Dubai Islamic Bank Targets 15-20% Loan Growth In 2015 – CEO

Dubai Islamic Bank (DIB) expects loan growth to moderate to between 15 and 20 per cent in 2015 and is also targeting a reduction in its ratio of bad loans, its chief executive said on Sunday.

Adnan Chilwan was speaking to reporters after the United Arab Emirates’ largest sharia-compliant lender reported a 64.1 per cent increase in fourth-quarter net profit as it continued to benefit from a positive local economic backdrop.

UAE banks have reported strong profit growth in the quarter so far, with Abu Dhabi Islamic Bank and Abu Dhabi Commercial Bank on Sunday joining Emirates NBD and Mashreq, who filed higher earnings last week.

They have benefited from needing to set aside less cash for bad loans compared to the height of a local property market crash at the turn of the decade, as well as strong lending growth as Dubai’s economy rebounds from that turbulent period.

“I see the industry going through its challenges, but our strategy went through the litmus test in 2014 and I don’t see 2015 being any different for us,” Chilwan said.

The bank is forecasting loan growth to moderate from 32 per cent last year, with the consumer and wholesale segments the main drivers, he said.

Last year’s loan growth was well ahead of the 10.2 per cent figure for the whole UAE banking sector in November, the latest central bank data showed.

The growth in lending, as well as the improvement in asset quality seen in the local economy, would help reduce the ratio of non-performing loans to six per cent of DIB’s total loan book in 2015 from eight per cent at the end of 2014.

DIB made Dhs850 million ($231.4 million) in the three months to Dec. 31, according to Reuters calculations, up from Dhs518 million in the corresponding period of 2013.

The bank did not provide a breakdown of its fourth quarter earnings, so Reuters used its full-year results statement to calculate the figure – which was ahead of the Dhs719.3 million forecast by EFG Hermes.

DIB boosted its capital reserves earlier this month by selling a Tier 1 sukuk, and Chilwan said the bank had no immediate plans to return with another issue.

The sukuk boosted its total capital adequacy ratio – a key indicator of the bank’s health which includes both Tier 1 and Tier 2, or supplementary, capital – to 18.5 per cent. That compares with the minimum 12 per cent set down by the UAE central bank.