Emirates NBD reported third quarter profits rose 13 per cent on the same period last year, but indicated it is feeling the impact of the credit crisis. The nation's largest bank today said it earned Dh1.02 billion (US$278 million) in the quarter, or Dh0.20 per share. Its earnings declined 31 per cent from second quarter profits of Dh1.47bn as the global financial crisis decreased the value of its assets.
Rick Pudner, the company's chief executive, affirmed that write-downs on the bank's investment portfolio affected its results. Mr Pudner also said the company expected a slowdown in the rate of growth next quarter because of an anticipated global recession. The company's third quarter revenue increased 18 per cent from a year ago to about Dh2bn. The nation's banking industry has enjoyed enormous profits in the past five years, but is now bracing for fallout from the global financial crisis.
However, Mr Pudner said the UAE economy remained "relatively attractive", despite the financial turmoil. The Federal Government has stepped in with a relief package of Dh70bn to financial institutions to facilitate lending between banks and ensure financing for the country's development projects. The Ministry of Finance announced this week it would begin its relief funding with an instalment of Dh25bn.
Mr Pudner said that the money would flow into the system when details were finalised. "They are going through the administrative side of things in terms of how they are going to allocate the money; we have not seen any of the details yet, but we expect to hear about it in the near future." The package replaces the money that banks borrowed from international banks until the global liquidity crisis halted that mechanism. In its absence, UAE banks had begun competing aggressively for deposits with rates that jeopardised their income.
Mr Pudner said that the Government's injection of relief funding would also stem the price war. "The initiatives that the ministry and the Central Bank have taken, particularly with the injection of Dh25bn into the market, should ease the situation considerably, and some of the pressure you're seeing in terms of pricing should be coming down," he said. Emirates NBD increased its deposits six per cent during the third quarter to Dh165.9bn, while loans grew eight per cent to Dh202.1bn.
The bank is the product of last year's merger of Emirates Bank and the National Bank of Dubai. Mr Pudner said the financial crisis created opportunities for Emirates NBD to ac quire other banks. "We got a few names that have come across our table that we are looking at," he said. With more than 50 banks for a population of 4.4 million, the UAE is considered an over-banked nation and it has long been expected that tough economic times would lead to mergers.
"Given the current environment, we feel that could happen more quickly than expected," Mr Pudner said. firstname.lastname@example.org