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"We signalled at the beginning of the year that our strategic focus would shift gradually from strengthening the bank, towards growth acceleration, and this is clearly demonstrated in our Q1 results," said Pudner in a conference call.
Stake sale helps bottom line
The bank's Q1 results were boosted significantly by the March sale of a stake in the bank's credit card processing unit, Network International, to private equity giant Abraaj Capital. It booked a gain of Dhs1.84bn from its sale of a 49% stake in Network International, which serves around 70 banks and financial institutions in the Middle East and Africa, and manages one of the region's most extensive ATM networks.
Were it not for the stake sale, Emirates NBD would have reported results more in keeping with some of its peers in Abu Dhabi: National Bank of Abu Dhabi, the UAE's second-largest bank by assets, reported a 10% fall in Q1 profit to Dhs927m as loan-loss charges rose, while First Gulf Bank said its profit slumped 5% in the same period.
Costs in Q1 2011 did drop by 6% compared to the same period last year, to Dhs808m. Emirates NBD said that these savings sprung from cost management initiatives implemented during the latter half of 2010. Against Q4 2010, however, costs rose by 7%, or around Dhs50m. "We've made significant progress in terms of optimising our costs base and increasing efficiency, and that's reflected in the results," said Ben Franz-Marwick, head of investor relations at Emirates NBD.
"At the same time, we have looked to accelerate our investment in future growth, and that's what you see coming through in terms of our operating costs trends from quarter to quarter," he continued. "The increase is primarily related to driving future income growth - feet on the street, extra sales staff, additional branches, and investment in marketing and advertising our brand as well as our services."
Other indicators were less encouraging for the bank, however, with customer loans slipping 1% during the quarter from Q4 2010, and deposits growing only 6% from the end of 2010. The bank revealed that total income for the quarter declined by 12% year-on-year to Dhs2.26bn, compared with Dhs2.56bn in Q1 2010.
Nevertheless, Pudner argued that forward momentum is with the bank as it looks to improve its liquidity position and pursue sustained asset growth.
"Our strong liquidity position not only allows us to comfortably repay maturing debt, but more importantly gives us tremendous flexibility to manage asset growth and net interest margins going forward," said Pudner, adding that the bank was looking for asset growth of around 5% and loan growth of between 3 and 4%, over the rest of 2011, on current figures.
"We've gone through the period of restructuring the balance sheet and adapting to the liquidity challenges in the market from 18 months ago, and are now looking for opportunities to deploy that liquidity," he said. "There are some very strong sectors of the economy here, showing signs of resurgence, and so we're looking at the retail market, products like credit cards, SMEs, and other opportunities. We will see a slower pick-up in corporate loans, but nevertheless we are still seeing a positive trend in that area."
Non-interest income declined 26 percent year-on-year and 5 percent compared to Q4 2010, to AED612m.
Staff
