Dubai Islamic Bank (DIB), the UAE’s biggest shariah-compliant lender said it its full-year 2016 profit climbed 6 cent as non-performing loans declined and income from fees and commission rose.

The lender’s net income for 12-months ended 31 December reached AED4.05bn ($1.1bn) from AED3.56bn recorded for a year earlier.

Total income and net operating revenues for the same period also registered 14 per cent and 4 per cent growth, respectively, for the same period. DIB’s income from net fees and commission also jumped by 10 per cent to AED1.42bn, it said in a statement to Dubai Financial Market, where its shares are traded.

DIB, which did not provide quarterly profit details in the bourse filing, has posted a 58.4 per cent hike for the last three months of 2016. DIB made AED1.37bn, according to calculations, which compares with net income of AED864.7m in the same period of 2015.

DIB is the second major financial institution to report earning so far. Emirates NBD, was the first. It recorded a modest growth in full-year net income but its profit for last three months of 2016 slumped on the back of tougher market conditions and a decline in fees income. It’s shariah-compliant arm Emirates Islamic recorded significant profit reduction on the back of a rise in credit losses and tougher economic conditions in the UAE’s over-banked market.

DIB’s quarterly profit, however, is significantly above the analysts’ expectations.

“With oil price volatility and ensuing tighter liquidity along with global economic and political uncertainty, of course there were challenges along the way,” DIB group chief executive, Adnan Chilwan, said in the statement. “The portfolio quality has simultaneously improved to extremely robust levels with NPLs [non-performing loans] down from double digits, a testament to the strong risk management practices and systems put in place.”

The bank reported a reduction in impairment losses to AED392m at the end of last year, down from AED410m in 2015. Its non-performing loans ratio improved to 3.9 per cent in 2016, according to the statement, which added that provision coverage ratio has improved to 117 per cent, compared to 95 per cent in 2015, while overall coverage including collateral at discounted value stood at 158 per cent in 2016, against 147 per cent a year earlier.

The lender has seen 11 per cent rise in customer deposits to AED122.4bn, while its loans to deposits ratio stood at 94 per cent.

The company’s board has proposed a 45 per cent cash dividend to shareholders for 2016. It also adopted resolutions to increase the bank’s Tier-1 issued capital by $1bn, and issue senior or subordinated sukuk for an amount not exceeding $5bn.

DIB, is currently enegaed with banks for a potential US dollar-denominated sukuk issue. It has already received proposals and is expected to formally appoint banks for the transaction within a week or two, Banking sources told MEED in second week of January.