Dubai lenders report modest profits

13 April 2017

Impairment charges rise amid challenging economic conditions

Dubai Islamic Bank (DIB) and Mashreq, two of the first Dubai-listed lenders to report first-quarter earnings have recorded modest low single-digit growth in income, despite a rise in impairment charges.

DIB, the biggest Islamic lender in the country by assets, reported a net profit of AED1.042bn ($283.7m) for the three-month period ending 31 March, a 4 per cent increase from AED1bn recorded for the same period of 2016. The bank attributed the profitability to growth in “core business” despite a 43 per cent increase in impairment charges to AED169m for the first quarter of this year, it said in a statement posted on Dubai Financial Market website where its shares are traded.

DIB’s total income climbed 13 per cent to AED2.379bn while revenues for the first three months of 2017 increased to AED1.8bn, a 4 per cent year-on-year jump.

“With a 6 per cent rise in core financing assets, liquidity ratio of 88 per cent and constantly improving asset quality, DIB is very well positioned to further penetrate and increase the share of wallet in its existing operative segments whilst simultaneously capturing new businesses and acquiring new clientele from across the entire banking sector in UAE,” DIB group chief executive Adnan Chilwan was quoted as saying in the statement.

Mashreq, one of the oldest Dubai-based lenders, recorded a 2.7 per cent increase in net income for the first quarter of 2017 to AED546m, helped by a 15 per cent decrease in impairment allowances.

Non-performing loans increased by AED221m in the quarter, which pushed non-performing loans to gross loans ratio to 3.3 per cent at the end of March 2017 from 3.1 per cent at the end of December 2016, according to a Mashreq statement. “The risk charge for the quarter decreased from AED425m in fourth-quarter of 2016 to AED311, and total provisions for loans and advances reached AED3.5bn, constituting 145.5 per cent coverage for non-performing loans,” the bank said.

Mashreq’s net interest income and net income from Islamic products dropped by 3.6 per cent on the back of flat loan growth.

“Given the challenging business environment in 2016, Mashreq’s cautious stance has allowed us to stay focused on building quality assets,” Mashreq chief executive Abdul Aziz al-Ghurair said in the statement.

While Mashreq reported a loan-to-deposit ratio of 80 per cent, marginally higher than 79.2 per cent recorded at the end of 2016, its assets and customers deposits decreased.

Total assets at the end of first three months of this year stood at AED120.7bn, down 1.7 per cent from AED122.8bn reported at the end of last year. Customer deposits reached AED76.4bn, sliding 0.8 per cent compared to December 2016, primarily due to a 12.9 per cent decline in Islamic deposits.

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