Dubai’s Emirates NBD Misses Q4 Profit Forecast

Emirates NBD, Dubai’s largest lender, missed analysts’ forecasts despite an eight per cent rise in fourth-quarter net profit as a surge in the amount set aside by the lender to meet loan losses offset increased net interest income.

The lender, 55.6 per cent owned by state fund Investment Corp of Dubai, made a net profit of Dhs673 million ($183.2 million) in the three months to Dec. 31, a statement from the bank said on Monday, compared with Dhs626 million in the same period last year.

An average of five analysts polled by Reuters forecast a net profit of Dhs705.9 million for the fourth quarter.

Fuelling the profit growth was a 26 per cent increase in net interest income versus the corresponding period of 2012 to Dhs2.22 billion, which the bank attributed to higher lending growth and lower funding costs.

However, this was offset by a 40 per cent year-on-year jump in impairment allowances, which rose to Dhs1.31 billion in the fourth quarter.

Provisioning has been a major drag on the bank’s profitability in recent years and despite signs earlier in 2013 that impairments – while remaining high – were showing signs of receding, the second half of the year saw significant advances once again as the bank took specific provisions and looked to build up its coverage ratios.

The increase in the final months of the year pushed 2013 impairments to Dhs4.71 billion, 18 per cent higher than the previous year.

Despite this, full-year net profit for 2013 was up 27 per cent to Dhs3.26 billion, helped by higher net interest and fee income.

ENBD’s earnings performance in 2013 benefited from renewed confidence in the wider Dubai economy, which has recovered from a deep financial crisis helped by a rebound in the key real estate sector.

Loans and advances stood at Dhs238.3 billion at the end of December, up nine per cent on the end of 2012.

Meanwhile, deposits increased 12 per cent over the same timeframe, standing at Dhs239.6 billion at the end of 2013.

The bank said it would pay a cash dividend of Dhs0.25 per share for 2013. This is the same as the 2012 dividend.

Shayne Nelson, the former head of Standard Chartered’s private bank, took over as chief executive of the Dubai lender from longstanding head Rick Pudner on January 1.