Emirates NBD Q4 net profit dips 13%

Emirates NBD (ENBD) posted a 13 per cent fall in fourth-quarter net profit on Monday as Dubai’s largest lender was squeezed by higher costs of fixed deposits and wholesale funding, as well as lower fees and commission.

The bank, the first lender from the United Arab Emirates to report its earnings this quarter, made a net profit of Dhs1.86bn ($506.4m) in the three months to Dec. 31, it said, down from Dhs2.13bn a year earlier but beating analysts’ forecasts for Dhs1.62bn.

The profit drop follows a decline in the third quarter, which marked an end to a run of 16 straight quarters of rising earnings as profits are hurt by the impact of Dubai’s slower growth.

The bank, 55.6-per cent owned by state fund Investment Corp. of Dubai and viewed as a gauge of the health of the Dubai economy, said net interest income fell 8 per cent due to rising costs of fixed deposits and wholesale funding.

Profitability for Gulf banks has been eroded by steeper funding costs as competition for deposits intensifies as lower oil prices squeezes liquidity in the banking sector.

ENBD’s net interest margins declined to 2.29 per cent during the quarter from 2.82 per cent in the year earlier period as the bank said loan spreads did not keep pace with the higher cost of deposits, coupled with lower yields from investments.

However, it added that it expected net interest margins for 2017 to be in the 2.35 to 2.45 per cent range, boosted by rate rises and a more stable liquidity environment.

The bank reported a 2 per cent rise in annual net profit for 2016 to Dhs7.24bn, compared to Dhs7.12bn in 2015.

ENBD’s board of directors recommended an annual dividend of 0.40 dirham per share for 2016, the same level as for the previous year.