Emirates NBD Beats Estimates With 25% Quarterly Profit Jump

Emirates NBD PJSC (EMIRATES), the biggest bank by assets in the United Arab Emirates, beat analysts’ estimates with a 25 percent jump in first-quarter profit as interest income and fees growth offset a surge in bad loan provisions.

Net profit climbed to 1.04 billion dirhams ($283 million) from 836 million a year ago, the Dubai government-controlled lender said in a statement to the bourse today. The mean estimate of five analysts was for a profit of 881.2 million dirhams, according to data compiled by Bloomberg. Impairment allowances, including for bad loans, increased 43 percent.

Lending and investment banking in the U.A.E., the second-biggest Arab economy, are improving as Dubai’s real-estate, tourism and trade industries recover from a slump during the credit crisis. Dubai says its economy will expand by about 4.7 percent this year after the emirate won a bid in November to host the World Expo in 2020, while property prices are forecast by the Land Department to jump 40 percent this year.

While the profit growth is “very encouraging,” Dubai-based brokerage Arqaam Capital Ltd. said in research note today, the bank is “firing on only one cylinder, consumer banking,” which delivered 87 percent of earnings. Corporate and Islamic banking are being hurt by the decision to increase reserves to cover bad loans, Arqaam analysts Jaap Meijer and Nisreen Assi said.

The shares closed 1 percent higher at 10 dirhams. The benchmark DFM General Index (DFMGI) fell 0.9 percent in Dubai.

Profit Margin

Emirates NBD’s net profit margin, the difference between what the bank earns on assets like loans and pays out on liabilities like deposits, improved to 2.75 percent in the quarter from 2.39 percent a year ago, it said in the statement. Loans grew 9 percent from a year ago to 239.7 billion dirhams, and deposits increased by 13 percent to 251.5 billion dirhams.

The bank is one of the biggest lenders to state-owned Dubai World, which reached a deal with creditors in March 2011 to alter the terms on $14.7 billion of debt. Emirates NBD received 200 million dirhams in repayments from the company in the first quarter, reducing the outstanding to 9.25 billion dirhams, investor relations head Patrick Clerkin said on a call.

The loan to Dubai World is classified by Emirates NBD as non-performing. The bank will wait for further repayments before making a decision on reclassifying it, Chief Financial Officer Surya Subramanian said on the conference call.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net James Doran

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