Emirates NBD profit falls

26 July 2010

First half profits for 2010 down 28 per cent to AED1.5bn

Dubai-based bank Emirates NBD made AED1.5bn ($409m) of profit during the first half of 2010. The figure is down 28 per cent on the same period last year.

Customer deposits have grown 9 per cent in the first six months of the year to stand at AED197.6bn at the end of June this year, while customer loans have fallen 5 per cent over the same period to AED203.7bn.

Today, the loan-to-deposit (LDR) ratio stands at 103 per cent compared with 118 per cent at the end of last year.      

“Credit metrics remain in line with our expectations and profitability remains good despite having conservatively added to our portfolio impairments during the period,” says Rick Pudner, chief executive of Emirates NBD.

The impairment allowance on financial assets grew to AED1.7bn in the first six months of 2010 compared with AED1.6bn over the same period last year.  

This was driven by an expected increase in specific impairments across retail and corporate portfolios and the addition of AED745m to portfolio impairment provisions during the first half of 2010, noted the bank in its financial results report published on 26 July.

Emirates NBD’s non-performing loan (NPL) ratio increased to 2.88 per cent at the end of June this year from 2.36 per cent at the end of 2009.  

The report also observed that while the first quarter of 2010 had demonstrated early signs of stability and increased economic activity in the UAE, credit expansion in the second quarter remained relatively subdued as a result of renewed global uncertainties.   

However, it noted that good progress is being made in resolving key debt restructurings in the UAE banking sector and expected resolution during the second half of 2010 is expected to improve confidence and activity.

Emirates NBD is one of the seven biggest lenders to state-owned conglomerate Dubai World, which is renegotiating the terms on $23.5bn of debt. On 22 July, Dubai World said it expects to complete the restructuring process in the “coming months”.

“We have continued to invest in selected platforms for growth such as our private banking business and Abu Dhabi expansion and are well positioned to capitalise on expected improvements in economic activity,” says Pudner.

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