Shares in Emirates NBD, Dubai's largest lender, jumped yesterday in the last minutes of the trading session to gain 6.95 per cent.
The bank is emerging from the worst of its problems with exposure to Dubai World, and increased profitsshould follow, analysts say.
The rise came at the end of a day in which the Dubai Financial Market General Index slid 1 per cent, and followed an announcement that the bank would form a partnership with Acordias, a service platform for financial intermediaries, to market the bank's Middle East-focused funds in Europe.
An increased emphasis on asset management is one method lenders might use to shield their profits after recent Central Bank regulations on their loan fees and limits on retail lending. Emirates NBD has recently launched a hiring drive for its retail business.
Murad Ansari, an analyst at EFG-Hermes, said that despite sluggish growth in the UAE, the bank was coming to grips with its problems with bad debts and its core lending business should improve.
"We're nearing the point where non-performing loans ought to peak," Mr Ansari said. He added that growth would remain subdued as a major surge in Dubai's economy was not yet expected.
"However, having said that, the way banks have been dropping provisioning costs can lead to a very strong rebound in profitability," Mr Ansari said.
A recent note from Goldman Sachs said Emirates NBD's non-performing loans, excluding Dubai World and Dubai Holding, would peak at 6 per cent, up from about 4.5 per cent at present.
Goldman tweaked its price target to Dh5.01, a decrease of 8 fils but still a 55 per cent premium on the current price of Dh3.23 a share.
"Although higher liquidity levels have temporarily impacted interest income growth, we anticipate margins to recover in the medium term as the bank gradually redeploys liquidity," the Goldman report said.