Bank results affirm improving asset quality and profitability

Dubai: More than half a dozen UAE banks reported robust third quarter results on Wednesday reinforcing the improvement in asset quality and profitability of the UAE banking sector.

Emirates NBD, the largest bank in UAE by total income and branch network reported a 51 per cent increase in the net profits to Dh3.9 billion for the first 9 months of 2014.

For the third quarter of the year, the bank’s net profit was up 102 per cent to Dh1.56 billion compared to Dh775 million. On quarter on quarter basis, net profit surged 20 per cent compared to Dh1.3 billion in the second quarter.

“During the first nine months of 2014, we have delivered another healthy set of results. This is driven by strong growth in both net interest income and non-interest income” said Shayne Nelson, Group Chief Executive Officer, Emirates NBD.

Improving asset quality of banks was reflected in sharp decline in provision across the industry. “ENBD’s results beat our estimates with a huge margin with the surprise emanating from lower provision expenses,” said Naveed Ahmed, Senior Manager, Research Group at Global Investment House.

Abu Dhabi Commercial Bank (ADCB) a leading Abu Dhabi based bank posted a net profit of Dh3.17 billion for the first nine months of this year, up 16 per cent compared to the same period last year. For the third quarter of the year, the bank reported a net profit of Dh1 billion, up 11 per cent compared to the third quarter of 2013.

ADCB reported significant improvement in asset quality metrics. “The bank recorded a massive drop in its provisions due to improvement in asset quality,” said Global’s Ahmed.

Dubai Islamic Bank (DIB), the largest Islamic Bank in the UAE by assets reported Dh2 billion net profits for the first nine months of this year. For the third quarter the bank reported Dh723 million net profits, up 57 per cent compared to Dh461 million in the same quarter last year.

Bank results announced so far reflect strong lending growth, sharp decline in provisions and strong liquidity in the UAE banking sector supported by relatively cheap and growing CASA [current & savings account] deposits.