x Abu Dhabi, UAEMonday 22 January 2018

Emirates NBD gets to grips with bad debts bringing in Dh744m profits

Emirates NBD sees a big jump in profits as it gets to grips with its bad debts and economic recovery in Dubai start to take hold, but its results left little to encourage analysts.

Emirates NBD, the UAE's biggest bank by assets, saw its problems with bad debts ease during the second quarter, leading to a sharply stronger bottom line.

Net profits jumped 84.8 per cent to Dh744.4m, though its profits fell slightly short of analysts' estimates of Dh752m.

The bank was getting to grips with its balance sheet issues and seeing benefits from an improving UAE economy, said Rick Pudner, Emirates NBD's chief executive.

The improved profit "not only reflects the progress made by the bank in addressing the challenges posed during the last few years but also demonstrates our ability to take advantage of improved economic conditions and to deliver on a clear strategic course," he said.

A credit bubble which swelled during the boom years left many banks nursing balance sheets full of bad debts when the Dubai's bubble burst, with Emirates NBD seeing particular difficulties resulting from its exposure to Dubai World, the conglomerate.

Despite the improved bottom line, many of the improvements to the bank's profit would be hard to repeat in the months ahead, said Jaap Meijer, a financial analyst at AlembicHC.

"They had very substantial investment gains … mostly non-recurring," he said.

Loans were flat, but the increase in costs showed the bank positioning itself for future growth, he added.

Write downs on financial assets fell 17.7 per cent to Dh980.9m, also helping the bank to improve its bottom line.

Net interest income grew slightly, rising 2.2 per cent to Dh1.61bn. That pushed operating income up 11.2 per cent to Dh2.5bn, but that was largely driven by mark-to-market gains on a debt swap with bond investors during May.

During the quarter, the bank saw a surprise change at its top ranks, as Ahmed Humaid al Tayer was swept out as chairman and replaced with Sheikh Ahmed bin Saeed al Maktoum.

In a statement, Sheikh Ahmed said: "We will move forward to achieve the ambitious vision of Dubai as a financial, commercial and international tourism hub, where Emirates NBD holds a leading position."