Dubai’s Emirates NBD Said to Plan Cutting 15% of Workforce to Reduce Costs
Emirates NBD PJSC (EMIRATES), Dubai’s biggest bank, plans to cut as much as 15 percent of its workforce to reduce costs, said two people with knowledge of the matter.
The job cuts will affect about 500 to 700 employees across all departments and will probably be carried out this month, said one of the people, declining to be identified because the information is private. The reductions will affect Emirates NBD and not the group, which also includes subsidiaries Emirates Islamic Bank PJSC and Dubai Bank PJSC, the person said.
“I was expecting them to rationalize their cost base, although I was expecting a more gradual contraction in cost,” Shabbir Malik, a Dubai-based analyst at EFG-Hermes Holding SAE, said by telephone. “But I am guessing from the size and the number of people that are going to be affected that this is going to have a large impact in a very short period of time.”
Loan defaults in the United Arab Emirates increased after the global credit crisis hurt the country’s real-estate industry and as assets prices slumped, leading to an increase in costs at banks. Emirates NBD is one of the biggest lenders to state-owned Dubai World, which restructured $25 billion of debt after roiling global markets by seeking to delay payments in 2009.
A spokesman for Emirates NBD declined to comment. He didn’t want to be identified because of company policy.
Emirates NBD, 56 percent owned by the Dubai government, paid 10 dirhams ($2.72) to acquire unprofitable Dubai Bank last year and received a deposit from the federal government and a state guarantee as part of the deal. In February, it reported an 8 percent increase in 2011 profit to 2.53 billion dirhams.
Emirates NBD’s ratio of non-performing loans to gross loans will rise to between 14 percent and 15 percent this year and to between 15 percent and 16 percent in 2013, the bank said in February. The company is one of the biggest lenders to Dubai Group LLC, an investment company owned by Dubai’s ruler, which is in talks with banks to reschedule $6 billion of loans.
Emirates NBD’s cost-to-income ratio increased to 35.3 percent in 2011 from 31.4 percent in the previous year, according to its earning’s presentation in February. The bank said it planned to manage costs to ensure the ratio remained within the target range of 33 percent to 34 percent.
Moody’s today assigned a negative outlook to the bank’s ratings, saying the lender’s holdings in government-related issuers of debt are “likely to increasingly constrain” profit.
Dubai’s financial-services industry, where most global banks have regional offices, was hurt by the credit crisis as lending slowed, mergers and acquisition activity declined and the share market slumped. Shuaa Capital PSC (SHUAA), a Dubai-based investment bank, cut headcount by 39 percent in 2011 to 174 and plans to cut another 55 jobs this year, it said Feb. 13.
Emirates NBD was formed in 2007 with the merger of Emirates Bank International PJSC and National Bank of Dubai PJSC, then the U.A.E.’s second- and fourth-biggest banks by assets. It is now U.A.E.’s biggest bank and the group employs more than 8,000 people, according to its website.
The bank’s profit in 2012 will rise to 2.77 billion dirhams, according to the median estimate of five analysts compiled by Bloomberg.
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