Dubai: The first half results of the UAE banks have reinforced the trend in that the banking sector profitability is gaining traction on declining provisions and expanding book size largely driven by consistent growth retail lending and low cost deposits.
Most banks exceeded market consensus on second quarter profits and asset quality while the overall first half profits pointed towards a strong year ahead for the sector.
Emirates NBD reported a net profit of Dh2.35 billion in the first half of 2014, up 30 per cent compared to the same period last year, its second quarter net profits were up 35 per cent at Dh1.3 billion compared to the same period last year.
The strong operating performance for the first half of 2014 was helped by solid revenue growth in both retail banking & wealth management and Islamic banking subsidiary, Emirates Islamic.
“The healthy set of results in the first half is driven by strong growth in both net interest income and non-interest income coupled with a firm control on expenses,” said Shayne Nelson, Group Chief Executive Officer, Emirates NBD.
Non-performing loans (NPL) ratio improved further to 13.5 per cent. The impairment charge for first half of 2014 increased to Dh2.61 billion, compared with Dh1.88 billion in the previous year with the coverage ratio improving to 64.7 per cent from 52.7 per cent in the first half of 2013.
Analysts said ENBD’s result was above their estimates. “The top-line was in line with our estimates. Overall we believe that the bank posted an amazing set of results and is very likely to prompt us to revise our full year estimates on the bank upwards again,” said Naveed Ahmad, Senior Manager, Research Group, Global Investment House.
Steaming ahead
Mashreq reported a 40 per cent increase in net profit for the first half of 2014, climbing to Dh1.16 billion as compared to Dh828 million in the first half of 2013. The bank’s net profit in the second quarter reached Dh585 million, an increase of 45 per cent from last year.
“Our first half results underscore the fact that the bank is steaming ahead to a record year in a sustained manner, recording both top and bottom line growth because of equally strong performances from the corporate, retail and international divisions,” said Abdul Aziz Al Ghurair, Mashreq’s CEO.
Leading Abu Dhabi banks led by National Bank of Abu Dhabi (NBAD) showed strong growth in profits supported by rising interest and non-interest incomes and consistently declining non-performing loans (NPLs).
Four leading banks such as NBAD, Abu Dhabi Commercial Bank (ADCB), First Gulf Bank (FGB) and Union National Bank (UNB) have reported significant balance sheet growth with consistent pick up in lending and deposits growth underlined by robust improvement in their asset quality matrixes.
NBAD reported a net profit of Dh2.82 billion, up 7.9 per cent for the first half of the year as its second quarter profit surged 17.5 per cent to Dh1.424 billion year on year. Bank’s total assets were up 6.7 per cent year-over-year. Net loans and advances increased 4.8 per cent year-over-year and 1.8 per cent sequentially.
NBAD’s net fees and commissions were up 26.8 per cent in the first half of 2014, driven by increases in trade finance, retail, brokerage and lending related fees.
Our results in the second quarter of 2014 provide further evidence that our strategy is working. We are seeing positive underlying trends across our businesses, particularly our fee generating businesses,” said Alex Thursby, Group Chief Executive.
Balance sheet
ADCB’s net profit for the first six months of the year was up 19 per cent at Dh2.16 billion in the first half of 2014 compared to the first half of 2013 and Dh1.05 billion net profits for the second quarter.
The bank’s balance sheet continued to strengthen with the total assets up by 8 per cent year to date and net impairment allowance charges reduced to Dh407 million in the first half 2014 and non NPL ratio and provision coverage ratios improved to 3.4 per cent and 129.2 per cent, respectively.
“Our focus on disciplined cost management combined with improved asset quality have contributed to our success in first half of 2014,” said Ala’a Eraiqat, member of the board and chief executive officer of ADCB.
FGB’s first half profits were up 21 per cent at Dh2.68 billion compared with the same period last year. The bank’s net profit for the second quarter of 2014 rose by 16 per cent to Dh1.35 billion. The bank reported a 13 per cent growth in revenue to Dh2.28 billion in second quarter of 2014 compared to the same period last year. The bank’s loan growth resumed in the second quarter of 2014 with loans and advances increasing 4 per cent to Dh128.2 billion.
“We are committed to enabling our clients to fulfil their financial goals and aspirations. Moreover, the bank’s continued expansion into new markets allows our customers to access valuable opportunities both locally and abroad,” said Andre Sayegh, CEO of FGB.
Union National Bank (UNB), posted a net profit of Dh1.03 billion for the first half of 2014, up 5 per cent compared to Dh987 million in the same period last year. The profit for the second quarter of 2014 was Dh520 million, an increase of 6 per cent compared to Dh492 million reported in the second quarter of 2013 and was up by 2 per cent compared to the first quarter of this year.