Dubai: Emirates NBD, the biggest UAE bank by assets reported on Monday Dh1.3 billion net profits for the first half of 2012 up 274 per cent compared with Dh0.3 billion reported in the first half of 2011 after excluding the Dh1.8 billion non-recurring gain on subsidiaries.
For the first half of the year the bank’s total income was Dh5.2 billion, up 7 per cent compared to the first half of 2011. Operating profit before impairment allowances of Dh 3.3 billion was up 5 per cent from the first half of 2011.
“During the first half of 2012 we have delivered a robust set of financial results with pre-impairment operating profits for the period up 5 per cent, despite a continued challenging external environment,” said Rick Pudner, Emirates NBD’s Chief Executive Officer.
The bank said its net profit for the second quarter of 2012 fell 13 per cent due to higher costs. Costs in the first half of 2012 amounted to Dh1.83 billion, an increase of 12 per cent over the first half of 2011 due to the inclusion of the Dubai Bank cost base in the current period.
The bank’s net interest margin was also hurt as it offered greater yields to sell new debt and offered lower rates to borrowers. “Lacklustre top-line performance was the major reason behind the weakened net income,” said Naveed Ahmad, an analyst at Kuwait’s Global Investment House. “Net interest income remained bogged down by dropping yields, building pressure on net interest margin, the effects of which were partially offset by improvement in loan volume. Asset quality of the bank remained within anticipated norms and still reasonably below our expectations of 14.8 per cent for full year 2012.”
Impaired loans across the bank’s corporate, retail and Islamic financing portfolios have increased moderately, within previously expected levels, during the first 6 months of 2012 by 0.5 per cent to end the period at 14.3 per cent.
Emirates ENBD’s provisions fell for the second straight quarter after hitting the bank’s top line heavily in the last six months of 2011. The bank’s second quarter impairments were Dh954 million, down from Dh981 million in the second quarter last year.
“The operating performance for the first half of 2012 has been strong despite challenges to top-line growth and has been supported by a sustained cost optimisation initiative,” said Surya Subramanian, Emirates NBD’s Chief Financial Officer.
Lending increased 2 per cent to Dh208.2 billion in June compared to December, while deposits rose 8 per cent to Dh208.4 billion.
The bank said it is in talks with the UAE central bank about regulations limiting the amount domestic banks can lend to government related entities. “We are still working through our plan, we talk to the central bank on a regular basis and we will be going back shortly to present our plan. This could involve a potential extension,” said Pudner said during a conference call.
The bank’s impaired-loan ratio rose to 14.3 per cent in the second quarter from 14.1 per cent at the end of the first. Emirates NBD expects that ratio to be between 14 per cent and 15 per cent this year and reach as high as 16 per cent in 2013.