Abu Dhabi Commercial Bank reported profits for 2011 more than seven times higher than a year earlier, with provisions falling.
The bank reported profits for the full year of Dh3.04 billion, up from Dh381 million in 2011 and more than Dh1 billion above analysts' estimates.
Analysts polled by Bloomberg had forecast earnings of Dh1.9bn.
The company's bottom line was helped by a decrease in writeoffs on investment properties and impairments on bad debts, which fell 27.1 per cent to Dh2.08bn.
Provisions for bad debts have hobbled many of the UAE's lenders since Dubai's debt crisis broke, constraining banks' ability to lend.
But ADCB had shrunk its need for provisions during the year by more than expected, said Shabbir Mailk, a financial analyst at EFG-Hermes.
"I was a bit concerned about their potential exposure to Dubai Holding, but from the looks of this they don't have that," he said. "I don't think there's anything major in terms of asset quality issues affecting them right now."
The bank's shares climbed 5.6 per cent after the release of earnings to Dh2.97, the highest level since October.
Non-performing loans fell to 4.6 per cent of the bank's total lending book, from 11.1 per cent last year, after a Dh6.7bn loan to an unnamed party was renegotiated. Mr Malik said this was most likely to Dubai World, the conglomerate which defaulted in 2009.
Despite ADCB's decrease in bad loans, impairment charges for defaulting debts are expected to remain high in 2012 for UAE lenders, according to a report from Fitch Ratings released last month.
"The significant increase in renegotiated private sector loans may hide the true extent of the banks' asset quality problems, as some of these loans may re-emerge as non-performing loans," the ratings agency said.
Falling spreads on the money the bank earned from lending, alongside a fourfold increase in profits from its Islamic subsidiary, pushed operating income 21.3 per cent higher to Dh6.06bn.
During the year, the bank's earnings received a Dh1.3bn boost from the sale of a minority stake in RHB Capital Berhad, a Malaysian lender, to Abu Dhabi's Aabar Investments.
The stake, bought for 5.9 billion Malaysian ringgit (U.S.$1.9 billion), was funded by an interest-free loan from Aabar's parent, International Petroleum Investment Company, according to a recent bond prospectus.
ADCB in turn financed that purchase through a Dh7.7bn loan to Ipic, it later emerged, initially swelling the size of the bank's loan book during the third quarter of 2011.
However, ADCB's lending has barely budged since then, growing only 0.4 per cent since then to Dh124.7bn.