The National Bank of Ras Al Khaimah (RAKBank) has posted a 10.5 per cent jump in its third-quarter profit despite setting aside five times more money for bad loans than in the same period last year. The bank earned Dh187 million (US$50.9m) despite having taken Dh90m in fresh provisions for bad loans in the latest quarter.
Provisions for the year stand at Dh167m. Graham Honeybill, the general manager, called the past year "testing times", but said the challenges of the financial crisis were "finally easing". Analysts believe lenders must continue to take provisions against customers hit by the financial crisis, who can no longer pay their debts. However, RAKBank suggested that provisioning may soon slow. "Leading-edge indicators suggest that delinquencies are declining and if these projections are ratified by future results, there should be a proportionate decline in provisioning in 2010," Mr Honeybill said.
The economic crisis has taken its toll on local lenders, which have been forced to set aside higher provisions against possible loan defaults since the beginning of the year. However, Emirates NBD, the UAE's largest lender by assets, on Monday said it had already slowed provisioning while warning that non-performing loans had not yet peaked. Like many of its peers, RAKBank bank has profited from a widening of credit spreads as costs of funding have fallen steadily from their peaks of late last year. As a result, RAKBank boosted its interest income by 32 per cent to Dh320m in the quarter.
The bank focuses on consumer banking and loans for small and medium-sized enterprises (SME). "By continuing to seek good lending opportunities, we have strengthened our position as one of the largest credit card providers in the country and an important provider of mortgage and SME finance," Mr Honeybill said. RAKBank shares closed down 1.6 per cent at Dh4.43 at the Abu Dhabi Securities Exchange yesterday before the results were released.