Dh2.4 billion in the first quarter of 2020. First quarter results of both banks indicate an overall recovery in the economy supporting loan growth, non-interest income streams, improvement in asset quality and costs.
"Emirates NBD's increase of Q1-21 reflects the resilience and gradual economic recovery following the global disruption in 2020," said Hesham Abdulla Al Qassim, ViceChairman and Managing Director. The ENBD Group's total income for the first quarter amounted to Dh6.16 billion, a sharp 25 per cent spike compared with Dh4.93 billion in the preceding quarter.
Net interest income was up 1 per cent over the quarter with net interest margin improving four basis points. Non- interest income shot up by 133 per cent quarter-onquarter with increased contribution from all lines and up 6 per cent year-on-year on improved fee and investment securities income.
For FAB, although total operating income at Dh 4.4 billion was down 4 per cent year-on-year due to lower net interest income resulting from rate cuts in 2020, was partially offset by higher other income. "FAB's strong foundations and competitive strengths continue to support the bank's ability to achieve a resilient performance in a challenging quarter characterised by a slower than expected recovery in business activity," said Hana Al Rostamani, Group Chief Executive Officer of FAB.
Both banks reported lower loan impairments driven by improving loan repayments and prudent advanced provisioning.
Emirates NBD's impairment allowances in the first quarter at Dh1.76 billion was down 31 per cent year-on-year following proactive provisioning. The non-performing loan ratio improved to 6.1 per cent while the coverage ratio strengthened to 125.1 per cent.
At the close of the quarter, FAB's non-performing loans (NPL) ratio was at 4 per cent, provision coverage at 96 per cent. FAB's impairment charges at Dh470 billion was down 36 per cent year-onyear, reflecting improving economic conditions and adequate provision buffers. Substantial cost control measures implemented by banks following the aftermath of COVID-19 have started yielding results in terms of improved profitability.
Emirates NBD's expenses for the first quarter - at Dh1.86 billion - was a 9pc improvement over the preceding quarter and year-on-year as the earlier cost management actions took effect. The cost-toincome ratio at 30.3 per cent remains well within management guidance. While FAB's operating expenses were down 3 per cent year on year as the group maintained strong cost discipline, the bank continues to invest in digital and strategic initiatives to achieve further efficiencies.