Dubai’s biggest bank says its income from loans and fees rose amid a growing economy. The bank benefitted from loan growth, an amelioration in net interest margin and higher growth in consumer lending amid cheaper financing.
Rising economic tide lifts Emirates NBD’s profit by 25%
Looking ahead, the bank said that while its loan growth would be as high as 8 per cent this year, it does not see a bubble forming – even after stock and home prices have surged over the past year.
Emirates NBD's net income for the first quarter reached Dh1 billion while total loans gained 1 per cent to Dh239.7bn and deposits advanced 5 per cent to Dh251.1bn, the bank said. Its profit beat the analysts' consensus estimate of Dh881 million, according to data compiled by Bloomberg News.
“I am delighted that, in my first full quarter with the group, we have delivered a strong set of financial results,” said Shayne Nelson, the bank's chief executive. “The bank is well positioned to capitalise on our strong franchise and capital base and to take advantage of further expected improvements in the economic environment of Dubai and the UAE.”
For the quarter, net interest income advanced 28 per cent to Dh2.23bn from the year-earlier Dh1.74bn. The bank attributed the improvement in net interest income to loan growth, an amelioration in the net interest margin and higher growth in consumer lending amid cheaper financing. Non-interest income advanced 25 per cent to Dh1.1bn on the back of a rise in the bank's credit card, trade finance, brokerage and asset management businesses.
Dubai's benchmark stock index has gained 51 per cent this year, making it the best performing primary stock index in the world. The measure more than doubled last year amid easy monetary policy, inflows of investments from other less stable emerging markets and a return of confidence to Dubai. The emirate has now restructured most of the debt that triggered the 2009 crisis that deflated property and stock prices – the values of which have now returned to pre-crisis level.
The UAE's economy turned the corner in 2013, growing by more than 4 per cent after years of subpar growth. Increased government spending on infrastructure, higher returns from trade and tourism and Dubai's Expo 2020 win all helped.
Banks have been one of the main beneficiaries of the boom as interest rates, hovering at eight year lows, prompt businesses and individuals to take out loans.
Emirates NBD is forecasting 7 per cent to 8 per cent loan growth this year, Surya Subramanian, the bank's chief financial officer, said on a conference call after the results were released.
There is, however, a growing chorus of concern that prices of Dubai's homes and stocks are reaching bubble territory again, a worry that Mr Nelson acknowledges but is not perturbed by.
“There's been quite a pick up in the property market but this time it's more location, location, location, than it was historically,” he said on the conference call.
“The marina area, downtown – they've all come back very strongly. Other areas have not done so well, so I think this time round people are a lot more choosey about the developer, the location, quality and price and that certainly was not what happened last time. There are better macro prudential policies in place. Pre-crisis we didn't have loan-to-value ratios controls from the central bank. We have that now. Dubai put up transaction costs from 2 to 4 per cent. We are in a much better position than we were historically.”