Dubai: Mashreq Bank saw a sharp drop in net profit for the first nine months of 2020 to total Dh352 million, as higher impairment charges made a heavy dent in the financials. Last year's profit at this stage was Dh1.76 billion.
The bank slipped into a Dh183 million loss in the third quarter, against a profit of Dh536 million a year ago. In the second quarter, profit was at Dh85 million. Total provisions at the end of September was Dh4.7 billion.
Higher impairment costs has been the feature of the UAE's banking sector in the last two quarters, with the pandemic bringing in new uncertainties to the economy and for businesses. Mashreq's operating income was down 12.3 per cent to Dh4 billion brought on by a "tough operating environment and decline in interest rates", the bank said in a statement. But salvaging a difficult situation was the contribution from non-interest income, with its share of the operating income ratio remaining at 48.1 per cent.
We remain fully aligned to support the UAE economy and our communities, as we together pave the way to recovery. We will also continue to look at capitalizing on opportunities in the digital and technology space
Tight hold on non-performing loans
Another plus was that the non-performing loans to gross loans ratio was at 4.2 per cent as of end of September and down from 4.6 per cent at the end of the second quarter. Its loan book was also lower, by 2.9 per cent, to Dh73.9 billion from December 2019 levels, while deposits inched higher to Dh94.7 billion, a gain of 4.1 per cent.
"Our emphasis this year has been on guiding the bank through an exceptionally difficult period by focusing unwaveringly on our customers – businesses, individuals, and SMEs," said Ahmed Abdelaal, Group CEO, Mashreq Bank. "Despite proactively managing the bank’s liquidity position and capital adequacy ratio, the continued market volatility and uncertain economic climate has led to a 12 per cent reduction in our operating income, which is primarily due to the prevailing environment of low interest rates."