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Abu Dhabi, UAEMonday 25 June 2018

Dubai Islamic Bank's first quarter net income surges, beating estimates

Net profit rose 16.4% year-on-year 

The rights issue "will support DIB's liquidity," according to Moody's. Chris Whiteoak / The National
The rights issue "will support DIB's liquidity," according to Moody's. Chris Whiteoak / The National

Dubai Islamic Bank on Wednesday reported a 16.4 per cent year-on-year jump in net profit, beating analysts' estimates, as revenues climbed for the UAE’s biggest sharia-compliant lender by assets, on the back of higher income from fees and commission business.

Net income attributable to equity owners surged to Dh1.17 billion in the three months to March 31, from Dh1bn reported for the same period in 2017, DIB said in a statement to the Dubai Financial Market, where its shares are traded. Net revenue for the period amounted to Dh1.97bn, a 9 per cent rise from a year-earlier, supported by 15.5 per cent growth in fees and commissions income, it said.

The results beat five analysts estimates averaging Dh1.14bn, according to Bloomberg. The first-quarter net income was above SICO Bahrain’s Dh1.13bn estimate, according to Reuters.

The bank said that the profitability was supported by a strategy focus on building a quality financing portfolio while simultaneously managing costs.

“2018 is a critical year as it effectively marks the culmination of the 10-year master plan that has seen the bank transform into a financial powerhouse in the UAE banking space," DIB group chief executive Adnan Chilwan said. “Whilst we continue on our expansionary agenda, this year is primarily about striking a balance between growth and profitability.”

Banks in the UAE, the region’s second-biggest economy, have fared relatively better than some of their regional peers during the three-year oil price slum. They have, however, struggled to maintain credit and profit growth amid softer economic conditions in the past two years as non-performing loans spiked with defaults in businesses, especially, among the small and medium-sized enterprises.

Economic activity is picking up with the recovery in the oil prices, improving prospects for lenders in the country over the next 12 to 18 months, rating agencies and analysts have said. Emirates NBD, the biggest bank in Dubai on Wednesday, also reported strong first-quarter profit growth, beating analysts’ estimates.

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Mr Chilwan said one critical component that has helped the bank is its ability to pre-emptively create capacity, both with regards to liquidity and capitalisation, which has been a key differentiator that has allowed it to grow over the years.

Non-performing financing ratio and impaired financing ratio in the first three months of the year remained steady at 3.4 per cent and 3.3 per cent respectively, depicting improving quality of credit. Buildup of provisions increased cash coverage to 122 per cent for the period, compared with 118 reported at the end of 2017, DIB said in the bourse filing.

The lender, which this year raised $1bn through a five-year sukuk and received shareholders’ nod for capital increase through a rights issue, said its net financing and sukuk investments grew 3.5 per cent to Dh162.7bn in the first quarter from the levels recorded at the end of last year.

Its corporate banking financing assets grew at around 4 per cent to Dh93bn, while the consumer business remained steady at Dh40bn. Customer deposits increased to Dh152bn at the end of March from Dh147bn as at December 31 2017.

"The overall macroeconomic environment continues to recover, with bright prospects on the horizon for 2018, based on further improvement in global oil prices and pick up in investment activity, as a result of mega projects leading up to the Expo 2020,” Mohammed Al Shaibani, the chief executive of Investment Corporation of Dubai and chairman of DIB, said. “DIB carries on its growth aspirations in the coming years following recent approvals from our shareholders to increase its capital and deploying it towards growing and expanding the business franchise.”