SME loan losses hit RAKBANK in Q3

UAE lender RAKBANK recorded a 70 per cent drop in third quarter profit due to much heavier provisions on losses for loans to SMES.

Profit attribute to the company’s parent declined from Dhs370.8m ($100.95m) in the three-months to September 30 last year to Dhs 107.9m this year.

This followed an 86.1 per cent increase in provisions for loans from Dhs274.9m to Dhs511.7m.

“2016 has been a very challenging year for RAKBANK as we have seen a significant increase of provisions in our legacy SME business loans portfolio,” said CEO Peter England.

“From 2008 until early 2015 the bank’s core focus had been on SME lending and therefore is it understandable that, as the largest SME bank in the UAE, we would be adversely affected by the very challenging market for SME’s due to a number of factors including a global economic slowdown.”

At an event in August England indicated the second half of the year would remain challenging for the bank after a 45 per cent dip in second quarter profit compared to the previous year.

Read: RAKBANK CEO expects challenging second half

The bank also revealed plans to cut 250 staff in January.

Read: RAKBANK expat staff to be hit by 250 job cuts

Despite the hit from bad SME loans, England said the bank was “firmly committed” to the business.

“We continue to book solid business here, albeit under a completely different set of risk parameters than used last year,” he said.

The CEO also highlighted growth in the bank’s corporate and financial institutions business and treasury unit and said it had seen progress in its revamped card business and home loan product.