Complex Made Simple

Emirates NBD sees Q1 net profit growth as costs drop

Dubai’s largest bank Emirates NBD (DFM: EmiratesNBD) on Wednesday reported a four per cent rise in its first quarter net profit, aided by increase in fee income and lower provisions.

The lender’s net profit for the three months ending March 31 reached AED1.873 billion compared to AED1.808bn in the corresponding period a year earlier. Quarter-on-quarter (q-o-q) net profit growth was one per cent, at AED1.857bn in Q4.

The bank said its operating performance was helped by a control on expenses and an improved cost of risk.

Net interest income fell by three per cent year-on-year (y-o-y) but it improved one per cent q-o-q due to loan growth coupled with an improvement in margins.

Core gross fee income increased 27 per cent q-o-q and seven per cent y-o-y on the back of higher income from forex and rates.

Net interest margin also fell during the quarter when compared to same period last year, but it saw some improvement as compared to the fourth quarter because rate rises flowed into loan yields and funding pressures receded.

The bank’s total assets stood at AED452.0bn, up one per cent from end of 2016.

“Emirates NBD made an encouraging start to the year with a 4 per cent growth in net profit and further strengthened its balance sheet, with improvements in credit quality and liquidity, coupled with strong capital ratios. We are delighted that our Investment Bank and Asset Management units successfully completed the UAE’s first IPO of 2017 with the launch of ENBD REIT. We are also particularly pleased to be ranked the UAE’s most valuable banking brand, and 75th worldwide, by The Banker,” said Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD.

Lower costs

Shayne Nelson, Group CEO of Emirates NBD, said the bank’s solid results were underpinned by a control on expenses and an improved cost of risk. Costs were four per cent lower for the period compared with the first quarter 2016.

Loans increased by 2 per cent and deposits grew by 3 per cent during the quarter. The advances to deposits ratio remains comfortably within management’s target range at 92.5 per cent.

In Q1-17, the bank raised AED3.3bn of term funding through private placements and term funding represents 10 per cent of total liabilities.

“The Group’s liquidity position remained strong and we are focused on improving margins by enhancing our funding base. We unveiled Liv., the UAE’s first digital bank targeted at millennials, which offers a differentiated digital experience for a new generation of customers. We are well positioned to utilise our strong franchise, digital capabilities and financial strength to take advantage of growth opportunities within the region,” Nelson added.

Group Chief Financial Officer Surya Subramanian said: “The operating performance for the first quarter of 2017 was pleasing as we saw margins improve compared to Q4 2016. This margin increase is due to an improvement in funding costs coupled with loan pricing benefiting from rising interest rates.”

“I am also glad to see that the cost control measures implemented in 2016 have taken effect. The cost to income ratio, at 30.9 per cent, is comfortably within management targets, enabling us to invest to support future growth. We also delivered a further improvement in credit quality and this, coupled with an improvement in margins, and lower costs is a position we expect to hold for the remainder of 2017,”  added Subramanian.


The bank expects growth in the UAE to improve to 3.4 per cent this year as higher oil prices contribute to improved consumer and business sentiment in 2017 and facilitate slightly higher government spending.

“We expect the UAE’s growth to accelerate to 4.1 per cent in 2018, with Dubai expected to enjoy stronger non-oil activity growth on the back of increased investment in infrastructure. Anticipation of a 5 per cent VAT to be introduced in early 2018 may boost spending in the second half of 2017, as consumers bring forward purchases that otherwise would be made in 2018,” Nelson said.