(MENAFN- Khaleej Times) Emirates NBD said on Wednesday its net profits in the first half jumped 41 per cent to Dh3.3 billion on higher income and lower provisions.
The bank, the largest lender in the UAE by total income and branch network, said in a statement that the strong operating performance was helped by an increase in both net interest income and non-interest income, a modest increase in costs and a lower impairment charge.
The bank's total income rose seven per cent to Dh7.6 billion as net interest income grew by nine per cent to Dh5 billion due to growth in retail assets and a lower cost of funds. Non-interest income improved by four per cent to Dh2.6 billion due to growth in foreign exchange, derivative income and higher asset management fees.
The lender said its balance sheet strengthened further "thanks to an improvement in liquidity, capital and credit quality ratios."
"Liquidity strengthened further as the bank grew its deposit base while prudentially issuing Dh8.9 billion of term debt. Capital ratios grew on the back of strong retained profit. The impaired loan ratio improved further to 7.4 per cent as the bank actively managed its existing stock of impaired loans while the impaired loan coverage ratio increased to 109.8 per cent," the bank said.
Hesham Abdulla Al Qassim, vice-chairman, Emirates NBD, said Emirates NBD had delivered higher profitability while continuing to strengthen the balance sheet. "In first half, Emirates NBD achieved a 41 per cent growth in net profit to Dh3.317 billion. The group also delivered further improvements in asset quality, capital and liquidity. The group is well positioned to utilise our strong franchise and balance sheet to take advantage of opportunities within the region," said Al Qassim.
Group chief executive officer, Shayne Nelson, said the bank's prudential balance sheet offers protection against future volatility in the global financial markets while providing a strong foundation for growth. "We remain cautiously optimistic for the remainder of 2015."
Group chief financial officer, Surya Subramanian, said the operating performance for the first half of 2015 was solid, as demonstrated by the growth in both the total income and profit.
"We continue to deliver favourable market conditions to prudently raise nearly Dh9 billion of term-funding in the first half of 2015. This decision to 'front load' our term-funding requirements is paying dividend even as we now see increased volatility in the global capital markets from a range of sources."
Total income for the half-year amounted to Dh7.555 billion - an increase of seven per cent compared with Dh7.042 billion during the same period in 2014. Net interest income improved by nine per cent to Dh4.982 billion.
"The improvement in net interest income is attributable to an improved asset mix due to growth
of Islamic and retail assets and a lower cost of funds," the bank said. Non-interest income for the period improved by four per cent to Dh2.573 billion, driven by increases in foreign exchange, derivative income and higher asset management fees which was partially offset by lower gains from the sale of properties.
Costs for the half year amounted to Dh 2.236 billion, a modest increase of five per cent over the previous year. This increase is attributed to higher staff costs linked with rising business volumes and partially offset by a control on other costs. The cost to income ratio improved marginally by 0.7 per cent to 29.6 per cent, as income growth outpaced cost growth.
During the first half, the impaired loan ratio improved to 7.4 per cent from 7.9 per cent at the end of 2014. The impairment charge in first half of Dh1.986 billion is 24 per cent lower than in corresponding period of 2014 as the cost of risk starts to normalise in 2015. "These provisions, along with a healthy level of write-backs and recoveries, helped boost the coverage ratio to 109.8 per cent," the bank said.
Loans increased by four per cent and deposits by six per cent. As at June 30, the bank's capital adequacy ratio and Tier 1 capital ratios were 21 per cent and 18 per cent respectively.
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