Dubai’s largest lender Emirates NBD has announced a 27 per cent jump in first quarter profits for 2011, with provisions for bad debt surging a massive 147 per cent, putting a dampener on economist expectations that we might have seen the last of provisioning rises in 2010.
The bank’s net profits improved to Dh1.4b for Q1 2011, up from Dh1.1b in the corresponding quarter last year, the bank said in a statement posted on the Dubai bourse website. However, the gain came largely on the back of its sale of a 49 per cent stake in Network International, a payment card processing company, to regional private equity group Abraaj Capital. The Dubai-based bank said it booked a gain of Dh1.8b on the stake sale.
“The quarter witnessed the formalisation of the Network International transaction and the resultant gain demonstrates the value we are able to create and realise for our shareholders,” said CEO Rick Pudner. “From an operational perspective, the quarter has importantly seen a return to top-line growth across both net interest and core fee income categories,” he added.
Emirates NBD’s net income for the quarter is down 12 per cent, from Dh2.56b in Q1, 2010, to Dh2.26b in Q1 this year. Operating profits at the bank are down 14 per cent year on year, from Dh1.69b in Q1 last year to Dh1.45b in Q1 this year.
The bank’s chairman Ahmed Humaid Al Tayer said: “Emirates NBD’s improved performance during the first quarter of 2011 highlights the strength of the Bank and its ability to take advantage of improving economic conditions and of realising value-adding opportunities for our shareholders. Having faced and successfully addressed significant challenges during the last few years, the Bank is in a strong position to take advantage of further expected improvements in the business environment and capitalise on future value adding opportunities.”
The bank said that portfolio impairment allowances increased by Dh628m substantially to cover future contingencies, taking the total allowance to Dh2.8b, or 1.8 per cent of credit Risk Weighted Assets, in excess of the UAE Central Bank requirement of 1.5 per cent by almost Dh500m. Emirates NBD’s impairment allowances for the first quarter stand at Dh1.37b, a 147 per cent jump from the Dh555m it provisioned in the corresponding quarter of last year.
“Emirates NBD continues to proactively manage credit quality and impaired loans across the bank’s corporate, retail and Islamic financing portfolios have increased moderately within previously expected levels,” the bank said in a statement posted on the Dubai bourse website.
“The impairment charge in respect of Q1 2011 increased to Dh1,369m compared with Dh555m in Q1 2010 and Dh201m in Q4 2010. This was primarily driven by an increase of Dh628m to portfolio impairment allowances during the quarter, substantially to cover future contingencies,” it said.
“We have accelerated investment in future growth opportunities, continued to de-risk the balance sheet and seen further improvements in our liquidity, while maintaining our capital adequacy at extremely comfortable levels,” said the bank’s CFO Surya Subramanian.