UAE corporate profits up 22% in Q2

A robust recovery in the fortunes of the country’s banks and other financial institutions has resulted in net profits at UAE firms rising by 22 per cent year-on-year in the second quarter of 2011, research compiled by Kuwait Financial Centre (Markaz) shows.

“UAE corporate profits (like-to-like basis) were up 22 per cent y-o-y to $2.4bn, against a profit of $1.9bn in 2Q10,” said MR Raghu, Senior Vice-President (Research), Markaz.

The country’s banking sector profits recorded a growth of 65 per cent year-on-year to $1.5bn, due in large part to Abu Dhabi Commercial Bank’s Q2 profits of $363m compared with a loss of $84m in the same quarter last year. Financial Services were up 40 per cent on a y-o-y basis, Markaz research shows.

However, telecom firms were a drag on earnings, declining 10 per cent on YoY basis and 11 per cent on a quarter-on-quarter basis. Etisalat’s net profits this quarter were $434mn, compared with $510mn in the same quarter last year, and lower than even the previous quarter (Q1 2011), when its profits were $495mn.

Profits at Du, etisalat’s competitor in the UAE, however, rose 51 per cent year-on-year to $56mn in Q2 2011.

Overall, GCC corporate earnings declined by 7 per cent in the second quarter of 2011 as compared with the previous quarter. Total earnings, which came in at $12.8bn, were less than the profits posted during the previous quarter (Q1, 2011) by 7 per cent.

However, in the first half of 2011, GCC corporate earnings show an upswing of 5 per cent compared to the first half of 2010. Total earnings came at $26.5bn compared to $25.3bn in H1, 2010, mainly due to the improved performance in Q1, 2011.

Markaz maintains that corporate earnings declined due to weak performance by the telecom sector in the region. Nevertheless, banks and commodity companies continued to perform strongly. The region’s continued dominance as a petrochemical hub, global recovery, and spikes in commodity prices supported the performance of companies across the region. 

Aggregate net profits from the commodity sector were $3.4bn (+54% YoY, +4% QoQ). Amongst sectors, banking continued to deliver the highest profits, at $5bn. Robust demand and access to low cost funds improved spreads in this quarter. Telecom sector registered 66 per cent YoY decline in net income due to Zain’s one time profit from discontinued income reported in 2Q10.

Excluding this one-time adjustment, the sector’s earnings fell by only 11 per cent YoY. Real estate sector recovered from the slump experienced last year and reported a profit of $386mn in Q2, 2011, up 127 per cent YoY.

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