Dubai: Emirates NBD (ENBD) on Wednesday reported a net profit of Dh3.9 billion for the first half of 2017, up 5 per cent year-on-year, largely driven by higher net interest income, lower expenses and lower provisions.
Net interest income improved 2 per cent year-on-year due to loan growth and helped by a recent improvement in margins.
Net interest margin improved since the beginning of the year as loans reset at higher rates and funding costs improved as liquidity conditions eased.
The operating performance was also supported by a control on expenses and lower provisions.
The bank’s balance sheet continues to strengthen with further improvements in credit quality and capital, coupled with solid liquidity ratios.
The bank’s total income for the half year ended 30 June 2017 amounted to Dh7.45 billion; a decrease of 3 per cent compared with Dh7.67 billion during the same period in 2016. Loans increased by 5 per cent and deposits grew by 3 per cent during the first half of 2017.
Loan growth
Net interest income improved by 2 per cent in the first half of 2017 to Dh5.18 billion as loan growth more than offset margin contraction.
Non-interest income declined 12 per cent compared to the same period in 2016 due to the lower gains from the sale of investment securities.
Non-interest income improved 10 per cent compared to the second half of 2016 as a result of lower foreign exchange income due to the Egyptian Pound devaluation at the end of 2016.
“Despite some uncertain times Emirates NBD has delivered a record set of half-year results. During 2017 we have seen margins widen 20 bps (basis points) as recent rate rises flowed through to loan pricing and funding costs improved as regional liquidity conditions eased.
"The Group’s balance sheet continued to strengthen with improved capital and credit quality ratios and liquidity ratios were comfortably maintained within management’s target range,” said Shayne Nelson, Group Chief Executive Officer of Emirates NBD.
During the first half of 2017 the impaired loan ratio improved by 0.3 per cent to 6.1 per cent. The impairment charge during this period of Dh1.26 billion is 13 per cent lower than in the corresponding period in 2016.
This net provision includes Dh696 million of write-backs and recoveries, and together helped boost the coverage ratio to 123.5 per cent.
“Expenses remain firmly under control and provide headroom to invest for future growth. We also delivered a further improvement in credit quality with the NPL ratio strengthening to 6.1 per cent and this, coupled with an increase in margins and lower costs, is a position we expect to hold for the remainder of 2017,” said Surya Subramanian, Group Chief Financial Officer.
Costs for the half year ended 30 June 2017 amounted to Dh2.25 billion, an improvement of 9 per cent over the previous year, helped by a containment in staff costs following cost control measures implemented in 2016.
In the first half, the bank raised Dh4.8 billion of term funding through private placements and term funding represents 10 per cent of total liabilities.
As at 30 June 2017, the bank’s capital adequacy ratio and Tier 1 capital ratio were 20.7 per cent and 18.3 per cent respectively.
