Interest income helps Emirates NBD quarterly net profit to rise 10%

Emirates NBD, Dubai’s biggest bank, posted a 10 per cent increase in fourth-quarter net profit as interest income rose, but the results slightly missed analysts’ estimates.

The bank, the first UAE lender to report quarterly results, made a net profit of Dh2.39 billion in the three months ended December 31, it said yesterday.

The results missed the median estimate of Dh2.44bn from four analysts polled by Bloomberg.

Total income rose 11 per cent to Dh4.5bn during the period, led by a 20 per cent uptick in net interest income to Dh3.35bn, offsetting an 8 per cent drop in non-interest income to Dh1.15bn.

“Margins widened 35 bps [basis points] in 2018 as rate rises flowed through to the loan book which more than offset a rise in funding costs,” group chief executive Shayne Nelson said.

“The group’s balance sheet remains healthy with a further strengthening in capital coupled with strong liquidity and stable credit quality.”

Provisions for bad loans rose 19 per cent to Dh640 million during the period, and operating expenses increased 14 per cent to Dh1.5bn.

This was partly due to higher staff and IT costs, which are related to the bank’s digital transformation.

“Costs were also higher as a result of international branch expansion, VAT, advertising and Expo 2020 sponsorship,” the lender said.

Gross loans grew 9 per cent to Dh360bn at the end of last year from a year earlier, while deposits rose 7 per cent to Dh348bn.

The bank achieved a milestone as total assets surpassed Dh500bn for the first time, up by 6 per cent from the end of 2017.

“Earnings were in line with our estimate of Dh2.3bn, with lower provisioning compensating for weaker-than-expected revenue,” said EFG Hermes in a note yesterday.

Ratings agency Moody’s Investors Service assigned Arabian Gulf banks a stable outlook for this year on the back of improving operating conditions, strong capital and weakening but still solid lending.

Banks in the UAE are expected to remain resilient, Moody’s said in a report issued last month.

Emirates NBD has operations in Egypt, Saudi Arabia, India, Singapore, the UK and representative offices in China and Indonesia.

It is expanding its footprint to boost revenue amid limited opportunities for growth in the UAE market, where more than 50 lenders are already operating.