The Emirates NBD Group, the Gulf’s largest lender, expects its profit growth to slow to 30 per cent this year compared with last year’s figure of 35 per cent.
Chairman Ahmed Humaid Al Tayer said interest rate cuts were responsible for the expected slowdown. And Chief Financial Officer Sanjay Uppal said profits would suffer from developments in international markets.
“There will be impact on operations in terms of business opportunities and investments,” said Uppal. “But we are in an environment in which most global organisations are showing a decline in profits and compared to this trend, regional banks are achieving good progress.
“The cost of operations will increase and there will be inflationary pressures – both domestic and imported due to the falling dollar.”
The group reported net profits of Dh3.95 billion in 2007. Its net assets reached Dh253.8bn, making it the largest bank by asset size in the GCC region.
The expected 30 per cent increase is still among the highest predicted growth rates of banks profits in the region. Estimates show that the expected growth in banks’ profits will range between 20 and 30 per cent in 2008.
The group warned last month that 2008 was likely to be a year of uncertainty as volatility in global markets impacted on the world’s largest oil-exporting region.
Al Tayer said Gulf countries were handicapped in terms of dealing with inflation because of the peg to the dollar. And the group’s CEO, Rick Pudner, has said that despite negative real interest rates the bank was seeing strong deposit growth.
He said there was nervousness about investing in real estate and equity markets and bank deposits were seen as a safe haven.
In 2007 the net profits of Emirates Bank International (EBI) reached Dh2.39bn, increasing by 27 per cent, while the net profits of the National Bank of Dubai (NBD) surged to Dh1.6bn, 44 per cent higher than in 2006.
The total assets of the merged group by the end of 2007 amounted to Dh253.8bn, an increase of 53 per cent, compared to assets of the two banks in 2006. Customer deposits reached Dh124.1bn, increasing by 44 per cent in 2007.
Prior to the merger of the EBI and the NBD the former recorded growth in net profits of nine per cent to Dh1.88bn in 2006. Total income of the bank grew by 29 per cent to Dh2.9bn. Total assets increased to Dh95.9bn, up by 61 per cent. Customer deposits grew by 39 per cent to Dh40.9bn.
In 2005 the EBI reported a net profit of Dh1.73bn, a 78 per cent increase over the 2004 results of Dh972 million. Total assets surged to Dh59.4bn, a 54 per cent increase from 2004. Customer deposits were Dh29.5bn, an increase of 51 per cent over the 2004 figure.
NO US IMPACT
The US sub-prime mortgage crisis has not had a negative impact on Gulf banks, Al Arabiya TV quoted the Emirates NBD Group’s Chairman as saying yesterday.
“Provisions protected the local banks from the US mortgage crisis,” Al Tayer told Al Arabiya.
“Gulf banks investments were not huge in the US market,” he said.
Asked whether the lender had made any provisions in 2007, Al Tayer refused to comment, saying only that the bank’s investment portfolio was healthy.
Emirates NBD profit growth to be 30%