Dubai banking stocks fell yesterday despite rising earnings at two of the emirate's largest lenders.
Dubai Islamic Bank posted a 25 per cent gain in full-year profit to Dh1 billion (US$272.24 million) while Mashreq earnings rose 2.1 per cent.
But the emirate's bank index still fell 3.8 per cent yesterday as investors sought signs of growth.
"Today's earnings announcements were disappointing," said Marwan Shurrab, the chief trader at Gulfmena Alternative Investments. "The focus right now has been on dividend yield."
Dubai banks are recovering from the emirate's property bust of 2008, but restructurings at Dubai World and Dubai Holding, two of the emirate's major government-related holding companies, have forced banks to set aside large sums of money to cover bad debts.
In contrast, Abu Dhabi's major banks have reported earnings and big payouts to shareholders, with First Gulf Bank leading the capital's lenders with its Dh1.5bn dividend payment.
The Dubai's biggest stand-alone Islamic lender, Dubai Islamic Bank reported a cash dividend payment of 15 per cent. However, the bank's shares fell 1.8 per cent to Dh2.15.
Rarely traded Mashreq stock fell 9.9 per cent after its earnings were released. The bank announced a 20 per cent cash dividend.
However, its loan book contracted sharply, with net loans and advances falling 8.5 per cent during the year to Dh37.7bn. Lending fell for the fourth consecutive year.
Mashreq's bottom line improved, but underlying performance remained weak, said Nancy Fahmy, an analyst at Beltone Financial.
"Full-year net income was up … but that wasn't because of better operations, it was because they booked less as impairments," she said.
Abu Dhabi banks were outstripping Dubai for credit growth, taking new business from lenders still dealing with the fallout of the crisis sparked by Nakheel and Dubai World in 2009, she added.
"The lending growth overall in the UAE was weak, but if I look at UAE peers - for example National Bank of Abu Dhabi or First Gulf Bank, they posted good lending growth."
Attention now turns to Emirates NBD,expected to report earnings of Dh2.5bn when it releases its full-year results on February 15.