Emirates NBD had to deal with a higher impairment related loss in the third quarter, and this did leave a dent on net income. Image Credit: Ahmed Ramzan/Gulf News Archive

Dubai: Dubai’s Emirates NBD recorded operating profits of Dh1.68 billion for the third quarter, a sizeable drop from the Dh2.6 billion it had same time last year. The decline was brought on by higher impairment loss, of Dh2.15 billion.

Last year's tally also had one-off gains from the selling of shares in the payments processing company Network International. Total income for the first nine months this year was Dh18.3 billion, which is an 18 per cent improvement from a year ago.

The group's profit before tax came to Dh1.69 billion, while net income was Dh589 million – as against Dh4.7 billion a year ago. As for the year to end September, the bank recorded a net profit of Dh5.6 billion and “maintained a strong balance-sheet”. For the nine months last year, group profit was Dh12.48 billion.

“The UAE Government has followed its earlier decisive action to protect the health of UAE residents with clear, prescriptive and measured guidelines to reopen the economy with safety continuing to be the top priority,” said Hesham Abdulla Al Qassim, Vice-Chairman and Managing Director, Emirates NBD. “The UAE Central Bank’s Targeted Economic Support Scheme has been influential in supporting customers and banks now in order to prevent credit issues arising later.”

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Impairment hurts

An impairment allowance of Dh2.15 billion during the third quarter was 41 per cent up year-on-year, "reflecting higher ECL (expected credit loss) post COVID-19," the bank said in a statement. "Provisions were 30 per cent higher quarter-on-quarter mainly due to a restructuring recovery in Q2-20."

But the bank confirmed that improved activity in the July to September period managed to "partially offset" the impact from lower interest rates. Total income in those three months was down 6 per cent year-on-year due to lower net interest income and lower volumes.

Net interest margin of 2.48 per cent reresented a 35 basis point decline from a year ago, "as lower interest rates fed through to loan book". In a statement, Patrick Sullivan, Group Chief Financial Officer, said: "Net interest income declined throughout 2020 due to lower interest rates, but non-funded income improved in the third quarter of 2020 as volumes picked-up following the acute disruption in Q2-2020.

Higher provisions too

"Excluding last year’s gain on disposal of Network International shares, net profit declined 30 per cent as higher income from the inclusion of DenizBank was more than offset by additional credit impairment provisions as the Group boosted Stage 1 and 2 coverage ratios.

"Emirates NBD continues to have a good operating performance, coupled with a robust balance sheet to help navigate multiple challenges from low interest rates and uncertain economic growth. The Group continues to operate with strong liquidity and healthy capital ratios.”

Emirates Islamic Bank takes a loss
Emirates Islamic Bank dropped into a Dh323.08 million net loss for the third quarter, against a Dh264.17 million profit last year. Again, impairment related costs was the biggest factor, totalling Dh496 million.
For the first nine months, EIB's losses total Dh311.23 million as against profits of Dh937.18 million a year ago.
In a statement, Salah Mohammed Amin, CEO, said, “Our results for the first nine months of 2020 are a result of the challenges faced due to the pandemic and reflect our cautious approach in the current situation. As the economy reopens following the acute disruption in the second quarter, we are witnessing a significant increase in business activity."