x Abu Dhabi, UAEFriday 28 July 2017

Dubai Islamic ups bad debt provisions

Dubai Islamic bank enjoys an increase in net profits, but ups provisions for loan impairments.

Dubai Islamic Bank upped impairment provisions by Dh216 million to a total of Dh718m for the first nine months of the year. Jeffrey E Biteng / The National
Dubai Islamic Bank upped impairment provisions by Dh216 million to a total of Dh718m for the first nine months of the year. Jeffrey E Biteng / The National

The UAE's largest Islamic bank increased provisions for bad debts by 43 per cent in the third quarter, joining a host of other lenders readying their balance sheets for any future financial headwinds.

Dubai Islamic Bank (DIB) upped impairment provisions by Dh216 million (US$58.8m) to a total of Dh718m for the first nine months of the year.

"Clearly there's some level of provisions that are still to come through from the banks, hence we are seeing provision costs elevated," said Murad Ansari, a financial analyst at EFG-Hermes.

DIB joins a growing number of banks increasing impairment provisions as global economic uncertainties weigh down confidence. Its share price has fallen 10 per cent so far this year.

Emirates NBD set aside Dh1.5 billion to cover bad debts, which caused the UAE's biggest bank to report its worst profits in three years last week, taking shares to a six-month low.

The situation is not likely to improve soon, as the bank raised its forecasts for bad debts, warning that impaired loans could peak at 16 per cent of total lending by 2013.

Emirates Islamic Bank suffered a third-quarter loss as it instigated a 29 per cent increase in provisions for bad debts.

Mr Ansari said DIB's provisions were not increasing on a quarterly basis, so the trend was not as negative as it was for some other banks.

"DIB[has] been conservative, but it's not like Emirates NBD. DIB provisions are more or less in trend for each quarter," he said.

The bank's net profits increased 10.5 per cent in the third quarter to Dh270m, compared with the same period a year earlier, while for the first nine months profits increased 10.3 per cent to Dh850m. DIB increased income by 7.6 per cent to Dh1.2 bn in the third quarter.

Abdulla Al Hamli, the chief executive, said the bank had added branches in The Dubai Mall and Sahara Centre, taking the total figure to 70 in the UAE.

Customer deposits are currently Dh68.6bn, compared with Dh63.4bn at the end of last year and the bank's total assets were at Dh93.5bn as of September 30 compared with Dh90bn in December.

Waha Capital, an investment firm, also reported results yesterday, posting a 7.5 per cent increase in total assets to Dh4.1bn compared with the end of last year.

Despite this increase, net profits for the first nine months of the year fell 19 per cent to Dh62.4m.

rjones@thenational.ae