Loan growth, higher margins boost Dubai bank Emirates NBD’s Q4 net profit

Emirates NBD, Dubai’s largest bank, on Wednesday reported a 10 per cent rise in fourth-quarter net profit as loan growth and improved margins offset lower income from investment securities and higher expenses.

The bank, the first UAE lender to report quarterly results, made a net profit of Dhs2.39bn ($650.7m) in the three months ended Dec. 31, 2018, compared with Dhs2.18bn in the year-ago period.

EFG Hermes forecast a net profit of Dhs2.33bn, while SICO had expected the lender to post a profit of Dhs2.51bn.

Emirates NBD, which is 55.6 per cent owned by state fund Investment Corp., and other banks in the United Arab Emirates benefited from a rise in interest rates in 2018.

The lender’s net interest margins surged 34 basis points from the previous year to 2.85 per cent as an increase in rates bolstered the loan book and outweighed a rise in deposit costs.

Apart from higher margins, loan growth also helped bolster net interest income by 20 per cent during the fourth quarter, while lower income from investment securities meant that non-interest income slipped 8 per cent.

However, the bank posted an increase of 14 per cent in expenditure due to staffing, information technology-related costs, global expansion, the implementation of Value Added Tax, advertising and also Expo 2020 sponsorship.

Impairment allowances for the lender surged 18 per cent to Dhs640m due to the higher cost of risk.