Emirates NBD reported a sharp rebound in net profits in the fourth quarter as it scaled back provisions for bad debts incurred during Dubai's property crash and pointed to "solid" growth in the UAE economy during the year ahead.
The country's biggest bank by assets generated net income of Dh2.5 billion (US$680.6 million) last year, an increase of 2.8 per cent compared with a year earlier.
Profit was Dh625m during the fourth quarter, more than quadruple that of the corresponding period a year earlier and ahead of analysts' estimates.
The earnings reflected a rebound in the Dubai economy, Sheikh Ahmed bin Saeed Al Maktoum, the bank's chairman, said in a statement.
"Despite the challenges reflected in the broader global economic environment, the UAE and Dubai in particular have shown resilience and solid growth during the year and Emirates NBD is well placed to continue to capitalise on this improving economic backdrop," he said.
Buoyed by record tourist arrivals, a resurgence in global trade and a recovering housing market, Dubai's economy cast off much of the misery that has troubled the emirate since the global financial crisis.
Markets are taking notice, with a recent 10-year sukuk sale by the emirate's Government paying a lower coupon rate than equivalent debts issued by Italy. Bond yields move in the opposite direction from price.
Emirates NBD announced on Wednesday that it would increase its dividend to 25 per cent, an increase of 5 percentage points from last year. The payout amounts to Dh1.4bn.
Stoked by record profits, the UAE's banking sector is paying back bumper dividends to investors, including the Government funds that own large stakes in many banks.
The Dh7.8bn in dividend payments already announced by big lenders is on track to exceed last year's Dh8bn, with many banks yet to report earnings.
Emirates NBD is 55.6 per cent controlled by Investment Corporation of Dubai, an investment arm of the emirate's Government.
The bank's shares were unchanged in trading yesterday at Dh3.80 each, having risen 33 per cent so far this year.
Allowances for charges on bad debts fell by 20 per cent last year to Dh4bn, with the bank also winding down some of its impairments on associates, notably Union Properties. Emirates NBD said that it was "comfortable" with the property developer's current book value after a Dh3.8bn restructuring deal that took place early last year.
The bank's lending increased by 7 per cent during the year to Dh218.2bn, with a substantial increase in lending to the Dubai Government alongside "booming" growth in the retail, tourism, trade and logistics sectors.
The bank anticipates 5 per cent loan growth in the year ahead, said the chief executive Rick Pudner.
In the meantime, deposits grew substantially, with an 11 per cent increase to Dh213.9bn helping to improve the bank's liquidity. Its loan-to-deposit ratio, a measure of its ability to cover lending with funds from depositors, fell from 105 per cent in 2011 to 102 per cent at the end of last year.