Dubai: The first quarter results of half a dozen banks published last week showed that the UAE banks are well prepared to meet the challenging global and regional economic conditions.
While a few banks had announced restructuring of their balance sheets in the beginning of the year involving reduction in exposures to risky portfolios, a few had made full provisions for legacy non-performing loans. Some of these efforts have already started showing results with a few other banks stepping up efforts to fortify their balance sheets.
Emirates NBD which reported a first quarter net profit of Dh1.8 billion, up 8 per cent compared to the first quarter of 2015. The bank’s balance sheet remained strong in the first quarter of 2016. Credit quality improved as the impaired loan ratio advanced from 7.1 per cent to 6.9 per cent during the quarter whilst the impaired loan coverage ratio also strengthened to 113.5 per cent.
“Asset quality (of Emirates NBD) improved during the quarter with an improvement in coverage ratio, while balance sheet growth was satisfactory. We see the results in positive light,” said Naveed Ahmad, Assistant Vice-President, Research Group at Global Investment House.
Emirates NBD’s top-line recorded 3 per cent growth with the improvement attributable to lending growth, favourable shift in the asset mix and growth in CASA [current and savings account] deposits. Net interest margins (NIM) was at 2.62 per cent in the first quarter of 2016 as compared to 2.9 per cent in the first quarter of due to lower yield on competitive margin compression across most products.
“We have delivered another robust set of financial results. This is driven by higher income from asset growth and lower provisions. Liquidity pressures in the sector continued to ease in the first quarter from the tight conditions experienced in the second half of 2015. We remain cautiously optimistic for the remainder of 2016 but are conscious of the headwinds that a strong dollar and volatile oil price can present,” said Shayne Nelson, Group Chief Executive Officer, Emirates NBD.
Abu Dhabi Islamic Bank (ADIB) reported a net profit of Dh482 million for the first quarter of 2016, up 6.9 per cent compared to the same period in 2015. Bank’s total assets increased by 4.5 per cent year on year to Dh119.2 billion in the first quarter. Customer deposits increased 9.6 per cent to Dh96 billion, and net customer financing grew by 8.3 per cent to Dh78.3 billion. Total non-performing accounts as a percentage of gross customer financing reduced to 4 per cent from 4.2 per cent a year earlier.
“Despite very challenging conditions ADIB has delivered a sustainable level of financial performance in the first quarter of 2016 with steady growth in revenues and net profits,” said Tirad Al Mahmoud, Chief Executive Officer of ADIB.
Commercial Bank of Dubai’s (CBD) net profit for the first quarter of 2016 was 18.4 per cent lower at Dh241 million as compared to Dh295 million in the first quarter of 2015. The bank set aside Dh127 million as net impairment allowances during the quarter; an increase of 35 per cent compared to the first quarter of 2015.
RAKBank, one of the first banks that announced restructuring of its small and medium enterprises portfolio to address a surge in non-performing loans last year is already seeing improvement in its financial performance.
The bank’s total income during the quarter grew by 6.2 per cent year-on-year to Dh990 million as net interest income and income from Islamic products net of distribution to depositors were up by 1.5 per cent to Dh744.3 million.
Operating profit before provisions were up by 16.8 per cent to Dh648.3 million, however, provisions for loan impairments increased over last year by Dh205.2 million due to higher loan provisioning in the bank’s unsecured lending portfolios.
“The bank has faced continued headwinds primarily in our Small Business Finance and SME portfolios due to the challenging business environment globally and locally. In the first quarter of 2016 we took the decision to move our SME products into a separate segment — Business Banking — so we can manage this sector of clients in a more holistic manner,” said Peter England, CEO of RAKBank.
United Arab Bank (UAB) which reported a Dh238 million losses in the fourth quarter of 2015 turned around to report aDh45 million profits for the first quarter of 2016.
The bank said its transformation strategy implemented in the second half of 2015 is progressing ahead of plan and the bank is back in black, aided by a substantial reduction in provisions, an uplift in non-interest income and cost savings from its streamlined operating model.
The positive results follow on from UAB revisiting its strategy in the latter part of 2015, given the slowing economy and an increase in problem-loan formation, specifically in the small-to-medium-sized enterprises (SME) segment. The bank made significant progress in containing provisions for credit losses in the first quarter of 2016.
