Dubai: Emirates NBD, the UAE’s largest lender reported a net profit of Dh5.4 billion for the first nine months of 2016, up 8 per cent compared to the same period last year.

The operating performance during the period was helped by higher recoveries and a modest increase in total income, driven by higher core fee income and asset growth which offset a contraction in margins, the bank said in statement.

“Despite a challenging operating environment, the Group has achieved improved profitability whilst further enhancing asset quality, liquidity and capital ratios,” said Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD.

In the third quarter of the year the bank reported a net profit of Dh1.66 billion, marginally down by 1 per cent year on year.

While the net interest income declined 2 per cent year on year due to high higher cost of fixed deposits and wholesale funding. Non-interest income improved 5 per cent year on year due to higher core fee income and declined13 per cent quarter on quarter due to lower one-off gains from the sale of properties, coupled with lower core fee income from foreign exchange and derivatives due to lower business volume during the third quarter.

Net interest margins declined to 2.54 per cent year to date and to 2.44 per cent in the third quarter of 2016. Loan spreads declined as loan margins across a range of products did not keep pace with rising EIBOR [Emirates interbank offered rates] rates.

For the nine-month period, total income of Dh11.3 billion was up 1 per cent as net interest income grew 1 per cent on the back of asset growth whilst core fee income grew 2 per cent due to growth in credit card and foreign exchange volumes.

“We have delivered another positive set of financial results. Income grew modestly driven by higher core fee income and asset growth which offset a contraction in margins,” said Shayne Nelson, Group Chief Executive Officer of Emirates NBD.

Cost of risk continues to normalise as impairment charge of Dh2.18 billion is 22 per cent lower than at the close of the third quarter of last year.

Bank’s total assets grew 10 per cent to Dh446 billion in the first nine months of the year from year end 2015. While loans and advances grew 7 per cent to Dh289.2 billion, deposits grew 8 per cent to Dh31.6 billion compared to year end 2015 figures.

Islamic financing grew 11 per cent since end 2015 due to growth in trade, services, personal and real estate sectors.  Corporate lending grew 5 per cent since end 2015 due to growth in trade, services and sovereign sectors. Consumer lending grew 10 per cent since end 2015 across a range of products including mortgages, credit cards and personal loans. Current and savings account (CASA) deposits grew 7 per cent since end 2015 and represent 55 per cent of total deposits, up from 43 per cent at end 2012.

Provisions of Dh729 million in the third quarter of 2016 was down 11 per cent as net cost of risk continues to normalize helped by further write backs and recoveries. Non-performing loans ratio improved to 6.4 per cent from 7.1 per cent at year-end 2015 and coverage ratio strengthened to 120.8 per cent.

“The operating performance improved for the first nine months of 2016, thanks largely to lower impairment allowances backed by higher recoveries. The Group’s liquidity position improved further, bolstered by a stable and highly diversified deposit base and our ability to raise over Dh19 billion of term funding in the first nine months of 2016,” said Surya Subramanian, Group Chief Financial Officer.

Given the challenging environment ahead, he said the bank has taken measures to contain costs even as the bank improved asset quality and capital ratios.

In the third quarter, the bank’s tier 1 ratio increased by 0.1 per cent to 18 per cent and capital adequacy ratio remained at 20.5 per cent.