Dubail: Emirates NBD, the largest UAE bank by assets, Monday reported a 60 per cent decline in third-quarter profit, which came in below analysts' estimates.
Net income for the three months ended September 30 stood at Dh424 million compared to Dh1.05 billion in the same quarter last year. Analysts had forecast an average of Dh800 million.
For the first nine month of the year, the bank reported a net profit of Dh1.9 billion, down 39 per cent from the same period in 2009. The bank's total income of Dh7.5 billion for the nine months was down 10 per cent. While net interest income declined 6 per cent to Dh5.2 billion, core non-interest income was down 4 per cent.
"In the light of the economic conditions and challenges that faced the banking sector globally and locally, Emirates NBD delivered a robust performance in the first nine months of 2010," Ahmad Humaid Al Tayer, Chairman of Emirates NBD, said in a statement.
Total provisions during the year amounted to Dh2.98 billion, with provisions for non-performing loans (NPLs) reaching Dh2.83 billion at the close of the third quarter, up 34 per cent from the same period last year. These provisions include specific full provisions on impairments on the renegotiated debt deal with Dubai World.
"These provisions are on interest rate differences," Emirates NBD chief executive Rick Pudner said during a conference call. He did not specify the rate of impairment or the actual amount impaired.
"It's good to see that they booked these expenses now and people see it won't push them into losses," said Raj Madha, banking analyst with Rasmala Investment Bank in Dubai. Rasmala had earlier estimated Emirates NBD's Dubai World-related impairment rate at 10 per cent.
"Many analysts have calculated the impairment in the range of 10 to 15 per cent based on the terms of the deal and the new tenure. We can say that the impairment is at the lower end of these calculations," said Surya Subramanian, chief financial officer of Emirates NBD.
Year to date, the bank's NPL ratio has touched 3.66 per cent. Pudner said this is expected to rise to 4.5 per cent in the next 6 to 9 months.
Customer loans as at September 30 (including Islamic financing) declined by six per cent from end-2009 levels to Dh201.1 billion.
Bad loans ratio expected to hit 4.5 per cent, chief executive says
Emirates NBD is not in talks with Dubai Bank or its shareholders to merge its Islamic banking arm Emirates Islamic Bank (EIB), chief executive Rick Pudner said during a conference call.
In late September, banking industry sources said there were discussions between both institutions to create a larger Islamic bank and take over Amlak, the troubled mortgage provider.
Pudner said yesterday that Emirates NBD is still seeking strategic investors for the sale of a significant minority stake in cards processing unit Network International. "We are still evaluating various proposals to bring a strategic investor on board for Network International's regional expansion plans," he said.
Pudner said the bank is considering an issue of medium term notes but believes that current interest rates are too high.