Net Profit Drops At Emirates NBD, Provisions Rise

Tom Burroughes Group Editor London 21 July 2020

Net Profit Drops At Emirates NBD, Provisions Rise

The bottom line was affected by rising provisions for credit impairments, a pattern seen in a number of banking groups reporting during the pandemic and its aftermath.

Emirates NBD, the Middle Eastern firm providing services, including private banking, has reported a net profit of AED4.1 billion ($1.12 billion) for the first six months of 2020, sliding by almost half (45 per cent) on a year ago. The drop was caused by higher impairment charges and the one-off effect of its sale of a stake in the Network International business last year.

Net interest income, however, rose by 36 per cent year-on-year and non-funded income grew by 24 per cent as a result of the bank’s purchase of DenizBank in 2019. 

Impairment allowances rose to AED4.2 billion with the annualised net cost of risk increasing to 172 basis points.

The group’s Common Equity Tier 1 ratio – a measure of financial strength – rose to 15.3 per cent, more than 7 per cent above minimum requirements.

Private banking performance for the first half of 2020 was “healthy”, with a 12 per cent rise in total income compared with the corresponding period in 2019, it said. 

Retail banking and wealth management logged a total income of AED3.961 billion, falling by 2 per cent compared with the corresponding period in 2019.  Net interest income increased by 5 per cent year-on-year led by growth in liabilities and higher loan volumes. Fee income fell by 14 per cent due to lower business volumes and fee waiver as Emirates NBD extended relief to customers during the precautionary shutdown due to COVID-19. 

“As the economy re-opens we are seeing business volumes improving although they are expected to remain below pre-COVID-19 levels in the coming quarters. The group’s balance sheet remains strong with stable credit, capital and liquidity. Emirates NBD’s solid capital base along with an ability to generate healthy operating profits, provides a strong loss absorption capacity,” Shayne Nelson, group chief executive, said.

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