Dubai’s Emirates NBD Beats Forecasts As Q2 Profits Surge 50%

Emirates NBD’s (ENBD) second-quarter net profit rose 50 per cent, beating analysts’ forecasts, as Dubai’s largest lender benefited from an recovery in the emirate’s economy.

ENBD, 55.6 per cent owned by state fund Investment Corp of Dubai, made a net profit of Dhs972 million ($264.6 million) in the three months to June 30, compared with Dhs647 million in 2012, a statement from the bank said on Monday.

An average of five analysts polled by Reuters forecast a net profit of Dhs783.8 million for the quarter.

Shares rose 3.5 per cent by 0647 GMT, taking their gains so far this year to 75.1 per cent. The stock has benefited in 2013 as investor confidence that Dubai’s economy is recovering, helped by a revival in real estate and tourism, has fed through into the banking sector.

Both net interest and non-interest income rose 17 per cent in the second quarter year-on-year, aided respectively by higher loan and deposit spreads and increased fee income.

Also boosting non-interest income was the sale of part of its stake in Union Properties during the first half of the year. The bank didn’t provide any details in its earnings statement but it remains the developer’s largest shareholder with 31.4 per cent of the firm, according to Dubai bourse data.

ENBD booked impairments of Dhs997 million in the second quarter of this year, marginally up on the 954 million dirhams recorded in the same three months of 2012.

The lender was heavily hit by impairment allowances in the latter half of 2011 and the first six months of 2012. However, the previous three quarters had seen the growth of impairments stall and, while still high, seemed to have peaked.

Loans and advances stood at Dhs231.8 billion at the end of June, up six per cent on the end of 2012. Meanwhile, deposits increased eight per cent over the same timeframe, standing at Dhs230.4 billion at the end of June.

In May, it raised $1 billion from a capital-boosting bond. This helped increase its Tier 1 ratio – a key measure of financial strength – to 14.5 per cent at the end of June, from 13.5 per cent at the end of March.

ENBD has now repaid Dhs7.8 billion of support from the United Arab Emirates government which it had received in the wake of the global financial crisis, the statement said. It had already repaid Dhs3 billion out of the Dhs12.6 billion of total support it had received in April.