Stock - DIB \ Dubai Islamic Bank
It's been a good start to the year for the UAE and Gulf banking sector, going by the initial results. Dubai Islamic Bank delivered quite the statement with a Dh4 billion plus income in Q1-2023. Image Credit: Bloomberg

Dubai: Dubai Islamic Bank pulled out a 47 per cent increase in total income to Dh4.4 billion for the first three months of 2023, continuing on the pace generated through 2022. This delivered a net profit of Dh1.5 billion, which works out to a year-on-year growth of 12 per cent.

"The UAE’s operating environment has been steadfast amidst the global economy’s complex challenges," said Dr. Adnan Chilwan, Group CEO. "The return of trade and tourism, increasing retail spending as well as rising profitability in banking and finance reflect the growing confidence that consumers have on the domestic economy."

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New financing during the quarter totalled Dh15.8 billion, an increase by a 'sizeable' 35 per cent compared to Dh11.7 billion a year ago. This was brought on by both corporate and retail financing - and despite the rate hikes the market had experienced through the recent past.

Risk-off investments

DIB's fixed income portfolio has reached Dh55 billion, a 6 per cent year-to-date growth as the 'bank continues to invest in primarily highly rated sovereign sukuk instruments'.

Government related entities (GREs) continue to maintain strong balance-sheets, with cash surplus, on the back of the UAE’s stable economy.

- Dr. Adnan Chilwan, Group CEO

Impairment losses totalled Dh496 million for the three months, higher by 19 per cent from Q1-2022. "In light of the global events, DIB’s asset quality has been remained robust with NPF ratio stable at 6.5 per cent," the bank said. "Our overall coverage ratio and cash coverage ratio have been increasing depicting the bank’s prudent approach to risk management."

The balance-sheet expanded 1.3 per cent year-to-date to Dh292 billion. "The banking sector remains well-insulated from the global contagion and continues to be on a solid footing with steady growth in their balance-sheets and rising profitability levels," said Mohammed Ibrahim Al Shaibani, Director-General of His Highness The Ruler’s Court of Dubai and Chairman of Dubai Islamic Bank.

Awaiting other bank numbers

ADCB and United Arab Bank have also announced their Q1-23 numbers, and others will follow suit shortly. The indications are that they will have similar growth trajectories to show, which would put to some rest concerns about whether the US Federal reserve rate hikes - and reflected in UAE lending rates - had cut into appetite for financing among local businesses and individuals.

The consumer banking financing portfolio was Dh53 billion, gaining 2 per cent on the 'back of home finance and personal finance'. The portfolio’s new underwriting reached Dh5 billion and generated Dh1.2 billion in revenues, an improvement by 19 per cent on Q1-22's Dh968 million. 

DIB's net financing and sukuk investments closed out the first quarter with Dh240 billion, a gain of 1 per cent, with nearly Dh21 billion in new underwriting during Q1-23 against Dh15 billion a year ago.

Solid on deposits

The Dubai bank's customer deposits were Dh198 billion, with CASA now standing at Dh80 billion, comprising 40 per cent of deposits. "Migration to wakala deposits was apparent during the quarter due to the current global rate scenario," DIB said in a statement. "This is reflected through an increase in the wakala portfolio (investment deposits) which is up 6 per cent year-to-date, comprising a higher share of 60 per cent of total deposits versus 56 per cent in 2022."