- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 03:59 05:25 12:21 15:42 19:11 20:37
Provisions for bad loans in Emirates NBD’s consumer division dropped 50 per cent in the third quarter compared to the first quarter of this year, a senior executive from the bank said.
Jamal bin Ghalaita, group deputy CEO at the Middle East’s largest bank by assets, said NPL provisioning has already peaked and that the bank is now moving aggressively to grow its loan book and workforce.
“Our provision, in the consumer side, dropped by 50 per cent in the last quarter compared to the quarter beginning of this year,” he told reporters on the sidelines of the bank’s launch of new gold business, without giving figures.
“Going forward, provisions will be lower for the consumer side because default is now showed quickly. Before it was 180 days, now with the new rules of the central bank, you have to write it off in 90 days so in 90 days you will know whether you are doing good or bad.”
The UAE Central Bank last month issued new rules where lenders will be required to set aside provisions for NPLs each quarter instead of waiting until the end of the financial year, and standardise accounting definitions for when debts are impaired.
For the consumer division, however, these new rules will have little effect because they are already incorporated, Ghalaita said. In retail, if the exposure is past due for more than 90 days, the financial asset is considered impaired.
Figures from the company’s website shows that the bank’s NPLs in retail continued to grow from Dh2.89bn in Q1 to Dh2.9bn in Q2 and Dh3.33 in Q3 against a loan book of Dh24bn, Dh21.16bn and Dh21bn in same period. This means the ratio of NPL over the total retail loan book continued to thread higher from 12 per cent in Q1, 13.7 per cent in Q2 and 15.8 per cent in Q3.
The bank posted a 60 per cent drop in its third quarter net profits as it increased its provisions for bad loans, including its exposure to Dubai World. Its NPL ratio rose to 3.66 per cent in third quarter 2010 compared with 2.3 per cent at the end of 2009. The company’s net impairment loss on financial assets rose 63 per cent to Dh1.24bn in 3Q 2010 from Dh762mn for the same period last year.
Notwithstanding, the bank is now in an aggressive mode, and is looking at hiring 200-300 people in consumer banking, Ghalaita said. The bank opened two new branches and 15 new ATMs in the first nine months of this year.
“We’ve added people in the private banking and priority banking. We’re adding more people, our team is busy travelling to recruit, so there are a lot of good signs. We’re aggressive in pushing to grow our car loan book and we’re pushing growth in all our product,” he said.”
Emirates NBD, however, remains conservative in terms of its lending policy. Ghalaita said the bank lends only 30 fils in every dirham of deposit. “We only lend 30 per cent of whatever deposit we have,” he said. “Banks in general are lending, we’re doing lots of transaction but we’re conservative. You have shareholders and depositors money. So we have to balance between being aggressive and conservative. We choose to be more conservative.”
The bank today has “too much liquidity”, which he said would push interest rates down. Meanwhile, the bank on Tuesday announced full settlement of $750 million (Dh2.76 billion) tier 1 notes (bonds) that are due to mature this year, which means the bank has met most of its Dh3.017 billion debt obligations maturing this year.
The bank raised $410 million (Dh1.5 billion) through a multi-currency loan structured around its portfolio of syndicated loans to corporates. The loan, priced at a margin of 1.75 per cent above the applicable reference rates, was fully subscribed by JP Morgan.
“All our liabilities are being paid on time. Our liquidity is looking good and we’re very happy,” Ghalaita said.
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