DUBAI: Dubai-based Emirates NBD said its third-quarter net profit more than halved, undershooting analysts’ forecasts, due to a spike in bad loans and a provision for its exposure to debt-laden Dubai World.
Emirates NBD, the Middle East’s largest bank by assets, reported 424 million dirhams ($115.5 million) in third-quarter net profit compared with 1.05 billion dirhams in the same quarter one year ago.
Analysts polled by Reuters on average expected 804.3 million dirhams in third-quarter net profit.
The lender is one of the main creditors to Dubai World, the emirate’s flagship conglomerate, which is restructuring a debt pile of nearly $25 billion.
"The bank’s specific provision for its exposure to Dubai World was taken in Q3 2010," Emirates NBD said in a statement on Monday. It didn’t provide an exact figure, but said it booked nearly 3 billion dirhams in impairment allowances in the first nine months of this year.
"It’s good to see they booked these expenses now and people see it won’t push them into losses, because that was a concern the market had," said Raj Madha, Middle East and North Africa banking analyst for Rasmala Investment Bank in Dubai.
"Still, there is a lot more to clear up. They still have Union Properties, Dubai Holding and the general exposure to the Dubai property market. But the single biggest chunk they needed to clear is out of the way," he said.
Emirates NBD holds a 48-percent stake in Union Properties, a Dubai property developer which has been hit by the downturn. The bank already booked a partial write-down in the fourth-quarter of 2009.
The bank also chairs the committee handling the debt talks between Dubai International Capital, the private equity vehicle of the ruler of Dubai, and part of Dubai Holding, and its creditors.
The lender’s non-performing loan ratio — a measure of bad loans — rose to 3.66 percent in the third quarter, compared to 2.30 percent at the end of 2009. The bank’s Chief Executive Rick Pudner said in July he expected the NPL ratio to peak at between 3 and 3.5 percent by the end of the year.
Emirates NBD said economic activity remained subdued in the United Arab Emirates in the first nine months of this year, but that the local financial sector was "showing signs of emerging from the deleveraging process".
Emirates NBD, Dubai’s largest bank by market value, is 56 percent owned by the Investment Corporation of Dubai (ICD), the emirate’s sovereign wealth fund. Its shares have risen 21 percent to 3 dirhams in the past three months, outperforming the Dubai index, which advanced 16 percent. By 0705 GMT, the shares were not trading in the Dubai bourse.
Abu Dhabi-based Union National Bank beat analysts’ forecasts last week by posting a 28 percent increase in third-quarter net profit, helped by a surge in net interest income.