Emirates NBD Profit Jump Spurs Shares to 2008 High: Dubai Mover

Emirates NBD PJSC advanced to the highest level in more than four years after the United Arab Emirates’ second-biggest bank by assets reported first-quarter profit that beat estimates as loan-loss provisions declined.

Shares of the Dubai-based lender gained for a sixth day, climbing 2.2 percent to 5.10 dirhams, the highest since November 2008, at the close in the emirate. Some 9.1 million shares were traded, more than 12 times the three-month daily average volume, according to data compiled by Bloomberg. The benchmark DFM General Index rose 1.1 percent.

Emirates NBD’s stock has rallied 79 percent this year as the bank benefits from a recovery in the U.A.E. economy. Net income advanced 31 percent to 837 million dirhams ($228 million), beating the 686 million-dirham mean estimate of five analysts compiled by Bloomberg. The stock trades at a price-to-book value of 0.8 times, compared with 1.4 times for the Bloomberg GCC Financial Index, data compiled by Bloomberg show.

“A lot of banks are closing the gap that was created between market cap and book value,” said Fadi Al Said, senior fund manager at ING Investment Management in Dubai. “It’s more of an upward correction rather than anything else. When we reach book value then we need to see more factors to price it at a premium to their book value.”.

The lender’s shares, which are still down 59 percent from peaks in 2007, have been supported partly by higher growth in Dubai. The emirate’s economy is set to expand 4.6 percent on average between 2012 and 2015, more than twice as fast in the prior four years, government forecasts show.

‘Resilient Quarters’

Dubai Islamic Bank PJSC, the country’s biggest Shariah-compliant lender, reported a 17 percent rise in first-quarter profit to 301.7 million dirhams. Its shares gained 4.7 percent today to 2.65 dirhams, the highest in three years.

Abu Dhabi’s ADX Banks Index has rallied 31 percent this year. National Bank of Abu Dhabi PJSC, which overtook Emirates NBD this quarter as the U.A.E.’s biggest bank by assets, this week reported a better-than-anticipated jump in first-quarter profit to 1.4 billion dirhams from 1.04 billion dirhams.

Emirates NBD, is one of the biggest lenders to investment company Dubai Group LLC, which is negotiating to restructure $6 billion of bank debt. Provisions for bad loans fell 19 percent from a year earlier to 888 million dirhams, the bank said in a regulatory filing today.

Pre-provision operating profit “shows signs of growth after a few resilient quarters,” Chief Financial Officer Surya Subramanian said in a statement.

Emirates NBD’s 14-day relative strength index climbed to 87 today after surpassing 70 on April 22. A reading above 70 indicates to some analysts that a security or index is poised to decline. Two analysts recommend investors buy the stock, four say hold and one says sell, data compiled by Bloomberg show.

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