Emirates NBD PJSC surged to the highest level in more than a month as investors deemed shares of Dubai’s biggest bank were cheap after the lender’s second-quarter profit beat analysts’ estimates.
The Dubai government-controlled bank’s stock jumped 6 percent to 5.11 dirhams, the strongest since June 20, at the close in Dubai as volume increased to 2.4 times its three-month daily average. Emirates NBD’s shares, which are up 79 percent this year, were the biggest gainers on the benchmark DFM General Index, which rose 0.2 percent.
Emirates NBD said net income increased to 972 million dirhams ($265 million), topping the 799 million-dirham average estimate of six analysts compiled by Bloomberg. The stock trades at 10.8 times estimated earnings, compared with 12.2 times for the Bloomberg GCC 200 Financial Index and competitor Dubai Islamic Bank, data compiled by Bloomberg show.
“The results are solid at a time lots of investors were underweight the stock, which was trading on stretched valuations compared to peers,” Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital PSC, said by phone. “Asset managers will be looking at buying.”
The bank’s fee income increased as Dubai’s economy recovers from a property-market crash, with the government forecasting average economic growth of 4.6 percent between 2012 and 2015. Emirates NBD, which suffered from an increase of bad loans during the crash, said its impaired-loan ratio fell to 13.9 percent at the end of June from 14.3 percent on Dec. 31.
The U.A.E., the second-largest Arab economy, has the biggest banking market in the six-nation Gulf Cooperation Council, which also includes Saudi Arabia. Emirates NBD’s annual profit may climb 15 percent to 2.95 billion dirhams, according to the average estimate of seven analysts compiled by Bloomberg. Three analysts have a buy recommendation on the shares, while five say hold and one says sell, data compiled by Bloomberg show.