Dubai: Emirates NBD, a leading banking group in the region, reported a net profit of Dh7 billion in 2020, down 52 per cent year on year.
The decline in net profit was driven by higher provisions and no repeat of the gain on disposal of Network International shares in 2019. Net profit was down 31 per cent excluding the Network International gain in 2019.
Total income for 2020 amounted to Dh23.21billion, an increase of 4 per cent compared with Dh22.41 billion in 2019.
“As the official banking partner of Expo 2020 Dubai, we look forward to helping showcase the UAE’s innovative, tolerant and proud culture as we welcome the world to the UAE. In light of the Bank’s performance, we are proposing a cash dividend at 40 fils per share,” said Sheikh Ahmed Bin Saeed Al Maktoum, Chairman, EmiratesNBDnI
Income
Net interest income improved 8 per cent year on year as the contribution from DenizBank more than offset a decline in margins due to lower interest rates. Excluding DenizBank, net interest income declined 13 per cent year on year due to lower margins.
The bank’s total non-funded income declined by 8 per cent year on year on lower fee-based activity due to the impact of Covid-19. Excluding DenizBank, non-funded income declined 19 per cent on lower volumes from subdued business activity.
Operating profit declined 29 per cent in 2020 mainly due to lower interest rates & transaction volumes, coupled with higher impairment allowances.
“Emirates NBD’s strong balance sheet, coupled with the ongoing ability to generate operating profit, enabled the bank to successfully deal with the unforeseen challenges in 2020, achieving a net profit of Dh7 billion and growing total assets to Dh698 billion,” said Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD.
Loans & deposits
The bank reported an increase of 2 per cent in total assets year on year to Dh698 billion. Loans increased by 1 per cent to Dh444 billion during 2020 while deposits were down 2 per cent to Dh464 billion mainly due to a lower dirham contribution from DenizBank.
Costs
Costs for 2020 increased by 9 per cent to Dh7.85 billion due to the full-year inclusion of DenizBank. Excluding DenizBank, costs improved 6 per cent year on year as a result of management actions during 2020 in response to Covid-19 and lower income. The cost-to-income ratio at 33.8 per cent in 2020, is broadly near long term guidance.
Asset quality
During 2020, the non-performing loan ratio increased to 6.2 per cent. The impairment charge during this period of Dh7.93 billion is 65 per cent higher compared to 2019 as Stage 1 & 2 coverage increased.
“Net interest income increased by 8% during the year as the contribution from DenizBank more than offset a decline in margins due to lower interest rates. Operating profit was 29 per cent lower mainly due to lower interest rates & transaction volumes, coupled with higher impairment allowances,” said Shayne Nelson, Group Chief Executive Officer of Emirates NBD.
Liquidity and capital
Liquidity remains strong with the Liquidity Coverage ratio at 165 per cent as at 31 December 2020 and the Advances to Deposits Ratio at 95.6 per cent. During 2020, the Group raised AED 18.4 billion of senior term funding in seven currencies including three benchmark senior public bond & sukuk issues and private placements with maturities out to 30 years.
As at 31 December 2020, the Group’s common equity tier 1 ratio is 15 per cent, Tier 1 ratio is 17.4 per cent and capital adequacy ratio is 18.5 per cent.
