Commercial Bank of Dubai's profits increased last year by less than analysts had hoped, but the disappointment to market estimates was sweetened by a substantial dividend payout.
Net profit for the year increased by 3.7 per cent to Dh853 million (US$232.2m), compared with the same period a year earlier. Analysts had estimated earnings of Dh919m.
However, the bank said it would pay a dividend of 30 fils per share, equivalent to a 10 per cent dividend yield.
CBD would retain a high capital adequacy ratio and had sought to keep its growth on an even keel while "positioning itself to capitalise on future opportunities", said Peter Baltussen, the bank's chief executive.
"Our robust capital base allows us the flexibility to pursue new strategic initiatives, which will enable us to better serve our customers while providing our shareholders with consistent solid returns," he said.
The bank's shares rose 4.8 per cent to Dh3.05 in trading yesterday ahead of the release of earnings, the biggest intraday gains since last March.
The results follow dismal earnings from the mortgage lender Tamweel, which resulted in full-year profits sliding 28.8 per cent on litigation costs and declining margins on lending.
CBD's operating income fell as a result of dwindling net interest margins "due to competitive market conditions", although its funding costs were also lower, said the bank.
Loan growth of 1 per cent was a "slight disappointment" but the overall numbers were good, said Jaap Meijer, a financial analyst at Arqaam Capital.
"Overall it was a steady performance for CBD for the full year," he said.
But this was more than tempered by the substantial dividend payout, equivalent to about two thirds of earnings, which was likely to set the tone for the UAE's other lenders to make big payouts to shareholders, added Mr Meijer.
"Dividend yield will be a major play. We also expect Union National Bank, RAKBank and First Gulf Bank to surprise with 7 to 8 per cent dividend yield."