Mashreq net eases on provisions
Revenues stable but bank reports 51% fall in first half earnings to Dh453m
Dubai: Mashreq on Thursday reported first half net profit of Dh453 million, down 51 per cent compared with Dh919 million in the same period last year.
For the second quarter of the year ended June 30, net profits were down 53.5 per cent to Dh202 million compared with Dh435 million in the same quarter last year.
In the midst of the uncertain operating environment and the global economic slowdown, the bank reported an operating income of Dh2.3 billion, 6 per cent lower compared to the same period last year.
"In spite of the difficult global financial environment, Mashreq has delivered a robust performance during the first six months of the year. The well diversified and stable revenue stream highlights the sustainability of our operating strategy in these uncertain times," said Abdul Aziz Al Ghurair, CEO of Mashreq.
Provisions
Analysts said the bank's profits suffered in the second quarter largely due to higher provisions. The bank set aside Dh892 million in provisions in the first six months of the year.
"Although provisions have doubled in the first half of the year, the recognition policy is prudent as it reduces the burden in the coming quarters," said an analyst with a brokerage firm.
The net interest margin of the bank for the first half of the year improved significantly to 2.6 per cent as against 2.2 per cent during the full year of 2009. The bank's net interest income and income from Islamic products net of distribution for the review period at Dh1.17 billion is higher by 10 per cent as compared to the same period last year. The fee and other income to gross income ratio at 49 per cent remained one of the highest in the market, the bank said in statement.
The bank's total assets declined 8.5 per cent to Dh86.3 billion. The bank continues to operate a highly liquid balance sheet with cash and balances due from banks standing at Dh25.4 billion. Advances to deposit ratio remained at 90 per cent and liquid assets comprising of cash and due from banks were strong at 30 per cent of total assets, even after repayment of the Dh1.1 billion of EMTN (euro medium term notes) tranche that matured during the first quarter of 2010. Capital adequacy ratio at the end of June 2010 under Basel II guidelines improved to 21.52 per cent compared to 20.18 per cent at the end of 2009.
Tier One ratio also improved from 14 per cent at the end of 2009 to 15 per cent at June 30, 2010.
The strong liquidity and capital adequacy ratio reflects the bank's overall strength and management's prudent policies in a challenging environment, Mashreq said in a statement. At an operational level, Mashreq continues to enhance and expand its offerings, it said.
