Banks’ 9-month income falls 9.6%

The net income of national banks in the UAE slumped by around 9.6 per cent in the first nine months of 2010 and analysts said the decline was mainly due to large allocations for loan loss provisions.

From around Dh15.5 billion in the first nine months of 2009, the combined net profits of 17 listed banks shrank to nearly Dh15 billion in the first nine months of 2010, according to figures compiled by Al Khaleej newspaper.

“Many banks recorded growth in their net profits but some suffered a decline…I think the performance of the banks so far this year was generally good but earnings were stifled by heavy provisions,” said Ziad Dabbas, a financial adviser at the government-controlled National Bank of Abu Dhabi.

The figures showed the largest profit fall was recorded by the government-controlled Abu Dhabi Commercial Bank (ADCB), which had reeled under losses early this year because of its heavy exposure to regional defaulters.

The Bank reported a sharp rebound in its performance in the third quarter and this allowed it to offset earlier losses and record profits in the first nine months of 2010. But they were far lower than in the first nine months of 2009 as they collapsed to only about Dh9 million from Dh683 million.

The balance sheets showed three Dubai-based banks recorded lower income in the first nine months of this year while there was slight growth in the profits of Commercial Bank of Dubai. In Sharjah, three banks reported higher earnings but there was a fall in the income of the Sharjah Islamic Bank.

The report showed banks have remained tight in their lending and this could be another factor for their stifled performance compared with the boom years of 2007 and 2008. The combined credit provided by 15 nationals banks edged up by only 1.7 per cent to Dh794.9 billion at the end of September 2010 from around Dh781.4 billion at the end of September 2009.

“The profits of the UAE banking sector this year could be more or less as in 2009 but I think the performance is good considering their slow credit and heavy provisioning,” said Fadi Kiswani of the Sharjah-based Sharhan Securities.

Central Bank figures showed UAE banks chopped nearly Dh5.2 billion off their balance sheets for non-performing loans (NPL) provisions in the first nine months of this year as they have been asked by the Central Bank to bolster their financial position following the global fiscal crisis and regional default problems.

High provisions allied with a sharp slowdown in lending depressed the banks’ collective net earnings by nearly 20 per cent in 2009.

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