Return to lending lifts RAKBank

RAKBank, Commercial Bank of Dubai and National Bank of Umm Al Qaiwain see gains, but stepping up lending leads to greater benefits for RAKBank.

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RAKBank led gains among banks reporting earnings yesterday, helped by a return in lending that analysts expect will continue throughout the year.

Commercial Bank of Dubai (CBD) and National Bank of Umm al Qaiwain (NBQ) also reported a rise in profits.

But all three banks have lowered their loan-to-deposit ratios to less than 100 per cent, within limits mandated by the Central Bank to ensure the financial health of the UAE's lenders. The banks did not provide detailed financial reports or earnings for the fourth quarter.

RAKBank said profits for the year had soared 38.1 per cent compared with 2009, to Dh1 billion (US$272.2 million), much of which was achieved by increased lending.

Net interest income rose 30.9 per cent to Dh1.61bn as the bank loosened its purse strings, it said. Total advances were up 22.1 per cent to Dh16.4bn.

John Tofarides, a financial analyst at Moody's Investors Service, said RAKBank had showed stronggrowth through expansion of its consumer banking division.

"RAKBank is a prime example of a bank that has a successful retail banking model that has managed to grow stronger out of the crisis," Mr Tofarides said.

Elsewhere in the banking sector, CBD reported a 2.2 per cent increase in profits to Dh821m, despite a 35 per cent increase in provisions to Dh555m.

CBD was expected by analysts to have set aside large provisions because of its exposure to Dubai Government-related companies.

The bank cut net loans and advances to Dh27.2bn by the end of the year, a 4.2 per cent decrease on 2009.

Meanwhile, NBQ nudged into positive territory for the year despite cutting net lending by more than Dh500m and accumulating greater reserves of funds.

The bank recorded a slight increase in net income for last year of 2.8 per cent to Dh350.8m, despite a decline in operating profit, which fell 10.9 per cent to Dh445.1m.

Net loans and advances also fell 6.9 per cent to Dh7.7bn as NBQ pulled back access to credit. But it maintained strong cash balances, with a Tier 1 ratio of 24.4 per cent, indicating it retains a great deal of potential to lend.

NBQ's troubles with bad debts appeared to have receded, as impairments fell 40.6 per cent to Dh94.2m.