Emirates NBD Net Misses Estimates on Provisions at Islamic Unit

  • Third-quarter profit little changed from a year earlier
  • Sees increased loan defaults in small, medium sized companies

Emirates NBD PJSC reported third-quarter profit that missed analysts’ estimates as the United Arab Emirates’ biggest bank was hurt by bad loan provisions at its Islamic unit.

Net income was 1.66 billion dirhams ($453 million), little changed from 1.67 billion dirhams in the year earlier period, the Dubai government-controlled lender said in a statement to the city’s bourse on Monday. The mean estimate of five analysts was for a profit of 1.83 billion dirhams. While overall impairments fell 11 percent, they almost doubled at its Islamic unit to 455 million dirhams, the bank said in a separate statement.

“Whilst we have seen increased delinquencies in the micro small and medium enterprise segment, which has prompted Emirates Islamic to take additional provisions, the group’s overall credit quality continues to improve," Group Chief Executive Officer Shayne Nelson said in the statement.

Oil’s plunge is curbing spending in the U.A.E., while the second biggest Arab economy is expanding at its slowest pace since 2010, leading to loan defaults. Banks in the U.A.E. are prepared for deteriorating conditions as oil prices remain lower for longer and asset quality worsens, S&P Global Ratings said earlier this year.

Emirates Islamic Bank PJSC, the lender’s Islamic unit, reported a third-quarter loss of 31 million dirhams compared to an 87 million dirham profit a year ago. The lender said earlier this month it plans to raise 1.5 billion dirhams from a rights issue to boost capital amid a surge in lending.

Emirates NBD’s shares rose 0.8 percent to 8.1 dirhams at 10:10 a.m. in Dubai trading.

Loans climbed 11 percent at the end of September from a year earlier to 289.2 billion dirhams, while deposits rose by 16 percent to 311.6 billion dirhams. The ratio of bad loans to total loans fell to 6.4 percent from 7.1 percent a year earlier, the bank said, while the net interest margin declined to 2.54 percent in the nine months through September from 2.8 percent in the same period a year ago.

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