Loan growth, lower provisions lift Emirates NBD's Q3 profit

Emirates NBD (ENBD), Dubai's largest lender, posted a 7 per cent rise in third-quarter net profit on Tuesday, with earnings boosted by higher net interest income and lower provisions for bad loans.

The lender, 55.6 per cent-owned by state fund Investment Corporation of Dubai, made a net profit of Dh1.67 billion ($454.71 million) in the three months to Sept. 30, compared to Dh1.56 billion in the same period in 2014, the company said in a statement.

An average of four analysts polled by Reuters forecast the bank to make a net profit of Dh1.60 billion for the third quarter.

ENBD has reaped the benefits of a robust Dubai economy in recent years as the emirate has made progress in resolving its debt. But pressure from lower oil prices has squeezed deposits across the banking system in recent months and generally lifted the sector's loan-to-deposit ratio.

Despite the trickier operating environment, the bank's provisions for bad loans dropped to Dh822 million in the third quarter, compared with Dh1.2 billion in the year earlier period. Bad loans dropped to Dh20.3 billion at Sept. 30, down from Dh20.6 billion at the end of June 30.

Net interest income improved by 5 per cent to Dh2.6 billion at the end of September, from the same period of last year, as loan growth offset a dip in margins.

Lower volumes of investment and property sales and lower income from foreign exchange and derivatives meant non-interest income fell 27 per cent on an annual basis to Dh1 billion.

For the nine-month period, net profit rose to Dh4.99 billion, up from Dh3.91 billion in the year earlier period, according to the statement.

Loans and advances stood at Dh261.6 billion at the end of September, up from Dh247.7 billion at the same point last year.

A significant amount of the bank's provisioning in recent quarters has been towards boosting its bad loans coverage ratio, which improved to 115.3 per cent at the end of September, up from 70.3 per cent at the same point of 2014.

Meanwhile, deposits increased 8 per cent over the same period, standing at Dh269.3 billion on Sept. 30.

The bank took advantage of stronger market conditions earlier this years to issue Dh9.5 billion of term debt in the first three quarters of 2015.

In a separate emailed statement, a spokesman for the bank said it had no need to access capital markets for the foreseeable future. "We continuously evaluate opportunities to raise term funding, but would only do so if and when the time is right for investors and for the bank," the spokesman added.