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29 March 2024

NPLs cut banks' Q1 earnings by 1.14%

The Emirates NBD head offices in Dubai. The consolidated net profits of the UAE's 19 listed banks slumped to Dh5.502bn in the first quarter of 2010. (DENNIS B MALLARI)

Published
By Nadim Kawach

An extensive drive to build up bad loan provisions appears to be still weighing on the performance of UAE banks, with their net earnings dipping by nearly 1.14 per cent in the first quarter of this year.

From around Dh5.566 billion in the first quarter of 2009, the consolidated net profits of the 19 listed banks slumped to Dh5.502bn in the first quarter of 2010, their balance sheets showed.

The combined income dropped despite a surge in the net profits of most of Abu Dhabi's large banks, but there was also a sharp fall in the earnings of such giants as Emirates NBD, Mashreq, Abu Dhabi Commercial Bank (ADCB) and Dubai Islamic Bank (DIB).

Analysts considered the Q1 2010 results to be good since they are far higher than the profits in Q4 2009 and slightly lower than their level in Q1 2009, which was better than the Q1 results in 2008 despite the high prices of oil that year.

"These results had been expected and I think they are good," said Jamal Ajjaj of the Sharjah-based Al Sharhan Securities. "The banks performed actually well, because the net profits could be much higher if you exclude their NPL (non-performing loan) provisions... For the whole year, our expectations are that the banks will be in a better position."

Central Bank figures showed UAE banks are pushing ahead with a drive to consolidate their NPL provisions in line with instructions by the Central Bank.

Provisions stood at around Dh1.8bn in the first quarter of 2010, boosting the total NPL provisions allocated by the banks since the beginning of 2009 to around Dh14.7bn.

The balance sheets showed nine banks recorded lower net income in the first quarter of this year, while nine reported higher profits. One bank, Ajman Bank, registered losses for the quarter.

Emirates NBD, one of the largest banks in the Middle East in terms of assets, netted the highest profits of around Dh1.11bn in the first quarter of 2010 although these were much below its net income of about Dh1.259bn in the first quarter of last year, its quarterly report showed.

The government-controlled National Bank of Abu Dhabi (NBAD), which is the second largest bank in the country, reported the highest profit growth of around 33.7 per cent to Dh1.03bn from Dh770.4 million. The other gainers included the Abu Dhabi Islamic Bank (ADIB), Dubai Commercial Bank (DCB), Union National Bank (UNB), Bank of Sharjah (BoS), National Bank of Fujairah (NBF), National Bank of Ras Al Khaimah (NBAK) and Emirates Islamic Bank (EIB).

Banks with lower profits were InvestBank, Sharjah Islamic Bank (SIB), National Bank of Umm Al Quwain (NBQ), Emirates NBD, ADCB, Mashreq Bank, Commercial Bank International (CBI), DIB, and United Arab Bank (UAB).

The surge in NPL provisions through 2009, triggered by bank exposures to the downturn in the real estate sector and to the two troubled Saudi business conglomerates, largely weighed on the net earnings of banks last year despite their generally strong performance.

Balance sheets of 16 listed national banks showed their net profits fell by around 20.6 per cent to Dh14.87bn in 2009 from Dh18.71bn in 2008. In the first quarter of 2009, their earnings edged up by nearly 0.07 per cent to Dh5.41bn from Dh5.406bn in the first quarter of 2008.