Emirates NBD branch near Al Wahda Mall street in Abu Dhabi. The bank’s balance sheet remains solid with a further strengthening in capital. Image Credit: Ahmed Kutty/Gulf News Archives

Dubai: Emirates NBD on Wednesday reported a net profit of Dh5 billion in the first half of 2018, up 29 per cent compared to the same period last year.

For the second quarter of 2018, the bank reported a net profit of Dh2.63 billion, up 30 per cent year on year from Dh2.02 billion in the same period last year.

Net interest income improved 20 per cent year on year due to loan growth and a further improvement in margins. The operating performance was also supported by a 40 per cent improvement in provisions, according to a bank statement.

“For the first time in the Group’s history, Emirates NBD delivered a half-yearly net profit in excess of Dh5 billion underpinned by higher net interest income on the back of loan growth and improving margins and a lower cost of risk,” said Shayne Nelson, Group Chief Executive Officer of Emirates NBD.

The bank’s balance sheet remains solid with a further strengthening in capital due to retained earnings, coupled with stable liquidity and credit quality ratios.

Total income for the first half of 2018 amounted to Dh8.45 billion; an increase of 13 per cent compared with Dh7,45 billion during the same period in 2017.

Net interest income improved 20 per cent to Dh6.22 billion due to loan growth coupled with an improvement in margins. Non-interest income declined 2 per cent compared to the same period in 2017 as higher core fee income was more than offset by a reduction in investment securities income as a result of an impairment provision on a private equity fund holding.

Improved margins

Earlier this week, the bank had disclosed that it has an exposure of $38.9 million (Dh142.87 million) to Abraaj.

“Margins improved 14 basis points [bps] during the quarter as rate rises flowed through to the loan book and more than offset a modest increase in deposit costs. With CASA [current and savings account] representing 54 per cent of deposits, our book is positioned to benefit from further rate rises and, as a consequence, we have revised up margin guidance for this year,” said Surya Subramanian, Group Chief Financial Officer of Emirates NBD.

Loans and deposits increased by 4 per cent and 3 per cent respectively since the beginning of the year. The advances to deposits ratio remains comfortably within Management’s target range at 94.4 per cent. In the first half 2018, the bank raised Dh6.7 billion of term funding through a mix of public issues and private placements. Term funding represents 10 per cent of total liabilities.

Costs for the half year ended June 30, 2018 amounted to Dh2.64 billion, an increase of 17 per cent over the previous year on higher staff and IT costs relating to our digital transformation and technology refresh.

Costs were also higher as a result of international branch expansion and a rise in costs associated with the acquisition in Turkey of Sberbank’s 99.85 per cent stake in Denizbank A.S.

The bank said its cost to income ratio at 31.3 per cent, remains within 2018 guidance of 33 per cent and enables us to invest to support future growth.

During the first half of 2018 the impaired loan ratio improved by 0.1 per cent to 6 per cent. The impairment charge during this period of Dh755 million is a 40 per cent lower than on the corresponding period of 2017.

As at 30 June 2018, the bank’s common equity Tier 1 ratio was 16.3 per cent, tier 1 ratio 19.8 per cent and total capital ratio 21.2 per cent.