x Abu Dhabi, UAEMonday 24 July 2017

Emirates NBD profits fall on bad loans

Emirates NBD, the UAE's largest bank by assets, saw second-quarter net profit fall 41 per cent as it booked more bad loan provisions.

Emirates NBD, the UAE's largest bank by assets, saw second-quarter net profit fall 41 per cent as it booked more bad loan provisions. Net income fell to Dh852.1 million dirhams (US$232 million) from Dh1.45 billion a year earlier, according to a statement to the Dubai Financial Market. The bank booked Dh1.6 billion in provisions for the first half of the year. Looking ahead, the bank said "economic conditions remained challenging in the near term" and it would continue to take a "prudent stance" on credit. Banks take provisions as a cushion to protect themselves if customers fail to pay back their loans. Without such charges, the bank would have boosted its operating profit by 26 per cent, it said.

The bank reported a four and five per cent increase in lending and customer deposits respectively. This uptick shows a slight improvement from the first quarter, when bank loans to the private sector fell 2 per cent, according to central bank data. Tight credit, sharp declines in property values and rising default have hurt bank earnings this year. Non-performing loans now account for 1.56 per cent of Emirates NBD's overall loan book, the bank said, up from 0.95 per cent at the end of 2008.

Most UAE banks have reported lower second-quarter earnings because of higher provisions. Dubai Islamic Bank, the country's biggest Islamic lender, said its second-quarter net profit declined by 40 per cent, while Abu Dhabi Commercial Bank (ADCB) reported a 51 per cent decline in the same period after increasing bad loans provisions three-fold in the past six months. According to the Central Bank, overall provisioning by UAE banks rose 11 per cent between May and June, its largest month-on-month rise ever. Provisioning now stands at Dh33.5 billion, up 50 per cent from last August.

uharnischfeger@thenational.ae