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Islamic banks defy market challenges in 2017

Lenders see sharp fall in non-performing financing

Gulf News

Dubai: Early indications from banking sector financial results suggest that Islamic banks have made big gains in financing growth and profitability in 2017 while keeping their operating costs and cost of risks under control.

Last week, Dubai Islamic Bank (DIB), reported a net profit Dh4.5 billion for 2017, up 11 per cent compared to 2016 driven by a combination of robust core business growth and effective cost management.

Total income increased to Dh10.19 billion, up 18 per cent compared to Dh8.63 billion for 2016. Net operating revenue increased to Dh7.68 billion, up 14 per cent compared to Dh6.76 billion for 2016

Net revenue for 2017 amounted to Dh7.68 billion, an increase of 14 per cent compared with Dh6.76 billion in 2016. The bank’s total assets stood at Dh207.3 billion, an increase of 19 per cent, compared to Dh174.9 billion at the end of 2016.

“The UAE continues to be one of the leading Islamic finance markets, with assets now reaching around $150 billion, a 7 per cent growth this year. We remain well-positioned to capitalise on improving economic conditions in UAE, where GDP is expected to increase in 2018 in the run up towards major economic events such as the EXPO 2020,” said Dubai Islamic Bank Managing Director, Abdullah Al Hamli.

DIB’s net financing assets grew to Dh133.3 billion for 2017 from Dh114.9 billion at the end of 2016, an increase of 16 per cent driven primarily by the continued growth of core businesses. Gross corporate banking including real estate financing assets grew by 20 per cent to Dh99.3 billion whilst gross consumer business ended the year at Dh39.7 billion.

Customer deposits for 2017 increased by 20 per cent to Dh147.2 billion at the end of 2017, compared to Dh122.3 billion as at the end of 2016. Financing to deposit ratio of 91 per cent as at the end of 2017 indicates that the bank has one of the strongest liquidity positions in the sector.

The bank managed to keep its operating expenses nearly flat at Dh2.33 billion for 2017 compared to Dh2.29 billion in 2016, due to efficient cost management. Non-performing financing (NPF, equivalent of NPL in conventional banking) have improved consistently with NPF ratio improving to 3.4 per cent for 2017, compared to 3.9 per cent at the end of 2016. The overall coverage ratio was at 157 per cent at yearend 2017.

“The constantly improving asset quality with NPF ratio falling below even the guided level to 3.4 per cent has been the result of robust and superior underwriting,” said Dr Adnan Chilwan, Dubai Islamic Bank Group Chief Executive Officer.

Emirates Islamic, the Islamic bank belonging to Emirates NBD Group reported a net profit of Dh702 million, up 565 per cent compared to 2016. Decline in operating costs and impairments boosted net profits last year. The bank’s impairment allowance declined sharply to Dh680.78 million last year to Dh1.29 billion in 2016.

“In 2017, we focused on consistent control of operating costs, which improved by 8 per cent over last year. With a lower cost of risk and an enhanced collection drive, net impairment allowances have improved by 48 per cent year-on-year,” said Jamal Bin Galita, Chief Executive Officer of Emirates Islamic.

Sharjah Islamic Bank (SIB) reported a full-year 2017 net profit of Dh477.7 million compared with Dh462.9 million in 2016. SIB’s total income reached Dh1.49 billion with an increase of 8.4 per cent compared with Dh1.37 billion last year. Net operating income increased 4.9 per cent year on year to Dh933.8 million compared with 890.4 million in 2016.

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