Dubai: All the published results of the UAE banks for the first quarter 2019 showed stronger balance sheet growth supported by improving operating costs.
Emirates NBD’s total assets grew 11 per cent year on year to Dh425.8 billion compared to Dh475.6 billion the same quarter last year. Both loans and deposits increased by 3 per cent during the quarter. The advances to deposits ratio remains within management’s target range at 94 per cent.
Costs for the quarter ended 31 March 2019 amounted to Dh1.39 billion, an improvement of 7 per cent over the preceding quarter due to an improvement in staff costs, lower professional fees and marketing expenses. The cost to income ratio at 29.6 per cent remains within 2019 guidance of 33 per cent and gives us headroom to invest selectively to support future growth.
“Costs improved by 7 per cent from the previous quarter due to a reduction in staff costs, lower professional fees and marketing expenses,” said Surya Subramanian, Group Chief Financial Officer of Emirates NBD.
CBD’s total assets increased 8.5 per cent year on year to Dh76.2 billion at the close of the first quarter compared to the Dh70.2 billion at the first quarter end 2018. Loans and advances grew 10.3 per cent to Dh51.8 billion from Dh46.9 billion as at the end of first quarter 2018. Customers’ deposits were up 13.3 per cent year on year to Dh54.6 billion in the first quarter of 2019.
During the quarter, Emirates NBD’s impaired loan ratio remained unchanged at 5.9 per cent. The impairment charge in Q1-19 of Dh570 million is 30 per cent higher than in Q1-18 and an 11 per cent improvement on the preceding quarter.
For CBD, non-performing loans (NPL) ratio decreased significantly to 6 per cent from 8.7 per cent at the end of first quarter 2018, with both ratios calculated under IFRS9. CBD set aside Dh228 million in provisions the first quarter compared to Dh165 million for the same period in the prior year.
Analysts expect bad debt charges of GCC are expected to be higher this year as banks continue to report Stage 2 and Stage loans in the International Financial Reporting Standards 9 (IFRS 9). “Non-performing loans (NPL) formation was already well ahead of cost of risk in 2018. Economic growth is likely to be below trend in 2019, with continued pressure on collateral value as real estate prices continue to be under pressure,” Arqaam Capital said in a recent note.
